What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2025-02-14 compared with 2024-02-08 · 302 added, 279 removed, 1524 unchanged (28% of the section changed)

15 unchanged sentences

Fair value (154) 159

Currently, our most significant foreign currency transactional exposures relate to the Mexican peso, various European currencies, the Chinese renminbi, the Honduran lempira, the Brazilian real and the Japanese yen.

Currently, our most significant foreign currency transactional exposures relate to the Mexican peso, various European currencies, the Honduran lempira, the Chinese renminbi, the Japanese yen and the Philippine peso.

A sensitivity analysis of our net transactional exposure is shown below (in millions):

1 unchanged sentence

December 31, Hypothetical Strengthening % (1)

10% $ 19 $ 15

Euro 10% 38 34

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Lear Corporation

To the Shareholders and the Board of Directors of Lear Corporation

Opinion on the Financial Statements

24 unchanged sentences

Auditing the consideration that the Company expects to be entitled to in exchange for certain of its products which are subject to non-routine price adjustments is highly judgmental as it relates to evaluating the sufficiency of evidence available from commercial negotiations to support the ultimate consideration that the Company is entitled to in exchange for those products.

How We Addressed the Matter in Our Audit We identified and tested controls over the identification and evaluation of product sales with non-routine price adjustments, including management’s review of the evidence to support the Company’s measurement of revenue related to those product sales.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the identification and evaluation of product sales with non-routine price adjustments, including management's review of the evidence to support the Company's measurement of revenue related to those product sales.

Our audit procedures included, among others, inspecting communications between the Company and its customers related to the pricing arrangements, auditing adjustments related to those product sales, performing retrospective reviews of management's estimates to identify contrary evidence, if any, and performing inquiries of and obtaining written representations from executives, within the Company, responsible for the respective customer relationships.

4 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Lear Corporation

To the Shareholders and the Board of Directors of Lear Corporation

Opinion on Internal Control Over Financial Reporting

1 unchanged sentence

In our opinion, Lear Corporation and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.

As indicated in the accompanying Management’s Annual Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of I.G.

Bauerhin ("IGB"), which is included in the 2023 consolidated financial statements of the Company and constituted less than 2% of total assets as of December 31, 2023 and less than 1% of net sales for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of IGB.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2024 consolidated financial statements of the Company and our report dated February 14, 2025 expressed an unqualified opinion thereon.

56 unchanged sentences

Accumulated other comprehensive loss ( 1,133.7 ) ( 688.8 )

Lear Corporation stockholders' equity 4,918.8 4,678.8

Lear Corporation shareholders' equity 4,451.7 4,918.8

Noncontrolling interests 149.3 141.8

52 unchanged sentences

— — ( 100.3 ) —

Dividends declared to Lear Corporation stockholders — — — ( 107.9 )

Dividends declared to Lear Corporation shareholders — — — ( 186.2 )

Dividends declared to noncontrolling interests — — — —

10 unchanged sentences

— — ( 316.0 ) —

Dividends declared to Lear Corporation stockholders — — — ( 186.2 )

Dividends declared to Lear Corporation shareholders — — — ( 184.5 )

Dividends declared to noncontrolling interests — — — —

Change in noncontrolling interests — — — —

Balance as of December 31, 2023 $ 0.6 $ 1,050.5 $ ( 1,044.6 ) $ 5,601.1

8 unchanged sentences

— — ( 403.9 ) —

Dividends declared to Lear Corporation stockholders — — — ( 184.5 )

Dividends declared to Lear Corporation shareholders — — — ( 174.7 )

Dividends declared to noncontrolling interests — — — —

9 unchanged sentences

Adjustments Lear

Stockholders'

Shareholders'

Equity Non-controlling

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— — — ( 100.3 ) — ( 100.3 )

Dividends declared to Lear Corporation stockholders — — — ( 107.9 ) — ( 107.9 )

Dividends declared to Lear Corporation shareholders — — — ( 186.2 ) — ( 186.2 )

Dividends declared to noncontrolling interests — — — — ( 87.6 ) ( 87.6 )

10 unchanged sentences

— — — ( 316.0 ) — ( 316.0 )

Dividends declared to Lear Corporation stockholders — — — ( 186.2 ) — ( 186.2 )

Dividends declared to Lear Corporation shareholders — — — ( 184.5 ) — ( 184.5 )

Dividends declared to noncontrolling interests — — — — ( 80.4 ) ( 80.4 )

Change in noncontrolling interests — — — — 0.6 0.6

Balance as of December 31, 2023 $ ( 107.3 ) $ 107.9 $ ( 689.4 ) $ 4,918.8 $ 141.8 $ 5,060.6

8 unchanged sentences

— — — ( 403.9 ) — ( 403.9 )

Dividends declared to Lear Corporation stockholders — — — ( 184.5 ) — ( 184.5 )

Dividends declared to Lear Corporation shareholders — — — ( 174.7 ) — ( 174.7 )

Dividends declared to noncontrolling interests — — — — ( 74.3 ) ( 74.3 )

18 unchanged sentences

Changes in other long-term liabilities 25.2 17.2 8.2

Loss on extinguishment of debt — — 24.6

Non-cash loss on pending disposal of a non-core business 24.4 — —

Other, net 36.5 ( 15.7 ) 38.8

7 unchanged sentences

Short-term borrowings, net — 17.7 8.0

Term loan repayments ( 50.0 ) — —

Term loan borrowings — 150.0 —

Repurchases of common stock ( 416.7 ) ( 296.5 ) ( 100.3 )

Dividends paid to Lear Corporation stockholders ( 181.9 ) ( 185.5 ) ( 106.7 )

Dividends paid to Lear Corporation shareholders ( 173.7 ) ( 181.9 ) ( 185.5 )

Dividends paid to noncontrolling interests ( 74.8 ) ( 78.7 ) ( 84.6 )

Term loan facility repayments — — ( 220.3 )

Proceeds from the issuance of senior notes — — 698.7

Redemption of senior notes — — ( 221.5 )

Payment of debt issuance and other financing costs ( 1.2 ) — ( 9.9 )

Other, net 21.3 ( 30.1 ) ( 24.9 )

23 unchanged sentences

The accompanying consolidated financial statements include the accounts of Lear, a Delaware corporation, and the wholly owned and less than wholly owned subsidiaries controlled by Lear.

(2) Current Operating Environment

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

Alth ough industry production has recovered modestly and returned to 2019 pre-pandemic production levels in 2023, industry production remains below 2017 peak levels.

Further, 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.

The accompanying consolidated financial statements reflect estimates and assumptions made by management as of December 31, 2023, and for the year then ended.

Such estimates and assumptions affect, among other things, the Company's goodwill, long-lived asset valuations, inventory valuations, valuations of deferred income taxes and income tax contingencies, and credit losses related to the Company's financial instruments.

Events and circumstances arising after December 31, 2023, will be reflected in management's estimates and assumptions in future periods.

For more information related to goodwill, long-lived assets, inventory and credit losses, see Note 3, "Summary of Significant Accounting Policies." For more information related to income taxes, see Note 3, "Summary of Significant Accounting Policies — Income Taxes," and Note 9, "Income Taxes." For more information related to leases, see Note 8, "Leases."

(2) Summary of Significant Accounting Policies

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The Company's allowance for credit losses on financial assets measured at amortized cost, primarily accounts receivable, reflects management's estimate of credit losses over the remaining expected life of such assets, measured primarily using historical experience, as well as current conditions and forecasts that affect the collectability of the reported amount.

Expected credit losses for newly recognized financial assets, as well as changes to expected credit losses during the period, are recognized

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Expected credit losses for newly recognized financial assets, as well as changes to expected credit losses during the period, are recognized in earnings.

The Company also considers geographic and segment specific risk factors in the development of expected credit losses.

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The Company records reserves for inventory in excess of production and/or forecasted requirements and for obsolete inventory in production and service inventories.

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

A summary of inventories is shown below (in millions):

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All other E&D costs are recorded in selling, general and administrative expenses as incurred and totaled $ 183.5 million, $ 180.8 million and $ 173.6 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Property, Plant and Equipment

5 unchanged sentences

Machinery and equipment 5 to 15 years

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

A summary of property, plant and equipment is shown below (in millions):

9 unchanged sentences

As of December 31, 2024, 2023 and 2022, capital expenditures recorded in accounts payable totaled $ 158.4 million, $ 133.1 million and $ 150.2 million, respectively.

Assets Held for Sale

As of December 31, 2024 and 2023, the Company has assets classified as held for sale of $ 47.4 million and $ 4.6 million, respectively.

The criteria for classification as held for sale have been met, as management is committed to a plan to sell the assets, the assets are available for immediate sale in their present condition, an active program to locate a buyer has been initiated, the sale is probable and expected to be completed within one year, and the assets are being marketed at a price that is reasonable in relation to their current fair value.

As of December 31, 2024, $ 42.0 million of the assets held for sale relate to the pending disposal of a non-core business in the Company's Seating segment.

The assets held for sale were measured at the lower of their carrying amount or fair value less costs to sell.

The carrying value of the net asset disposal group was $ 66.4 million.

A loss of $ 24.4 million was recognized as the carrying value exceeded the fair value less costs to sell.

The loss is included in other expense, net in the accompanying consolidated statement of income for the year ended December 31, 2024.

The remaining assets held for sale as of December 31, 2024 and 2023, are primarily buildings and improvements.

The classification of assets held for sale is shown below (in millions):

December 31, 2024 2023

Other current assets 59.3 $ 4.6

Accrued liabilities 11.9 —

Net assets held for sale $ 47.4 $ 4.6

Assets held for sale by segment is shown below (in millions):

December 31, 2024 2023

Seating $ 45.3 $ 1.1

E-Systems 2.1 3.5

Net assets held for sale $ 47.4 $ 4.6

Impairment of Goodwill

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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.

The Company believes 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.

The Company believes that this

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

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.

6 unchanged sentences

The annual goodwill impairment assessment is completed as of the first day of the Company's fourth quarter.

The Company performed a qualitative assessment for each reporting unit.

The Company 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.

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

The goodwill of the E-Systems reporting unit and Seating reporting units where quantitative analyses were performed account for 16.8 % and 11.7 %, respectively, of the Company's total goodwill.

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

A summary of the changes in the carrying amount of goodwill for each of the periods in the two years ended December 31, 2024, is shown below (in millions):

5 unchanged sentences

Acquisition 3.3 — 3.3

Pending disposal of a non-core business

(classified as held for sale) ( 11.7 ) — ( 11.7 )

Foreign currency translation and other ( 27.2 ) ( 3.1 ) ( 30.3 )

1 unchanged sentence

Intangible Assets

As of December 31, 2023, intangible assets consist primarily of certain intangible assets recorded in connection with the Company's acquisitions, including substantially all of Kongsberg Automotive's Interior Comfort Systems business unit ("Kongsberg ICS") in 2022 and I.G.

Bauerhin ("IGB") in 2023 (Note 4, "Acquisitions").

As of December 31, 2024, intangible assets consist primarily of certain intangible assets recorded in connection with the Company's acquisitions, including I.G.

Bauerhin ("IGB") in 2023 (Note 3, "Acquisition").

These intangible assets were recorded at their estimated fair value, based on independent appraisals, as of the transaction or acquisition date.

11 unchanged sentences

Customer-based $ 199.5 $ ( 104.1 ) $ 95.4 14

Licensing agreements 71.0 ( 66.3 ) 4.7 5

Technology 25.7 ( 6.2 ) 19.5 11

1 unchanged sentence

Balance as of December 31, 2024 $ 225.6 $ ( 110.6 ) $ 115.0 13

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

A summary of intangible assets as of December 31, 2023, is shown below (in millions):

11 unchanged sentences

In 2024 and 2023, intangible assets with a gross carrying value of $ 325.6 million and $ 1.3 million, respectively, became fully amortized and are no longer included in the gross carrying value or accumulated amortization.

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Also in 2024, intangible assets with a net carrying value of $ 21.0 million are classified as held for sale in connection with a pending disposal of a non-core business.

Excluding the impact of any future acquisitions, the Company's estimated annual amortization expense for the five succeeding years is shown below (in millions):

10 unchanged sentences

Asset impairment charges are recorded in cost of sales in the accompanying consolidated statements of income for the years ended December 31, 2024, 2023 and 2022.

In 2023, 2022 and 2021, the Company recognized impairment charges of $ 1.9 million, $ 8.9 million and $ 8.5 million, respectively, related to certain definite-lived and indefinite-lived intangible assets of its E-Systems segment resulting from a change in the intended use of such assets.

In 2023 and 2022, the Company recognized impairment charges of $ 1.9 million and $ 8.9 million, respectively, related to certain definite-lived and indefinite-lived intangible assets of its E-Systems segment resulting from a change in the intended use of such assets.

The impairment charges are included in amortization of intangible assets in the accompanying consolidated statements of income for the years ended December 31, 2023 and 2022.

For information related to impairments of right-of-use assets, see Note 7, "Leases."

Impairment of Investments in Affiliates

2 unchanged sentences

Fair value is generally determined using an income approach based on discounted cash flows or negotiated transaction values.

For the years ended December 31, 2023 and 2021, the Company recognized impairment charges of $ 7.0 million and $ 1.0 million, respectively, related to its investments in affiliates.

There were no impairment charges recognized related to the Company's investments in affiliates for the year ended December 31, 2022.

The impairment charges are included in other expense, net in the accompanying consolidated statements of income for the years ended December 31, 2023 and 2021.

For the year ended December 31, 2023, the Company recognized impairment charges of $ 7.0 million related to its investments

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

in affiliates.

The impairment charges are included in other expense, net in the accompanying consolidated statement of income for the year ended December 31, 2023.

There were no impairment charges recognized related to the Company's investments in affiliates for the years ended December 31, 2024 and 2022.

Accrued Liabilities

7 unchanged sentences

Accrued liabilities $ 2,167.6 $ 2,205.2

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

The Company determines if an arrangement contains a lease at inception.

24 unchanged sentences

Further, there were no significant contract liabilities recognized in revenue during the years ended December 31, 2024, 2023 and 2022.

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Amounts billed to customers related to shipping and handling costs are included in net sales in the consolidated statements of income.

9 unchanged sentences

Other incremental net costs principally include equipment and personnel relocation costs and gains and losses on the sales of facilities.

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

to restructuring costs, the Company also incurs incremental manufacturing inefficiency costs at the operating locations impacted by the restructuring actions during the related restructuring implementation period.

In addition to restructuring costs, the Company also incurs incremental manufacturing inefficiency costs at the operating locations impacted by the restructuring actions during the related restructuring implementation period.

Restructuring costs are recognized in the Company's consolidated financial statements in accordance with GAAP.

1 unchanged sentence

Other Expense, Net

Other expense, net includes non-income related taxes, foreign exchange gains and losses, gains and losses related to certain derivative instruments and hedging activities, losses on the extinguishment of debt, gains and losses on the disposal of fixed assets, gains and losses on the consolidation and deconsolidation of affiliates, the non-service cost components of net periodic benefit cost and other miscellaneous income and expense.

Other expense, net 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.

A summary of other expense, net is shown below (in millions):

14 unchanged sentences

If operating results improve or decline on a continual basis in a particular jurisdiction, the Company's decision regarding the need for a valuation allowance could change, resulting in either the initial recognition or reversal of a valuation allowance in that jurisdiction, which could have a significant impact on income tax expense in the period recognized and subsequent periods.

In determining the provision for income taxes for financial statement purposes, the Company makes certain estimates and judgments, which affect its evaluation of the carrying value of its deferred tax assets, as well as its calculation of certain tax liabilities.

In determining the provision for income taxes for financial statement

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

purposes, the Company makes certain estimates and judgments, which affect its evaluation of the carrying value of its deferred tax assets, as well as its calculation of certain tax liabilities.

The Company reclassifies taxes from accumulated other comprehensive loss to earnings as the items to which the tax effects relate are similarly reclassified.

11 unchanged sentences

dollar are reflected in accumulated other comprehensive loss in the consolidated balance sheets.

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Transaction gains and losses that arise from foreign exchange rate fluctuations on transactions denominated in a currency other than the functional currency, except certain long-term intercompany transactions, are included in the consolidated statements of income as incurred.

For the years ended December 31, 2024, 2023 and 2022, other expense, net includes net foreign currency transaction losses of $ 21.4 million, $ 53.0 million and $ 30.4 million, respectively.

For the year ended December 31, 2023, net foreign currency transaction losses include $ 30.6 million related to the hyper-inflationary environment and significant currency devaluation in Argentina.

For the years ended December 31, 2024, 2023 and 2022, net foreign currency transaction losses include $ 16.1 million, $ 30.6 million and $ 10.3 million, respectively, related to the hyper-inflationary environment and significant currency devaluation in Argentina.

For the year ended December 31, 2022, net foreign currency transaction losses include $ 9.6 million related to foreign exchange rate volatility following Russia's invasion of Ukraine.

13 unchanged sentences

Diluted net income per share attributable to Lear $ 8.97 $ 9.68 $ 5.47

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Product Warranty

2 unchanged sentences

The Company is organized under two reportable operating segments:

Seating, which consists of the design, development, engineering and manufacture of complete seat systems and key seat components, and E-Systems, which consists of the design, development, engineering and manufacture of complete electrical distribution and connection systems;

high-voltage power distribution products, including battery disconnect units ("BDUs");

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

Included in the Company's complete seat systems and components are thermal comfort systems and configurable seating product technologies.

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.

Key seat component product offerings include seat trim covers;

Seating and E-Systems.

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

Further, the Company continuously evaluates this portfolio, aligning it with industry trends while balancing risk-adjusted returns, which allows the Company to offer value-added solutions to its customers.

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

The Company's capabilities in operations and supply chain management enable synchronized assembly and just-in-time delivery of complex complete seat systems at high volumes to its customers.

Key seat components include seat trim covers;

surface materials such as leather and fabric;

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.

Our E-Systems segment consists of the design, development, engineering and manufacture of complete electrical distribution and connection systems;

high-voltage power distribution products, including battery disconnect units ("BDUs");

and low-voltage power distribution products and electronic controllers.

• Electrical distribution and connection systems utilize low-voltage and high-voltage wire, high-speed data cables and flat wiring to connect networks and electrical signals and manage electrical power within the vehicle for all types of powertrains – from traditional ICE architectures to the full range of electrified powertrains that require management of higher voltage and power.

Key components of the Company's electrical distribution and connection systems portfolio include wire harnesses, terminals and connectors, high-voltage battery connection systems and engineered components.

High-voltage battery connection systems include intercell connect boards, bus bars and main battery connection

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

• High-voltage battery connection systems include intercell connect boards, bus bars and main battery connection systems.

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 the Company's 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.

The Company's software offerings include embedded control, cybersecurity software and software to control hardware devices.

The Company's customers traditionally have sourced its electronic hardware together with the software that the Company embeds in it.

The other category includes unallocated costs related to corporate headquarters, regional headquarters and the elimination of intercompany activities, none of which meets the requirements for being classified as an operating segment.

The Company's customers traditionally have sourced the Company's electronic hardware together with the software that the Company integrates and embeds in it.

The other category includes unallocated costs related to corporate headquarters, regional headquarters and the elimination of intercompany activities, including intersegment revenues and cost of sales, none of which meets the requirements for being classified as an operating segment.

Corporate and regional headquarters costs include various support functions, such as information technology, advanced research and development, corporate finance, legal, executive administration and human resources.

Each of the Company's operating segments reports its results from operations and makes its requests for capital expenditures directly to the chief operating decision maker.

The economic performance of each operating segment is driven primarily by automotive production volumes in the geographic regions in which it operates, as well as by the success of the vehicle platforms for which it supplies products.

Such costs are reflected in the operating segment results to the extent they are directly attributable to an operating segment.

The Company's chief operating decision maker ("CODM") is Raymond E.

Scott, President and Chief Executive Officer.

Each of the Company's operating segments reports its results from operations and makes its requests for capital expenditures directly to the CODM.

The CODM assesses the operating performance of each segment based on segment earnings which is driven primarily by automotive production volumes in the geographic regions in which it operates, as well as by the success of the vehicle platforms for which it supplies products.

Also, each operating segment operates in the competitive Tier 1 automotive supplier environment and is continually working with its customers to manage costs and improve quality.

The Company's production processes generally make use of hourly labor, dedicated facilities, sequential manufacturing and assembly processes and commodity raw materials.

The Company evaluates the performance of its operating segments based primarily on (i) revenues from external customers, (ii) pretax income before equity in net income of affiliates, interest expense, net and other expense, net ("segment earnings") and (iii) cash flows, being defined as segment earnings less capital expenditures plus depreciation and amortization.

The Company's production processes generally make use of an hourly workforce, dedicated facilities, sequential manufacturing and assembly processes and commodity raw materials.

The CODM evaluates the performance of its operating segments based primarily on (i) revenues from external customers, (ii) pretax income before equity in net income of affiliates, interest expense, net and other expense, net ("segment earnings") and (iii) cash flows, being defined as segment earnings less capital expenditures plus depreciation and amortization.

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

The accounting policies of the Company's operating segments are the same as those described in this note to the consolidated financial statements.

Derivative Instruments and Hedge Activities

Derivative Instruments and Hedging Activities

The Company has used derivative financial instruments, including forwards, futures, options, swaps and other derivative contracts, to reduce the effects of fluctuations in foreign exchange rates and interest rates and the resulting variability of the Company's operating results.

12 unchanged sentences

The Company formally documents its hedge relationships, including the identification of the hedge instruments and the related hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction.

Derivatives are recorded at fair value in other current and long-term assets and other current and long-term liabilities in the consolidated

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

balance sheets.

Derivatives are recorded at fair value in other current and long-term assets and other current and long-term liabilities in the consolidated balance sheets.

The Company also formally assesses whether a derivative used in a hedge transaction is highly effective in offsetting changes in either the fair value or the cash flows of the hedged item.

3 unchanged sentences

During 2024, there were no material changes in the methods or policies used to establish estimates and assumptions.

Other matters subject to estimation and judgment include amounts related to accounts receivable realization, inventory obsolescence, asset impairments, useful lives of fixed and intangible assets and unsettled pricing negotiations with customers and suppliers (Note 3, "Summary of Significant Accounting Policies"), acquisitions (Note 4, "Acquisitions"), restructuring accruals (Note 5, "Restructuring"), deferred tax asset valuation allowances and income taxes (Note 9, "Income Taxes"), pension and other postretirement benefit plan assumptions (Note 10, "Pension and Other Postretirement Benefit Plans") and accruals related to legal, warranty and environmental matters (Note 14, "Legal and Other Contingencies").

Other matters subject to estimation and judgment include amounts related to accounts receivable realization, inventory obsolescence, asset impairments, useful lives of fixed and intangible assets and unsettled pricing negotiations with customers and suppliers (Note 2, "Summary of Significant Accounting Policies"), acquisitions (Note 3, "Acquisition"), restructuring accruals (Note 4, "Restructuring"), deferred tax asset valuation allowances and income taxes (Note 8, "Income Taxes"), pension and other postretirement benefit plan assumptions (Note 9, "Pension and Other Postretirement Benefit Plans") and accruals related to legal, warranty and environmental matters (Note 13, "Legal and Other Contingencies").

Actual results may differ significantly from the Company's estimates.

(4) Acquisitions

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(3) Acquisition

On April 26, 2023, the Company completed the acquisition of IGB, a privately held supplier of automotive seat heating, ventilation and active cooling, steering wheel heating, seat sensors and electronic control modules, headquartered in Grundau-Rothenbergen, Germany.

1 unchanged sentence

The acquisition of IGB furthers the Company's comprehensive strategy to develop and integrate a complete portfolio of thermal comfort systems for automotive seating.

The acquisition of IGB was accounted for as a business combination, and accordingly, the assets acquired and liabilities assumed are included in the accompanying consolidated balance sheet as of December 31, 2023.

The operating results and cash flows of IGB are included in the accompanying consolidated financial statements from the date of acquisition in the Company's Seating segment.

The preliminary purchase price and related allocation are shown below (in millions):

The final purchase price and related allocation are shown below (in millions):

2023 Adjustments December 31,

Preliminary purchase price, net of acquired cash $ 174.5 $ — $ 174.5

Purchase price, net of acquired cash $ 174.5 $ 0.8 $ 175.3

Property, plant and equipment 47.5 ( 0.7 ) 46.8

2 unchanged sentences

Intangible assets 15.4 — 15.4

Preliminary purchase price allocation $ 174.5 $ — $ 174.5

Purchase price allocation $ 174.5 $ 0.8 $ 175.3

Goodwill recognized is primarily attributable to the assembled workforce and expected synergies related to future growth.

2 unchanged sentences

Customer-based assets include IGB's established relationships with its customers and the ability of these customers to generate future economic profits for the Company and have a weighted average useful life of approximately thirteen years .

The purchase price and related allocation are preliminary and may be revised as a result of further adjustments made to the purchase price and additional information obtained regarding assets acquired and liabilities assumed, including, but not limited to, certain tax attributes and contingent liabilities.

For the years ended December 31, 2023 and 2022, the Company incurred transaction costs of $ 0.5 million and $ 1.2 million, respectively, which were expensed as incurred and are recorded in selling, general and administrative expenses in the accompanying consolidated statements of income.

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

The pro-forma effects of this acquisition do not materially impact the Company's reported results for any period presented.

For further information related to acquired assets measured at fair value, see Note 16, "Financial Instruments."

Kongsberg ICS

On February 28, 2022, the Company completed the acquisition of Kongsberg ICS.

Kongsberg ICS specializes in thermal comfort systems, including seat massage, lumbar, heat and ventilation products, with annual sales of approximately $ 300 million, of which approximately 20 % are intercompany.

The acquisition of Kongsberg ICS was accounted for as a business combination, and accordingly, the assets acquired and liabilities assumed are included in the accompanying consolidated balance sheets as of December 31, 2023 and 2022.

The operating results and cash flows of Kongsberg ICS are included in the accompanying consolidated financial statements from the date of acquisition in the Company's Seating segment.

The final purchase price and related allocation are shown below (in millions):

Purchase price, net of acquired cash $ 188.3

Property, plant and equipment 124.1

Other assets purchased and liabilities assumed, net 25.2

Goodwill 27.9

Intangible assets 11.1

Purchase price allocation $ 188.3

Goodwill recognized is primarily attributable to the assembled workforce and expected synergies related to future growth.

Intangible assets consist of amounts recognized for the fair value of developed technology based on an independent appraisal.

Developed technology assets have a weighted average useful life of approximately seventeen years .

For the year ended December 31, 2023, the Company incurred transaction costs of $ 0.5 million, which were expensed as incurred and are recorded in selling, general and administrative expenses in the accompanying consolidated statement of income.

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For further information related to acquired assets measured at fair value, see Note 15, "Financial Instruments."

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(4) Restructuring

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$ 138.9 $ 132.7 $ 154.2

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Restructuring charges by income statement account are shown below (in millions):

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Selling, general and administrative expenses 19.3 20.7 24.5

Other (income) expense, net ( 18.2 ) — ( 6.7 )

Other income, net ( 13.5 ) ( 18.2 ) —

$ 138.9 $ 132.7 $ 154.2

5 unchanged sentences

$ 138.9 $ 132.7 $ 154.2

The Company expects to incur approximately $ 62 million and approximately $ 14 million of additional restructuring costs in its Seating and E-Systems segments, respectively, related to activities initiated as of December 31, 2023, and expects that the components of such costs will be consistent with its historical experience.

The Company expects to incur approximately $ 67 million and approximately $ 11 million of additional restructuring charges in its Seating and E-Systems segments, respectively, related to activities initiated as of December 31, 2024, and expects that the components of such costs will be consistent with its historical experience.

A summary of the changes in the Company's restructuring reserves is shown below (in millions):

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Balance as of December 31, $ 100.0 $ 121.6

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

(5) Investments in Affiliates and Other Related Party Transactions

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Beijing Lear Hyundai Transys Co., Ltd.

(China) 50 50 50

Changchun Lear FAWSN Automotive Seat Systems Co., Ltd.

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(China) 49 49 49

Shenzhen Shinry Lear Electric Control Technology Co., Ltd.

(China) 49 49 —

Hyundai Transys Lear Automotive Private Limited (India) 35 35 35

Techstars Corporate Partner 2017 LLC 34 34 34

RevoLaze, LLC 20 20 20

Maniv Mobility II A, L.P.

Trucks Venture Fund 2, L.P.

Maniv Mobility II A, L.P.

Autotech Fund II, L.P.

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Shenzhen Shinry Lear Electric Control Technology Co., Ltd.

(China) — 49 49

Summarized group financial information for affiliates accounted for under the equity method as of December 31, 2024 and 2023, and for the years ended December 31, 2024, 2023 and 2022, is shown below (unaudited;

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Payables due to affiliates 5.6 0.5

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

A summary of transactions with affiliates accounted for under the equity method and other related parties is shown below (in millions):

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The Company has certain investments with beneficial ownership interests of less than 20% that are accounted for under the equity method as the Company's beneficial ownership interests in these entities are similar to partnership interests.

In 2021, the Company acquired a 49 % interest in Shenyang Jinbei Lear Automotive Seating Co.

("Shenyang Jinbei") for $ 41.3 million.

The investment is accounted for under the equity method as the Company does not control Shenyang Jinbei but does have the ability to exercise significant influence over certain operating and financial policies of Shenyang Jinbei.

The acquisition cost is classified within cash flows used in investing activities in the accompanying consolidated statement of cash flows for the year ended December 31, 2021.

For further information related to acquired assets measured at fair value, see Note 16, "Financial Instruments."

Short-Term Borrowings

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As of December 31, 2024 and 2023, the Company had short-term debt balances outstanding related to draws on its lines of credit of $ 26.7 million and $ 27.5 million, respectively.

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Long-Term Debt

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Long-term debt $ 2,733.3

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

December 31, 2023

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Debt, Net Weighted

Term Loan $ 150.0 $ ( 0.5 ) $ — $ 149.5 6.575 %

2027 Notes 550.0 ( 1.6 ) ( 1.4 ) 547.0 3.885 %

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

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

2027 Notes Issued in 2017

In 2017, the Company issued $ 750 million in aggregate principal amount at maturity of 2027 Notes at a stated coupon rate of 3.8 %.

The 2027 Notes were issued at 99.294 % of par, resulting in a yield to maturity of 3.885 %.

The net proceeds from the offering of $ 744.7 million, after original issue discount, were used to redeem the outstanding $ 500 million in aggregate principal amount of the senior unsecured notes due 2023 at a redemption price equal to 100 % of the principal amount thereof, plus a "make-whole" premium of $ 17.0 million, as well as to refinance a portion of the Company's $ 500 million prior term loan facility.

In November 2021, the Company paid $ 221.5 million for the purchase of $ 200 million in aggregate principal amount of the 2027 Notes, including an early tender premium of $ 21.0 million and related fees of $ 0.5 million.

In connection with this transaction, the Company recognized a loss of $ 23.9 million on the extinguishment of debt.

Prior to June 15, 2027, the Company, at its option, may redeem the 2027 Notes, in whole or in part, at a redemption price equal to 100 % of the principal amount thereof, plus a "make-whole" premium as of, and accrued and unpaid interest to, the redemption date.

On or after June 15, 2027, but prior to the maturity date of September 15, 2027, the Company, at its option, may redeem the 2027 Notes, in whole or in part, at a redemption price equal to 100 % of the principal amount thereof, plus accrued and unpaid interest to the redemption date.

2029 and 2049 Notes Issued in 2019

In 2019, the Company issued $ 375 million in aggregate principal amount at maturity of 2029 Notes and $ 325 million in aggregate principal amount at maturity of 2049 Notes.

The 2029 Notes have a stated coupon rate of 4.25 % and were issued at 99.691 % of par, resulting in a yield to maturity of 4.288 %.

The 2049 Notes have a stated coupon rate of 5.25 % and were issued at 98.32 % of par, resulting in a yield to maturity of 5.363 %.

The net proceeds from the offering of $ 693.3 million, after original issue discount, were used to redeem $ 325 million in aggregate principal amount of 5.375 % senior notes due 2024 (the "2024 Notes") at a redemption price equal to 102.688 % of the principal amount of such 2024 Notes, plus accrued interest, as well as to finance the acquisition of Xevo and for general corporate purposes.

2029 Notes Issued in 2019

Prior to February 15, 2029, the Company, at its option, may redeem the 2029 Notes, in whole or in part, at a redemption price equal to 100 % of the principal amount thereof, plus the applicable premium, if any, as of, and accrued and unpaid interest to, but not including, the redemption date.

On or after February 15, 2029, the Company, at its option, may redeem the 2029 Notes, at any time, in whole or in part, on not less than 15 nor more than 60 days' prior notice, at a redemption price equal to 100 % of the principal amount thereof, plus accrued and unpaid interest to, but not including, the redemption date.

2049 Notes Issued in 2019 and 2020

Prior to November 15, 2048, the Company, at its option, may redeem the 2049 Notes, in whole or in part, at a redemption price equal to 100 % of the principal amount thereof, plus the applicable premium, if any, as of, and accrued and unpaid interest to, but not including, the redemption date.

On or after November 15, 2048, the Company, at its option, may redeem the 2049 Notes, at any time, in whole or in part, on not less than 15 nor more than 60 days' prior notice, at a redemption price equal to 100 % of the principal amount thereof, plus accrued and unpaid interest to, but not including, the redemption date.

2030 Notes and 2049 Notes Issued in 2020

In 2020, the Company issued $ 350 million in aggregate principal amount at maturity of 2030 Notes and $ 300 million in aggregate principal amount at maturity of 2049 Notes.

The 2030 Notes have a stated coupon rate of 3.5 % and were issued at 99.774 % of par, resulting in a yield to maturity of 3.525 %.

The 2049 Notes have a stated coupon rate of 5.25 % and were issued at 106.626 % of par, resulting in a yield to maturity of 4.821 %.

The net proceeds from the offering were $ 669.1 million after original issue discount.

The proceeds were used to redeem $ 650 million in aggregate principal amount of 5.25 % senior notes due 2025 (the "2025 Notes") at a redemption price equal to 102.625 % of the principal amount of such 2025 Notes, plus accrued interest.

Prior to February 28, 2030, the Company, at its option, may redeem the 2030 Notes, in whole or in part, at a redemption price equal to 100 % of the principal amount thereof, plus the applicable premium, if any, as of, and accrued and unpaid interest to, but not including, the redemption date.

On or after February 28, 2030, the Company, at its option, may redeem the 2030 Notes, at any time, in whole or in part, on not less than 15 nor more than 60 days' prior notice, at a redemption price equal to 100 % of the principal amount thereof, plus accrued and unpaid interest to, but not including, the redemption date.

On or after November 15, 2048, the Company, at its option, may redeem the 2049

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Notes, at any time, in whole or in part, on not less than 15 nor more than 60 days' prior notice, at a redemption price equal to 100 % of the principal amount thereof, plus accrued and unpaid interest to, but not including, the redemption date.

2030 Notes Issued in 2020

2032 Notes and 2052 Notes Issued in 2021

In 2021, the Company 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 $ 698.7 million, after original issue discount, were used, in part, to fund the tender of $ 200 million in aggregate principal amount of 2027 Notes (see "— 2027 Notes" above) and the repayment in full of $ 206.3 million outstanding on the Company's $ 250 million term loan facility under its credit agreement (see "— Credit Agreement" below).

The remaining net proceeds were used to finance the 2022 acquisition of Kongsberg ICS (Note 4, "Acquisitions") and for general corporate purposes.

Prior to October 15, 2031, the Company, at its option, may redeem the 2032 Notes, in whole or in part, at a redemption price equal to 100 % of the principal amount thereof, plus the applicable premium, if any, as of, and accrued and unpaid interest to, but not including, the redemption date.

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On or after July 15, 2051, the Company, at its option, may redeem the 2052 Notes, at any time, in whole or in part, on not less than 15 nor more than 60 days' prior notice, at a redemption price equal to 100 % of the principal amount thereof, plus accrued and unpaid interest to, but not including, the redemption date.

In connection with these transactions, the Company paid related issuance costs of $ 7.1 million in 2021.

Subject to certain exceptions, the indentures governing the Notes contain restrictive covenants that, among other things, limit the ability of the Company to:

3 unchanged sentences

Credit Agreement

In 2017, the Company entered into an unsecured credit agreement, which 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, the Company 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, the Company repaid in full $ 206.3 million outstanding on the Term Loan Facility.

Inclusive of this amount, the Company made principal payments on the Term Loan Facility of $ 220.3 million in 2021.

In connection with these transactions, the Company recognized a loss of $ 0.7 million on the extinguishment of debt and paid related issuance costs of $ 2.8 million.

The Company has an amended and restated unsecured credit agreement (the "Credit Agreement"), which consists of a $ 2.0 billion revolving credit facility (the "Revolving Credit Facility").

In June 2023, the Company amended the Credit Agreement to implement the transition from the London Interbank Offered Rate to the Secured Overnight Financing Rate ("SOFR") in accordance with the existing terms of the Credit Agreement, adopting SOFR as the reference rate for certain U.S.

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

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Advances under the Credit Agreement generally bear interest based on (i) Term Benchmark, Central Bank Rate and Risk Free Rate ("RFR") (in each case, as defined in the Credit Agreement) or (ii) Alternate Base Rate ("ABR") and Canadian Prime Rate (in each case, as defined in the Credit Agreement).

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The facility fee, which ranges from 0.075 % to 0.20 % of the total amount committed under the Revolving Credit Facility, is payable quarterly.

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

The C redit Agreement contains various customary representations, warranties and covenants by the Company, including, without limitation, (i) covenants regarding maximum leverage, (ii) limitations on fundamental changes involving the Company or its subsidiaries and (iii) limitations on indebtedness and liens.

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

In May 2023, the Company borrowed $ 150.0 million under its unsecured delayed-draw term loan facility (the "Term Loan") to finance, in part, the acquisition of IGB (Note 4, "Acquisitions").

In May 2023, the Company borrowed $ 150.0 million under its unsecured delayed-draw term loan facility (the "Term Loan") to finance, in part, the acquisition of IGB (Note 3, "Acquisition").

The Term Loan matures on May 1, 2026, three years after the funding date.

1 unchanged sentence

As of December 31, 2024, the interest rate was 5.835 %.

In December 2024, the Company made a principal payment under the Term Loan of $ 50.0 million.

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

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

As of December 31, 2024, other long-term debt, including the current portion, consisted of amounts outstanding under an unsecured working capital loan and finance lease agreements.

As of December 31, 2023, other long-term debt, including the current portion, consisted of amounts outstanding under finance lease agreements.

As of December 31, 2022, other long-term debt, including the current portion, consisted of amounts outstanding under an unsecured working capital loan and a finance lease agreement.

The Company has operating leases for production, office and warehouse facilities, manufacturing and office equipment and vehicles.

7 unchanged sentences

$ 735.1 $ 774.9

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Maturities of lease obligations as of December 31, 2024, are shown below (in millions):

3 unchanged sentences

Lease obligations under operating leases $ 735.1

In addition to the right-of-use assets obtained in exchange for operating lease obligations shown below, the Company acquired $ 14.3 million of right-of-use assets and related lease obligations in conjunction with its acquisition of IGB in 2023 and $ 34.1 million of right-of-use assets and related lease obligations in conjunction with its acquisition of Kongsberg ICS in 2022.

See Note 4, "Acquisitions."

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Cash flow information related to operating leases is shown below (in millions):

14 unchanged sentences

For the years ended December 31, 2024, 2023 and 2022, the Company recognized impairment charges of $ 2.3 million, $ 10.9 million and $ 6.5 million, respectively, related to its right-of-use assets in conjunction with its restructuring actions (Note 4, "Restructuring").

For the year ended December 31, 2024, the Company recognized additional right-of-use asset impairment charges of $ 0.9 million.

For the year ended December 31, 2022, the Company recognized additional right-of-use asset impairment charges of $ 7.0 million related to its Russian operations.

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The weighted average lease term and discount rate for operating leases as of December 31, 2024, are shown below:

Weighted average remaining lease term Seven years

Weighted average remaining lease term Six years

Weighted average discount rate 3.9 %

For the year ended December 31, 2023, the Company recognized a gain of $ 11.3 million on the sale of a manufacturing facility that was subsequently leased back under a short-term lease.

The gain is included in other expense, net in the accompanying consolidated statement of income.

For the year ended December 31, 2023, the Company recognized net gains of $ 11.3 million on the sale of facilities that were subsequently leased back under short-term leases.

The gains are included in other expense, net in the accompanying consolidated statement of income.

Lear Corporation and Subsidiaries

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Research and development and other tax credits (2)

4.7 ( 15.9 ) ( 15.0 )

FDII deduction ( 17.8 ) ( 20.1 ) ( 16.9 )

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Provision for income taxes $ 191.1 $ 180.8 $ 133.7

(1) Relates primarily to changes in valuation allowances on the deferred tax assets of foreign subsidiaries in 2022 and 2021.

(1) Primarily reflects changes in valuation allowances on the deferred tax assets of foreign subsidiaries.

(2) 2024 includes $ 22.1 million of tax expense related to the write-off of a deferred tax asset in a foreign subsidiary that was fully offset by a valuation allowance.

(3) Reflects the impact on the domestic provision for income taxes related to foreign source income, including foreign branch earnings net of the applicable foreign tax credits in the general, foreign branch, GILTI and passive separate limitation categories.

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Accrued liabilities 257.1 275.2

Self-insurance reserves 5.4 5.5

Current asset basis differences 57.2 50.3

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Derivative instruments and hedging activities 29.9 ( 31.6 )

Other 1.2 1.8

Net deferred income tax asset before valuation allowance 1,188.1 1,123.3

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(1) Included in the long-term asset basis differences for the years ended December 31, 2024 and 2023, are deferred tax assets of $ 132.0 million and $ 157.3 million, respectively, related to lease obligations and deferred tax liabilities of $ 132.0 million and $ 157.3 million, respectively, related to right-of-use assets.

As of December 31, 2023 and 2022, the valuation allowance with respect to the Company's deferred tax assets was $ 429.0 million and $ 417.9 million, respectively, a net increase of $ 11.1 million.

As of December 31, 2024 and 2023, the valuation allowance with respect to the Company's deferred tax assets was $ 399.4 million and $ 429.0 million, respectively, a net decrease of $ 29.6 million.

Concluding that a valuation allowance is not required is difficult when there is significant negative evidence, such as cumulative losses in recent years, which is objective and verifiable.

17 unchanged sentences

research and development credits of $ 141.0 million that expire between 2025 and 2044 and other tax credits primarily in international jurisdictions of $ 13.0 million that generally expire between 2025 and 2042.

As of December 31, 2023, 2022 and 2021, the Company's gross unrecognized tax benefits were $ 33.1 million, $ 32.7 million and $ 34.9 million (excluding interest and penalties), respectively, which are recorded in other long-term liabilities in the

As of December 31, 2024, 2023 and 2022, the Company's gross unrecognized tax benefits were $ 34.0 million, $ 33.1 million and $ 32.7 million (excluding interest and penalties), respectively, which are recorded in other long-term liabilities in the accompanying consolidated balance sheets.

All of the Company's gross unrecognized tax benefits, if recognized, would affect the Company's effective tax rate.

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

accompanying consolidated balance sheets.

All of the Company’s gross unrecognized tax benefits, if recognized, would affect the Company’s effective tax rate.

A summary of the changes in gross unrecognized tax benefits is shown below (in millions):

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Additions based on tax positions related to current year 6.6 5.1 4.8

Reductions based on tax positions related to prior years — — ( 4.0 )

Settlements — — ( 1.9 )

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However, as a result of ongoing examinations, tax proceedings in certain countries, additions to the gross unrecognized tax benefits for positions taken and interest and penalties, if any, arising in 2025, it is not possible to estimate the potential net increase or decrease to the Company's gross unrecognized tax benefits during the next twelve months.

The Company considers its significant tax jurisdictions to include China, Germany, Italy, Mexico, Morocco, Spain, the United Kingdom and the United States.

The Company considers its significant tax jurisdictions to include China, Germany, Mexico, Morocco, Spain, the United Kingdom and the United States.

The Company or its subsidiaries generally remain subject to income tax examination in certain U.S.

state and local jurisdictions for years after 2019.

Further, the Company or its subsidiaries remain subject to income tax examination in Spain for years after 2007, in Mexico for years after 2016, in Italy and Morocco for years after 2017, in Germany for years after 2018, in China and the United Kingdom for years after 2019 and in the United States generally for years after 2021.

Further, the Company or its subsidiaries remain subject to income tax examination in Spain for years after 2007, in Mexico for years after 2016, in Germany for years after 2018, in China, Morocco and the United Kingdom for years after 2020, and in the United States generally for years after 2022.

On August 16, 2022, the Inflation Reduction Act of 2022 ("IRA") was signed into law.

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The tax-related provisions of the IRA did not have a material impact on the Company's consolidated financial statements.

For the year ended December 31, 2023, the Company incurred $ 2.9 million of excise taxes on its share repurchases, which is included in repurchases of shares of common stock in the accompanying consolidated statement of equity.

In 2021, the Brazilian Supreme Court ruled on certain matters, including the method of determining the amount of indirect tax credits that taxpayers are entitled to monetize in future periods.

As a result of the ruling, other expense, net includes a gain of $ 45.0 million for the year ended December 31, 2021, for which $ 8.0 million of tax expense was recognized.

For the year ended December 31, 2024 and 2023, the Company incurred $ 3.8 million and $ 2.9 million, respectively, of excise taxes on its share repurchases, which is included in repurchases of shares of common stock in the accompanying consolidated statements of equity.

(9) Pension and Other Postretirement Benefit Plans

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Benefits paid ( 22.3 ) ( 23.4 ) ( 21.8 ) ( 21.8 ) ( 2.7 ) ( 1.6 ) ( 2.2 ) ( 1.4 )

Benefits paid - lump-sum payout (1)

( 52.7 ) — — — — — — —

Curtailment — ( 0.6 ) — — — — — —

Translation adjustment — ( 24.2 ) — 9.5 — ( 1.2 ) — 0.4

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Actuarial gains

As of December 31, 2024, the decrease in the U.S.

pension benefit obligation attributable to actuarial gains primarily relates to an increase in the discount rate.

The decrease in the foreign pension benefit obligation attributable to actuarial gains relates to increases in the discount rate and changes in demographics, partially offset by changes in mortality assumptions.

As of December 31, 2024, the increase in the U.S.

other postretirement benefit obligation attributable to actuarial losses relates to the plans' biennial valuation update, offset by an increase in the discount rate.

The increase in the foreign other postretirement benefit obligation attributable to actuarial losses relates to changes in mortality assumptions.

As of December 31, 2023, the increase in pension and U.S.

other postretirement benefit obligations attributable to actuarial losses primarily relates to a decrease in the discount rate used to determine the benefit obligations.

As of December 31, 2023, the decrease in the foreign other postretirement obligation attributable to actuarial gains relates primarily to demographic and claims cost updates.

As of December 31, 2022, the decrease in the pension and other postretirement benefit obligations attributable to actuarial gains primarily relates to an increase in the discount rate used to determine the benefit obligations (see assumptions below).

other postretirement benefit obligations attributable to actuarial losses primarily relates to a decrease in the discount rate.

As of December 31, 2023, the decrease in the foreign other postretirement obligation attributable to actuarial gains primarily relates to demographic and claims cost updates (see assumptions below).

Plan Assets and Funded Status

A reconciliation of the change in plan assets for the years ended December 31, 2023 and 2022, and the funded status as of December 31, 2023 and 2022, is shown below (in millions):

A reconciliation of the change in plan assets for the years ended December 31, 2024 and 2023, and the funded status as of December 31, 2024 and 2023, are shown below (in millions):

Pension Other Postretirement

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Benefits paid ( 22.3 ) ( 23.4 ) ( 21.8 ) ( 21.8 ) ( 2.7 ) ( 1.6 ) ( 2.2 ) ( 1.4 )

Benefits paid - lump-sum payout (1)

( 52.7 ) — — — — — — —

Translation adjustment — ( 22.7 ) — 9.1 — — — —

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Funded status $ ( 23.0 ) $ ( 37.0 ) $ ( 37.1 ) $ ( 42.8 ) $ ( 27.9 ) $ ( 14.7 ) $ ( 29.1 ) $ ( 15.7 )

(1) See lump-sum payout below

Lear Corporation and Subsidiaries

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Funded status $ ( 23.0 ) $ ( 37.0 ) $ ( 37.1 ) $ ( 42.8 ) $ ( 27.9 ) $ ( 14.7 ) $ ( 29.1 ) $ ( 15.7 )

Lump-Sum Payout

In 2024, the Company initiated a limited lump-sum payout offer ("Lump-Sum Payout") to certain terminated vested plan participants of its U.S.

qualified defined benefit pension plans.

Under the Lump-Sum Payout, eligible plan participants were able to voluntarily elect an early payout of their pension benefits in the form of a lump-sum payment equal to the present value of the participant's pension benefits in satisfaction of all benefits payable to the participant under the plans.

In connection with the Lump-Sum Payout, payments of $ 52.7 million were distributed from existing defined benefit pension plan assets, and the Company recognized a $ 6.6 million non-cash settlement charge, which is included in other expense, net in the consolidated statement of income.

Payments under the Lump-Sum Payout are reflected as benefits paid in the reconciliation of the change in benefit obligation and the change in plan assets for the year ended December 31, 2024.

Accumulated Benefit Obligation

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Fair value of plan assets 187.4 368.2

Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss ("AOCL")

Pretax amounts recognized in other comprehensive income (loss) ("OCIL") for the years ended December 31, 2023 and 2022, is shown below (in millions):

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Other Comprehensive Income (Loss) ("OCIL") and Accumulated Other Comprehensive Loss ("AOCL")

Pretax amounts recognized in other comprehensive income (loss) for the years ended December 31, 2024 and 2023, is shown below (in millions):

Pension Other Postretirement

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Amounts recognized in OCIL during the period 18.2 10.6 0.6 ( 10.9 ) ( 4.4 ) ( 1.8 ) ( 4.1 ) 1.7

0.6 ( 10.9 ) 43.7 53.4 ( 4.1 ) 1.7 24.5 4.7

Unrecognized amounts in AOCL at end of period $ ( 40.1 ) $ ( 61.5 ) $ ( 58.3 ) $ ( 72.1 ) $ 30.7 $ 4.1 $ 35.1 $ 5.9

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Pretax amounts recorded in accumulated other comprehensive loss not yet recognized in net periodic benefit cost (credit) as of December 31, 2024 and 2023, are shown below (in millions):

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The amortization periods range from 3 to 31 years for the Company's defined benefit pension plans and from 6 to 14 years for the Company's other postretirement benefit plans.

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Net Periodic Pension and Other Postretirement Benefit Cost (Credit)

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Amortization of actuarial loss 1.0 1.9 1.0 1.9 2.0 4.1

Curtailment gain — ( 0.6 ) — — — —

Settlement (gains) losses 6.5 ( 0.1 ) ( 0.1 ) ( 0.4 ) 0.4 ( 0.2 )

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Net periodic benefit cost (credit) $ ( 1.7 ) $ 0.4 $ ( 1.9 ) $ 0.7 $ 0.2 $ 0.7

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

The weighted average actuarial assumptions used in determining the benefit obligations are shown below:

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Foreign plans 2.6 % 2.6 % N/A N/A

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

The weighted average actuarial assumptions used in determining the net periodic benefit cost (credit) are shown below:

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As of December 31, 2024 and 2023, the weighted-average interest crediting rate used by one of the Company's U.S.

pension plans was a minimum of 4.7 %.

pension plans was a minimum of 4.5 % and 4.7 %, respectively.

Healthcare Trend Rate

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Government obligations 18.6 — 18.6 — Market

Preferred stock 0.2 0.2 — — Market

Cash and short-term investments 8.3 6.8 1.5 — Market

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For further information on the GAAP fair value hierarchy, see Note 15, "Financial Instruments." Pension plan assets for the foreign plans relate to the Company's pension plans primarily in Canada and the United Kingdom.

The Company's investment policies incorporate an asset allocation strategy that emphasizes the long-term growth of capital.

The Company's investment policies incorporate an asset allocation strategy that prioritizes reducing volatility in the plans' funded status, while generating moderate long-term growth.

The Company believes that this strategy is consistent with the long-term nature of plan liabilities and ultimate cash needs of the plans.

8 unchanged sentences

Excluding alternative investments, mutual funds and ETFs, retained investment managers are provided investment guidelines, which restrict the use of certain assets, including commodities contracts, futures contracts, options, venture capital, real estate, interest-only or principal-only strips and investments in the Company's own debt or equity.

Derivative instruments

Derivative instruments are also prohibited without the specific approval of the Company.

Investment managers are limited in the maximum size of

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

are also prohibited without the specific approval of the Company.

Investment managers are limited in the maximum size of individual security holdings and the maximum exposure to any one industry relative to the total portfolio.

individual security holdings and the maximum exposure to any one industry relative to the total portfolio.

Fixed income managers are provided further investment guidelines that indicate minimum credit ratings for debt securities and limitations on weighted average maturity and portfolio duration.

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Labor-Management Group Pension Plan (EIN 51-6099782-001) and UNITE Here National Retirement Fund (EIN 13-6130178-001), for certain of its employees.

Contributions to these plans are based on four collective bargaining agreements, which expire between July 21, 2024 and June 30, 2027.

Contributions to these plans are based on four collective bargaining agreements, which expire between April 4, 2025 and July 31, 2028.

Detailed information related to these plans is shown below (amounts in millions):

3 unchanged sentences

Certification

December 31, 2022

Certification

41 unchanged sentences

• Voting Rights – All shares of the Company's common stock have identical rights and privileges.

With limited exceptions, holders of common stock are entitled to one vote for each outstanding share of common stock held of record by each stockholder on all matters properly submitted for the vote of the Company's stockholders.

With limited exceptions, holders of common stock are entitled to one vote for each outstanding share of common stock held of record by each shareholder on all matters properly submitted for the vote of the Company's shareholders.

• Dividend Rights – Subject to applicable law, any contractual restrictions and the rights of the holders of outstanding preferred stock, if any, holders of common stock are entitled to receive ratably such dividends and other distributions that the Company's Board of Directors (the "Board"), in its discretion, declares from time to time.

• Liquidation Rights – Upon the dissolution, liquidation or winding up of the Company, subject to the rights of the holders of outstanding preferred stock, if any, holders of common stock are entitled to receive ratably the assets of the Company available for distribution to the Company's stockholders in proportion to the number of shares of common stock held by each stockholder.

• Liquidation Rights – Upon the dissolution, liquidation or winding up of the Company, subject to the rights of the holders of outstanding preferred stock, if any, holders of common stock are entitled to receive ratably the assets of the Company available for distribution to the Company's shareholders in proportion to the number of shares of common stock held by each shareholder.

• Conversion, Redemption and Preemptive Rights – Holders of common stock have no conversion, redemption, sinking fund, preemptive, subscription or similar rights.

5 unchanged sentences

The Company has a common stock share repurchase program (the "Repurchase Program") which permits the discretionary repurchase of its common stock.

Since its inception in the first quarter of 2011, the Board has authorized $ 6.1 billion in share repurchases under the Repurchase Program.

As of December 31, 2023, the Company has repurchased, in aggregate, $ 5.2 billion of its outstanding common stock, at an average price of $ 93.43 per share, excluding commissions and related fees.

As of December 31, 2023, the Company has a remaining repurchase authorization of $ 0.9 billion under its Repurchase Program, which expires on December 31, 2024.

Since its inception in the first quarter of 2011, the Board has authorized $ 6.7 billion in share repurchases, including an increase in the Company's share repurchase authorization to $ 1.5 billion on February 16, 2024.

As of December 31, 2024, the Company has repurchased, in aggregate, $ 5.6 billion of its outstanding common stock, at an average price of $ 94.54 per share, excluding commissions and related fees, and has a remaining repurchase authorization of $ 1.1 billion, which expires on December 31, 2026.

Share repurchases are shown below (in millions, except for shares and per share amounts):

For the year ended December 31, Aggregate Repurchases Cash paid for Repurchases Number of Shares Average Price per Share (1)

For the year ended December 31, Aggregate Repurchases (1)

Cash paid for Repurchases (1), (2)

Number of Shares Average Price

per Share (1)

2024 $ 400.1 $ 416.7 3,578,167 $ 111.81

1 unchanged sentence

2022 $ 100.3 $ 100.3 763,309 $ 131.37

(1) Excludes commissions.

(1) Excludes excise tax and commissions

(2) Includes $ 16.6 million of 2023 share repurchases paid for in the first quarter of 2024

In addition to shares repurchased under the Repurchase Program described above, the Company classifies shares withheld from the settlement of the Company's restricted stock unit and performance share awards to cover tax withholding requirements as common stock held in treasury in the consolidated balance sheet.

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

In 2021, the 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.

Dividends declared and paid are shown below (in millions):

4 unchanged sentences

Comprehensive Income

Comprehensive income is defined as all changes in the Company's net assets except changes resulting from transactions with stockholders.

Comprehensive income is defined as all changes in the Company's net assets except changes resulting from transactions with shareholders.

It differs from net income in that certain items recorded in equity are included in comprehensive income.

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( 77.2 ) ( 141.3 ) ( 35.3 )

Other comprehensive income recognized during the period (net of tax expense of $ 51.0 million in 2023, $ 19.1 million in 2022 and $ 1.2 million in 2021)

Other comprehensive income (loss) recognized during the period (net of tax benefit (expense) of $ 41.1 million in 2024, ($ 51.0 ) million in 2023 and ($ 19.1 ) million in 2022)

( 164.4 ) 215.8 87.3

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For the years ended December 31, 2024, 2023 and 2022, other comprehensive income (loss) related to currency translation adjustments also includes net investment hedge gains (losses) of $ 8.2 million, ($ 5.9 ) million and $ 25.3 million, respectively.

Noncontrolling Interests

In 2021, the Company sold a 49 % equity interest in its wholly owned consolidated subsidiary, Shenyang Lear Jinbei Automotive Systems Co., Ltd.

("Shenyang Lear"), for $ 36.2 million.

The Company continues to control Shenyang Lear, and as a result, the operating results and cash flows of Shenyang Lear continue to be included in the Company's consolidated financial statements.

Noncontrolling interest of $ 7.6 million was recorded in conjunction with the transaction.

The difference between the consideration paid and the carrying value of the noncontrolling interest recorded is reflected in additional paid-in capital in the accompanying consolidated balance sheets.

The proceeds from the sale are classified within cash flows used in financing activities in the accompanying consolidated statement of cash flows for the year ended December 31, 2021.

(12) Stock-Based Compensation

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Under the Plans, the Company has granted restricted stock units, performance shares and stock options to certain of its employees, all of which generally vest in one to three years following the grant date.

For the years ended December 31, 2023, 2022 and 2021, the Company recognized compensation expense related to these awards of $ 65.8 million, $ 50.3 million and

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

$ 58.7 million, respectively.

For the years ended December 31, 2024, 2023 and 2022, the Company recognized compensation expense related to these awards of $ 62.8 million, $ 65.8 million and $ 50.3 million, respectively.

Unrecognized compensation expense related to these awards of $ 66.5 million will be recognized over th e next 1.5 years on a weighted average basis.

1 unchanged sentence

The withheld shares are classified as common stock held in treasury in the accompanying consolidated balance sheets as of December 31, 2024 and 2023.

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

A summary of restricted stock units, performance shares and stock options for the year ended December 31, 2024, is shown below:

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The weighted average grant date fair value of performance shares granted in 2023 and 2022 was $ 138.54 and $ 196.83 , respectively.

The grant date fair value of stock options is based on a Black-Scholes model.

The grant date fair value of options granted in 2021 was $ 35.33 .

There were no stock options granted in 2022.

There were no stock options granted in 2023 or 2022.

(13) Legal and Other Contingencies

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The Company can provide no assurances that it will not experience material claims in the future or that it will not incur significant costs to defend such claims.

The Company is a party to agreements with certain of its customers, whereby these customers may pursue claims against the Company for contribution of all or a portion of the amounts sought in connection with warranty and recall matters.

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

The Company is party to agreements with certain of its customers, whereby these customers may pursue claims against the Company for contribution of all or a portion of the amounts sought in connection with warranty and recall matters.

In certain instances, allegedly defective products may be supplied by the Company's suppliers.

The Company may seek recovery from its suppliers of materials or services included within the Company's products that are associated with product liability claims and/or warranty and recall matters.

The Company may seek recovery from its suppliers of materials or services included within the Company's products that are associated with product liability claims or warranty and recall matters.

The Company carries insurance for certain legal matters, including product liability claims, but such coverage may be limited.

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The Company records reserves for warranty and recall matters when liability is probable and related amounts are reasonably estimable.

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

A summary of the changes in reserves for warranty and recall matters for each of the periods in the two years ended December 31, 2024, is shown below (in millions):

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However, the Company currently is, has been and in the future may become the subject of formal or informal enforcement actions or procedures.

As of December 31, 2023 and 2022, the Company had recorded environmental reserves of $ 4.9 million and $ 7.9 million, respectively.

As of December 31, 2024 and 2023, the Company had recorded environmental reserves of $ 4.9 million.

The Company does not believe that the environmental liabilities associated with its current and former properties will have a material adverse impact on its business, financial condition, results of operations or cash flows ;

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Cash proceeds related to the destruction of inventory and incremental costs are included in cash flows from operating activities and cash proceeds related to the destruction of property, plant and equipment are included in cash flows from investing activities.

As of December 31, 2023, the Company had incurred cumulative losses and incremental costs of $ 27.1 million and received cumulative cash proceeds of $ 22.6 million related to the typhoon.

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

As of December 31, 2023, the Company had incurred cumulative losses and incremental costs related to the typhoon of $ 27.1 million, of which $ 0.6 million was incurred in 2023.

As of December 31, 2023, the Company received cumulative cash proceeds of $ 22.6 million, of which $ 9.3 million was received in 2023.

The classification of insurance recoveries included in the accompanying consolidated financial statements is shown below (in millions):

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(14) Segment Reporting

A summary of revenues from external customers and other financial information by reportable operating segment is shown below (in millions):

A reconciliation of segment earnings to consolidated income before provision for income taxes and equity in net income of affiliates is shown below (in millions):

Year Ended December 31, 2024

1 unchanged sentence

Revenues from external customers $ 17,222.1 $ 6,083.9 $ — $ 23,306.0

Intersegment revenues (1)

3.4 230.1 ( 233.5 ) —

Cost of sales 15,845.5 5,892.2 ( 71.0 ) 21,666.7

Gross margin 1,380.0 421.8 ( 162.5 ) 1,639.3

Selling, general and administrative 348.7 154.6 199.2 702.5

Amortization of intangibles 37.2 11.9 — 49.1

Intersegment support activities 5.6 7.9 ( 13.5 ) —

Segment earnings (3)

$ 988.5 $ 247.4 $ ( 348.2 ) 887.7

Depreciation and amortization 394.4 189.3 20.7 604.4

Capital expenditures 344.6 261.3 20.6 626.5

Total assets 8,371.2 4,046.5 2,277.8 14,695.5

Reconciliation of segment earnings:

Interest expense, net 106.2

Other expense, net 48.6

Consolidated income before provision for income taxes and equity in net income of affiliates $ 732.9

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Year Ended December 31, 2023

1 unchanged sentence

Revenues from external customers $ 17,548.8 $ 5,918.1 $ — $ 23,466.9

Intersegment revenues (1)

0.6 224.9 ( 225.5 ) —

Cost of sales 16,090.0 5,730.4 ( 63.9 ) 21,756.5

Gross margin 1,459.4 412.6 ( 161.6 ) 1,710.4

Selling, general and administrative 346.5 156.6 211.6 714.7

Amortization of intangibles 39.0 23.5 — 62.5

Intersegment support activities 7.0 3.6 ( 10.6 ) —

Segment earnings (3)

$ 1,066.9 $ 228.9 $ ( 362.6 ) 933.2

Depreciation and amortization 369.5 188.2 18.8 576.5

Capital expenditures 369.4 241.3 27.5 638.2

Total assets 7,897.4 3,684.7 2,180.9 13,763.0

Reconciliation of segment earnings:

Interest expense, net 101.1

Other expense, net 54.9

Consolidated income before provision for income taxes and equity in net income of affiliates $ 777.2

Year Ended December 31, 2022

1 unchanged sentence

Revenues from external customers $ 15,711.2 $ 5,180.3 $ — $ 20,891.5

Intersegment revenues (1)

2.3 188.4 ( 190.7 ) —

Cost of sales 14,472.2 5,078.8 ( 69.4 ) 19,481.6

Gross margin 1,241.3 289.9 ( 121.3 ) 1,409.9

Selling, general and administrative 306.9 178.7 199.2 684.8

Amortization of intangibles 38.6 32.2 — 70.8

Intersegment support activities 2.8 4.6 ( 7.4 ) —

Segment earnings (3)

$ 893.0 $ 74.4 $ ( 313.1 ) 654.3

Depreciation and amortization 362.6 195.7 15.6 573.9

Capital expenditures 340.7 217.2 27.2 585.1

Reconciliation of segment earnings:

Interest expense, net 98.6

Other expense, net 46.4

Consolidated income before provision for income taxes and equity in net income of affiliates $ 509.3

(1) Intersegment transactions are accounted for at values comparable to unaffiliated third-party transactions.

(2) The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM.

Intersegment expenses are included within the amounts shown.

(3) For a definition of segment earnings, see Note 2, "Summary of Significant Accounting Policies — Segment Reporting."

Other segment related disclosures are shown below (in millions):

Year Ended December 31, 2024

Seating E-Systems Other Consolidated

Depreciation $ 370.9 $ 180.1 $ 20.6 $ 571.6

Capital expenditures 375.0 166.7 17.0 558.7

Inventories 828.1 773.0 — 1,601.1

Total assets 7,974.4 3,799.1 2,254.0 14,027.5

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

A reconciliation of segment earnings to consolidated income before provision for income taxes and equity in net income of affiliates is shown below (in millions):

For the year ended December 31, 2023

Segment earnings $ 1,295.8 $ 967.4 $ 972.5

Corporate and regional headquarters and elimination of intercompany activity ("Other") ( 362.6 ) ( 313.1 ) ( 297.1 )

Consolidated income before interest, other expense, provision for income taxes and equity in net income of affiliates 933.2 654.3 675.4

Interest expense, net

101.1 98.6 91.8

Other expense, net 54.9 46.4 0.1

Consolidated income before provision for income taxes and equity in net income of affiliates $ 777.2 $ 509.3 $ 583.5

Seating E-Systems Other Consolidated

Depreciation $ 355.4 $ 165.8 $ 20.7 $ 541.9

Capital expenditures 344.6 261.3 20.6 626.5

Inventories 920.9 837.1 — 1,758.0

Total assets 8,371.2 4,046.5 2,277.8 14,695.5

For the year ended December 31, 2022

Seating E-Systems Other Consolidated

Depreciation $ 331.0 $ 156.0 $ 18.7 $ 505.7

Capital expenditures 369.4 241.3 27.5 638.2

Revenues from external customers and tangible long-lived assets for each of the geographic areas in which the Company operates is shown below (in millions):

5 unchanged sentences

Germany 1,364.4 1,402.2 1,211.0

Morocco 1,219.8 1,085.8 778.4

Other countries 9,028.2 9,635.8 7,991.7

2 unchanged sentences

Tangible long-lived assets (1)

United States $ 730.6 $ 688.3

Mexico $ 723.1 $ 740.5

United States 700.2 730.6

China 404.1 457.0

Morocco 242.0 246.5

Poland 203.5 241.5

Germany 168.2 200.3

41 unchanged sentences

Equity Securities Without Readily Determinable Fair Values

As of December 31, 2023 and 2022, investments in equity securities without readily determinable fair values of $ 11.2 million and $ 18.2 million, respectively, are included in other long-term assets in the accompanying consolidated balance sheets.

As of December 31, 2024 and 2023, investments in equity securities without readily determinable fair values of $ 11.2 million are included in other long-term assets in the accompanying consolidated balance sheets.

Such investments are valued at cost, less cumulative impairments and adjusted for changes resulting from observable, orderly transactions for identical or similar securities.

For the years ended December 31, 2023 and 2021, the Company recognized impairment charges of $ 7.0 million and $ 1.0 million, respectively, related to certain investments.

Investments in equity securities without readily determinable fair values have been reduced for cumulative impairments of $ 17.0 million and $ 10.0 million as of December 31, 2023 and 2022, respectively.

For the year ended December 31, 2023, the Company recognized impairment charges of $ 7.0 million related to certain investments.

Investments in equity securities without readily determinable fair values have been reduced for cumulative impairments of $ 17.0 million as of December 31, 2024 and 2023.

Derivative Instruments and Hedging Activities

1 unchanged sentence

The Company uses forwards, swaps and other derivative contracts to reduce the effects of fluctuations in foreign exchange rates on known foreign currency exposures.

Gains and losses on the derivative instruments are intended to offset gains and losses on

Gains and losses on the derivative instruments are intended to offset gains and losses on the hedged transaction in an effort to reduce exposure to fluctuations in foreign exchange rates.

The principal currencies hedged

Lear Corporation and Subsidiaries

Notes to Consolidated Financial Statements (continued)

the hedged transaction in an effort to reduce exposure to fluctuations in foreign exchange rates.

The principal currencies hedged by the Company include the Mexican peso, various European currencies, the Chinese renminbi, the Philippine peso, the Japanese yen and the Canadian dollar.

by the Company include the Mexican peso, various European currencies, the Philippine peso, the Japanese yen, the Brazilian real and the Canadian dollar.

Foreign currency derivative contracts not designated as hedging instruments consist principally of hedges of cash transactions, intercompany loans and certain other balance sheet exposures.

1 unchanged sentence

The Company uses cross-currency interest rate swaps which are designated as net investment hedges of the foreign currency rate exposure of its investment in certain Euro-denominated subsidiaries.

Contra interest expense on net investment hedges was $ 2.3 million, $ 4.6 million and $ 6.5 million for the years ended December 31, 2023, 2022 and 2021, respectively, and is included in interest expense, net in the accompanying consolidated statements of income.

Contra interest expense on net investment hedges was $ 2.3 million for the years ended December 31, 2024 and 2023, and $ 4.6 million for the year ended December 31, 2022, and is included in interest expense, net in the accompanying consolidated statements of income.

Balance Sheet Classification

6 unchanged sentences

Other long-term liabilities ( 61.6 ) ( 0.5 )

( 150.4 ) 154.8

Notional amount $ 2,605.7 $ 2,352.3

28 unchanged sentences

Comprehensive income (loss) $ ( 294.5 ) $ 84.5 $ 87.9

As of December 31, 2023 and 2022, pretax net gains of $ 156.3 million and $ 71.8 million, respectively, related to the Company's derivative instruments and hedge activities were recorded in accumulated other comprehensive loss.

During the next twelve month period, net gains (losses) expected to be reclassified into earnings are shown below (in millions):

As of December 31, 2024 and 2023, pretax net gains (losses) of ($ 138.2 ) million and $ 156.3 million, respectively, related to the Company's derivative instruments and hedge activities were recorded in accumulated other comprehensive loss.

During the next twelve month period, net losses expected to be reclassified into earnings are shown below (in millions):

Foreign currency contracts $ ( 89.3 )

1 unchanged sentence

Total $ ( 91.7 )

Such gains and losses will be reclassified at the time that the underlying hedged transactions are realized.

Such losses will be reclassified at the time that the underlying hedged transactions are realized.

For the years ended December 31, 2024, 2023 and 2022, the Company recognized tax benefit (expense) of $ 61.1 million, ($ 15.9 ) million and ($ 10.6 ) million, respectively, in other comprehensive income (loss) related to its derivative instruments and hedge activities.

39 unchanged sentences

As these non-recurring fair value measurements are generally determined using unobservable inputs, these fair value measurements are classified within Level 3 of the fair value hierarchy.

In 2023, as a result of the acquisition of IGB (Note 4, "Acquisitions"), Level 3 fair value estimates related to property, plant and equipment of $ 47.5 million, developed technology and customer-based intangible assets of $ 15.4 million and right-of-use assets of $ 14.3 million are recorded in the accompanying consolidated balance sheet as of December 31, 2023.

In 2022, as a result of the acquisition of Kongsberg ICS (Note 4, "Acquisitions"), Level 3 fair value estimates related to property, plant and equipment of $ 124.1 million, right-of-use assets of $ 34.1 million and developed technology intangible assets of $ 11.1 million are recorded in the accompanying consolidated balance sheets as of December 31, 2023 and 2022.

Assets held for sale

In 2024, as a result of a pending disposal of a non-core business (Note 2, "Summary of Significant Accounting Policies — Assets Held for Sale"), Level 3 fair value estimates related to the asset group held for sale are reflected in the accompanying consolidated balance sheet as of December 31, 2024.

The fair value estimates of the related asset group were based on the estimated disposal price less costs to sell.

In 2023, as a result of the acquisition of IGB (Note 3, "Acquisition"), Level 3 fair value estimates related to property, plant and equipment of $ 46.8 million, developed technology and customer-based intangible assets of $ 15.4 million and right-of-use assets of $ 14.3 million are recorded in the accompanying consolidated balance sheets as of December 31, 2024 and 2023.

Fair value estimates of property, plant and equipment were based on independent appraisals, giving consideration to the highest and best use of the assets.

5 unchanged sentences

Notes to Consolidated Financial Statements (continued)

In 2023, 2022 and 2021, the Company completed impairment assessments related to certain of its intangible assets resulting from changes in the intended uses of such assets and recorded impairment charges of $ 1.9 million, $ 8.9 million and $ 8.5 million, respectively.

The fair value estimate of the related asset group was based on management's estimates, using a discounted cash flow method (Note 3, "Summary of Significant Accounting Policies — Impairment of Long-Lived Assets").

In 2023, 2022 and 2021, the Company completed impairment assessments related to certain right-of-use assets in conjunction with its restructuring actions (Note 4, "Restructuring") and recorded impairment charges of $ 10.9 million, $ 6.5 million and $ 7.2 million, respectively.

In 2024, 2023 and 2022, the Company completed impairment assessments related to certain fixed assets in conjunction with its restructuring (Note 4, "Restructuring") and other actions and recorded impairment charges of $ 7.3 million, $ 11.4 million and $ 15.6 million, respectively.

Impairment charges in 2022 include $ 4.4 million related to the Company's assets in Russia discussed below.

The fair value estimates of the related assets were based on management's estimates, using a discounted cash flow method.

In 2024, 2023 and 2022, the Company completed impairment assessments related to certain right-of-use assets in conjunction with its restructuring (Note 4, "Restructuring") and other actions and recorded impairment charges of $ 3.2 million, $ 10.9 million and $ 13.5 million, respectively.

Impairment charges in 2022 include $ 7.0 million related to the Company's assets in Russia discussed below.

The fair value estimates of the related assets were based on management's estimates, using a discounted cash flow method.

In 2023 and 2022, the Company completed impairment assessments related to certain of its intangible assets resulting from changes in the intended uses of such assets and recorded impairment charges of $ 1.9 million and $ 8.9 million, respectively.

The fair value estimate of the related asset group was based on management's estimates, using a discounted cash flow method.

In 2022, the Company completed impairment assessments related to substantially all of its operating assets in Russia and recorded charges of $ 19.4 million related to impairments of inventory, property, plant and equipment and right-of-use assets.

The fair value estimates of the related assets were based on management's estimates, using a discounted cash flow method.

In 2022, the Company completed quantitative goodwill impairment analyses for selected reporting units (Note 3, "Summary of Significant Accounting Policies — Impairment of Goodwill").

The Level 3 fair value estimates of the reporting units were based on management's estimates, using the discounted cash flow method.

For further information related to impairment charges, see Note 2, "Summary of Significant Accounting Policies — Impairment of Long-Lived Assets," and Note 7, "Leases."

As of December 31, 2024 and 2023, there were no additional significant assets or liabilities measured at fair value on a non-recurring basis.

1 unchanged sentence

Accounting Standards Updates ("ASU") Issued But Not Yet Adopted:

ASU 2023-07 (issued November 2023), "Segment Reporting - Improving Reportable Segment Disclosures." The ASU requires disclosure of significant segment expenses impacting profit and loss that are regularly provided to the chief operating decision maker.

It also requires public entities to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually.

The update is required to be applied retrospectively to prior periods presented, based on the significant segment expense categories identified and disclosed in the period of adoption.

The update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of the standard on its financial disclosures.

ASU 2023-09 (issued December 2023), "Improvements to Income Tax Disclosures." The ASU requires disclosure of specific categories in the effective tax rate reconciliation, as well as additional information for reconciling items that meet a quantitative threshold.

It also requires disclosure of income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes, and further disaggregated by jurisdiction based on a quantitative threshold, for annual periods.

It also requires disclosure of income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes, and further disaggregated by jurisdiction based on a quantitative threshold.

The update is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The standard is to be adopted prospectively;

The update is to be adopted prospectively;

however, retrospective application is permitted.

The Company is currently evaluating the impact of the standard on its financial disclosures.

The ASU will modify the Company's financial statement disclosures but will not have a significant impact on its consolidated financial statements.

ASU 2024-03 (issued November 2024), "Disaggregation of Income Statement Expenses." The ASU requires the disaggregation of certain expenses presented on the face of the income statement in a tabular footnote disclosure.

The expense categories include purchases of inventory, employee compensation, depreciation and amortization.

It also requires the definition and disclosure of selling expense, a qualitative description of expense amounts not disaggregated and inclusion of existing expense disclosures within the same tabular footnote disclosure.

The update is effective for fiscal years beginning after December 15, 2026, with early adoption permitted.

The update is to be adopted prospectively;

however, retrospective application is permitted.

The ASU will modify the Company's financial statement disclosures but will not have a significant impact on its consolidated financial statements.

The Company considers the applicability and impact of all ASUs issued by the Financial Accounting Standards Board.

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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 7A. Quantitative and Qualitative Disclosures About Market Risk