---

---

---

(1)	Unaudited.

---

---

---

---

---

---

---

Lear Corporation ("Lear," and together with its consolidated subsidiaries, the "Company") and its affiliates design and manufacture automotive seating and electrical distribution systems and related components. The Company’s main customers are automotive original equipment manufacturers. The Company operates facilities worldwide.

The accompanying condensed consolidated financial statements include the accounts of Lear, a Delaware corporation, and the wholly owned and less than wholly owned subsidiaries controlled by Lear. In addition, Lear consolidates all entities, including variable interest entities, in which it has a controlling financial interest. Investments in affiliates in which Lear does not have control, but does have the ability to exercise significant influence over operating and financial policies, are accounted for under the equity method.

In the second quarter of 2019, the Company completed the acquisition of Xevo Inc. ("Xevo"), a Seattle-based, global leader in connected car software, by acquiring all of Xevo's outstanding shares. The acquisition of Xevo has been accounted for as a business combination, and accordingly, the assets acquired and liabilities assumed are included in the accompanying condensed consolidated balance sheets as of July 4, 2020 and December 31, 2019. The operating results and cash flows of Xevo are included in the accompanying condensed consolidated financial statements from the date of acquisition and in the Company's E-Systems segment. For further information related to the acquisition of Xevo, see Note 3, "Acquisition," to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The Company’s annual financial results are reported on a calendar year basis, and quarterly interim results are reported using a thirteen week reporting calendar.

Unprecedented industry disruptions related to the COVID-19 pandemic during the first half of 2020 impacted operations in every region of the world. The Company's operations in China were impacted first, with most plants in the country closed for several weeks during the first quarter. At the end of the first quarter, all of the Company's facilities in China were operating and capacity utilization was increasing. Beginning in mid-March, the Company's operations in Europe, North America, South America and Asia (outside of China) were impacted, with virtually all of its plants closed at the end of the first quarter and closures continuing throughout April and, in most cases, a portion of May. Although manufacturing resumed gradually, most of the Company's plants in its major markets were operating at pre-COVID-19 levels at the end of the second quarter. While the Company experienced significant inefficiencies and incremental costs related to the COVID-19 pandemic in the first half of the year, these inefficiencies began to diminish toward the end of the second quarter.

Various government programs have been enacted to provide financial relief for businesses affected by the COVID-19 pandemic. In the first half of 2020, the Company recognized approximately $80 million of government assistance primarily related to the reimbursement of certain employee costs. The Company recognizes such assistance as a reduction of the related costs as such costs are incurred and the Company is reasonably assured to receive payment.

Although industry production has returned to pre-COVID-19 levels, partially due to the customers' need to replenish inventory levels, it is likely that, for a period of time, the global automotive industry will experience lower demand for new vehicles as a result of the global economic slowdown caused by the COVID-19 pandemic, as new vehicle sales are typically correlated with positive consumer confidence and low unemployment. Further, a resurgence of the virus with corresponding shelter-in-place orders impacting industry production later in the year could also impact the Company's financial results.

The accompanying condensed consolidated financial statements reflect estimates and assumptions made by management as of July 4, 2020, and for the six months then ended. Such estimates and assumptions affect, among other things, the Company's goodwill, long-lived asset and indefinite-lived intangible asset valuations; inventory valuations; assessment of the annual effective tax rate; valuation of deferred income taxes and income tax contingencies; and credit losses related to our financial instruments. Events and circumstances arising after July 4, 2020, including those resulting from the impact of the COVID-19 pandemic, will be reflected in management's estimates and assumptions in future periods.

---

Restructuring costs include employee termination benefits, asset impairment charges and contract termination costs, as well as other incremental costs resulting from the restructuring actions. Employee termination benefits are recorded based on existing union and employee contracts, statutory requirements, completed negotiations and Company policy. Other incremental costs principally include equipment and personnel relocation costs. In addition to restructuring costs, the Company 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 condensed consolidated financial statements in accordance with GAAP. Generally, charges are recorded as restructuring actions are approved and/or implemented.

In the first half of 2020, the Company recorded charges of $70.2 million in connection with its restructuring actions. These charges consist of $49.5 million recorded as cost of sales, $18.0 million recorded as selling, general and administrative expenses and $2.7 million recorded as other expense, net. The restructuring charges consist of employee termination costs of $53.1 million, asset impairment charges of $12.4 million and contract termination costs of $0.6 million, as well as other related costs of $4.1 million. Employee termination benefits were recorded based on existing union and employee contracts, statutory requirements, completed negotiations and Company policy. Asset impairment charges relate to the disposal of buildings, leasehold improvements and/or machinery and equipment with carrying values of $10.4 million in excess of related estimated fair values and the impairment of right-of-use assets of $2.0 million.

The Company expects to incur approximately $48 million of additional restructuring costs related to activities initiated as of July 4, 2020, and expects that the components of such costs will be consistent with its historical experience. Any future restructuring actions will depend upon market conditions, customer actions and other factors.

A summary of 2020 activity is shown below (in millions):

	Accrual as of				2020				Utilization								Accrual as of
	January 1, 2020				Charges				Cash				Non-cash				July 4, 2020
Employee termination benefits	$	152.8			$	53.1			$	(58.5	)		$	—			$	147.4
Asset impairment charges	—				12.4				—				(12.4		)		—
Contract termination costs	4.9				0.6				(0.3		)		—				5.2
Other related costs	—				4.1				(4.1		)		—				—
Total	$	157.7			$	70.2			$	(62.9	)		$	(12.4	)		$	152.6

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. Finished goods and work-in-process inventories include material, labor and manufacturing overhead costs. A summary of inventories is shown below (in millions):

	July 4, 2020				December 31, 2019
Raw materials	$	956.3			$	906.3
Work-in-process	105.7				107.0
Finished goods	353.0				380.4
Reserves	(169.6		)		(135.5		)
Inventories	$	1,245.4			$	1,258.2

The Company incurs pre-production engineering and development ("E&D") and tooling costs related to the products produced for its customers under long-term supply agreements. The Company expenses all pre-production E&D costs for which reimbursement is not contractually guaranteed by the customer. In addition, the Company expenses all pre-production tooling costs related to customer-owned tools for which reimbursement is not contractually guaranteed by the customer or for which the Company does not have a non-cancelable right to use the tooling.

During the first six months of 2020 and 2019, the Company capitalized $91.8 million and $125.8 million, respectively, of pre-production E&D costs for which reimbursement is contractually guaranteed by the customer. During the first six months of

---

2020 and 2019, the Company also capitalized $90.0 million and $91.3 million, respectively, of pre-production tooling costs related to customer-owned tools for which reimbursement is contractually guaranteed by the customer or for which the Company has a non-cancelable right to use the tooling. These amounts are included in other current and long-term assets in the accompanying condensed consolidated balance sheets.

During the first six months of 2020 and 2019, the Company collected $127.8 million and $163.7 million, respectively, of cash related to E&D and tooling costs.

The classification of recoverable customer E&D and tooling costs related to long-term supply agreements is shown below (in millions):

	July 4, 2020				December 31, 2019
Current	$	189.6			$	157.2
Long-term	135.2				113.8
Recoverable customer E&D and tooling	$	324.8			$	271.0

Property, plant and equipment is stated at cost. Costs associated with the repair and maintenance of the Company’s property, plant and equipment are expensed as incurred. Costs associated with improvements which extend the life, increase the capacity or improve the efficiency or safety of the Company’s property, plant and equipment are capitalized and depreciated over the remaining useful life of the related asset. Depreciable property is depreciated over the estimated useful lives of the assets, using principally the straight-line method.

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

	July 4, 2020				December 31, 2019
Land	$	109.6			$	113.1
Buildings and improvements	819.3				831.3
Machinery and equipment	3,980.5				3,844.1
Construction in progress	318.2				382.4
Total property, plant and equipment	5,227.6				5,170.9
Less – accumulated depreciation	(2,609.3		)		(2,466.7		)
Property, plant and equipment, net	$	2,618.3			$	2,704.2

Depreciation expense was $114.3 million and $112.4 million in the three months ended July 4, 2020 and June 29, 2019, respectively, and $227.7 million and $223.3 million in the six months ended July 4, 2020 and June 29, 2019, respectively.

The Company monitors its long-lived assets for impairment indicators on an ongoing basis in accordance with GAAP. If impairment indicators exist, the Company performs the required impairment analysis by comparing the undiscounted cash flows expected to be generated from the long-lived assets to the related net book values. If the net book value exceeds the undiscounted cash flows, an impairment loss is measured and recognized. In the first six months of 2020, the Company did not recognize any long-lived asset impairment charges, except as discussed below. The Company will, however, continue to assess the impact of significant industry events on the realization of its long-lived assets.

In the first six months of 2020 and 2019, the Company recognized asset impairment charges of $12.4 million and $3.6 million, respectively, in conjunction with its restructuring actions (Note 3, "Restructuring"). In the six months ended July 4, 2020, the Company recognized additional asset impairment charges of $0.6 million.

---

A summary of the changes in the carrying amount of goodwill, by operating segment, in the six months ended July 4, 2020, is shown below (in millions):

	Seating				E-Systems				Total
Balance at January 1, 2020	$	1,235.4			$	378.9			$	1,614.3
Foreign currency translation and other	(7.2		)		(1.0		)		(8.2		)
Balance at July 4, 2020	$	1,228.2			$	377.9			$	1,606.1

Goodwill is not amortized but is tested for impairment on at least an annual basis. Impairment testing is required more often than annually if an event or circumstance indicates that an impairment is more likely than not to have occurred. In conducting its annual impairment testing, the Company may first perform a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount. If not, no further goodwill impairment testing is required. If it is more likely than not that a reporting unit’s fair value is less than its carrying amount, or if the Company elects not to perform a qualitative assessment of a reporting unit, the Company then compares the fair value of the reporting unit to the related net book value. If the net book value of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill recorded. The Company conducts its annual impairment testing as of the first day of its fourth quarter.

During the first quarter of 2020, an interim goodwill impairment analysis related to one of the Company’s reporting units within its E-Systems operating segment was performed, largely due to industry disruptions resulting from the COVID-19 pandemic. The goodwill impairment analysis reflected the Company’s best estimates of the COVID-19 pandemic’s ultimate impact on industry conditions, including consumer demand, as well as economic recovery. The results of the quantitative analysis indicated that the fair value of the reporting unit exceeded the related carrying value. During the second quarter of 2020, the Company determined that it was not more likely than not that this reporting unit was impaired. The reporting unit continues to be at risk of failing a future quantitative assessment if the impact of the COVID-19 pandemic is more severe or if economic recovery is slower or weaker than anticipated. As of July 4, 2020, the goodwill of the reporting unit represents less than 7% of the Company’s total goodwill.

There was no impairment of goodwill in the first six months of 2020 and 2019. The Company will, however, continue to assess the impact of significant events or circumstances on its recorded goodwill.

A summary of long-term debt, net of unamortized debt issuance costs and unamortized original issue premium (discount), and the related weighted average interest rates is shown below (in millions):

	July 4, 2020
Debt Instrument	Long-Term Debt				Unamortized Debt Issuance Costs				Unamortized Original Issue Premium (Discount)				Long-Term Debt, Net				Weighted Average Interest Rate
Credit Agreement — Term Loan Facility	$	228.1			$	(0.8	)		$	—			$	227.3			1.360%
3.8% Senior Notes due 2027 (the "2027 Notes")	750.0				(4.4		)		(3.8		)		741.8				3.885%
4.25% Senior Notes due 2029 (the "2029 Notes")	375.0				(2.7		)		(1.0		)		371.3				4.288%
3.5% Senior Notes due 2030 (the "2030 Notes")	350.0				(2.7		)		(0.8		)		346.5				3.525%
5.25% Senior Notes due 2049 (the "2049 Notes")	625.0				(6.4		)		14.4				633.0				5.103%
	$	2,328.1			$	(17.0	)		$	8.8			$	2,319.9
Less — Current portion													(17.2		)
Long-term debt													$	2,302.7

---

	December 31, 2019
Debt Instrument	Long-Term Debt				Unamortized Debt Issuance Costs				Unamortized Original Issue Discount				Long-Term Debt, Net				Weighted Average Interest Rate
Credit Agreement — Term Loan Facility	$	234.4			$	(1.0	)		$	—			$	233.4			2.880%
5.25% Senior Notes due 2025 (the "2025 Notes")	650.0				(4.2		)		—				645.8				5.250%
2027 Notes	750.0				(4.7		)		(4.1		)		741.2				3.885%
2029 Notes	375.0				(2.9		)		(1.1		)		371.0				4.288%
2049 Notes issued 2019	325.0				(3.3		)		(5.3		)		316.4				5.363%
	$	2,334.4			$	(16.1	)		$	(10.5	)		2,307.8
Less — Current portion													(14.1		)
Long-term debt													$	2,293.7

Senior Notes

The issuance, maturity and interest payment dates of the Company's senior unsecured 2027 Notes, 2029 Notes, 2030 Notes and 2049 Notes (together, the "Notes") are shown below:

Note	Issuance Date(s)	Maturity Date	Interest Payment Dates
2027 Notes	August 2017	September 15, 2027	March 15 and September 15
2029 Notes	May 2019	May 15, 2029	May 15 and November 15
2030 Notes	February 2020	May 30, 2030	May 30 and November 30
2049 Notes	May 2019 and February 2020	May 15, 2049	May 15 and November 15

In February 2020, the Company issued $350.0 million in aggregate principal amount at maturity of 2030 Notes and an additional $300.0 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 the $650.0 million in aggregate principal amount of 2025 Notes at a redemption price equal to 102.625% of the principal amount of such 2025 Notes, plus accrued interest.

In connection with these transactions, the Company recognized a loss of $21.1 million on the extinguishment of debt and paid related issuance costs of $5.9 million in the six months ended July 4, 2020.

Covenants

Subject to certain exceptions, the indentures governing the Notes contain certain investment-grade style restrictive covenants that, among other things, limit the ability of the Company to: (i) create or permit certain liens and (ii) consolidate, merge or sell all or substantially all of the Company’s assets. The indentures governing the Notes also provide for customary events of default.

As of July 4, 2020, the Company was in compliance with all covenants under the indentures governing the Notes.

Credit Agreement

The Company's unsecured credit agreement (the "Credit Agreement"), dated August 8, 2017, consists of a $1.75 billion revolving credit facility (the "Revolving Credit Facility") and a $250.0 million term loan facility (the "Term Loan Facility"). In February 2020, the Company entered into an agreement to extend the maturity date of the Revolving Credit Facility by one year to August 8, 2024. The maturity date of the Term Loan Facility remains August 8, 2022.

In connection with the extension agreement, the Company paid related issuance costs of $1.0 million.

As of July 4, 2020, there were $1.0 billion of borrowings outstanding under the Revolving Credit Facility, which is reflected in current liabilities in the accompanying condensed consolidated balance sheet. As of December 31, 2019, there were no

---

borrowings outstanding under the Revolving Credit Facility. As of July 4, 2020 and December 31, 2019, there were $228.1 million and $234.4 million, respectively, of borrowings outstanding under the Term Loan Facility.

In the first six months of 2020, the Company made required principal payments of $6.3 million under the Term Loan Facility.

Advances under the Revolving Credit Facility and the Term Loan Facility generally bear interest based on (i) the Eurocurrency Rate (as defined in the Credit Agreement) or (ii) the Base Rate (as defined in the Credit Agreement) plus a margin, determined in accordance with a pricing grid. The range and the rate as of July 4, 2020, are shown below (in percentages):

		Eurocurrency Rate									Base Rate
								Rate as of									Rate as of
		Minimum			Maximum			July 4, 2020			Minimum			Maximum			July 4, 2020
Revolving Credit Facility		1.00	%		1.60	%		1.10	%		0.00	%		0.60	%		0.10	%
Term Loan Facility		1.125	%		1.90	%		1.25	%		0.125	%		0.90	%		0.25	%

A facility fee, which ranges from 0.125% to 0.30% of the total amount committed under the Revolving Credit Facility, is payable quarterly.

Covenants

The Credit 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 July 4, 2020, the Company was in compliance with all covenants under the Credit Agreement.

For further information related to the Company's debt, see Note 6, "Debt," to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Right-of-Use Assets and Lease Obligations

The Company has operating leases for production, office and warehouse facilities, manufacturing and office equipment and vehicles. Operating lease assets and obligations included in the accompanying condensed consolidated balance sheet are shown below (in millions):

	July 4, 2020				December 31, 2019
Right-of-use assets under operating leases:
Other long-term assets	$	537.2			$	527.0
Lease obligations under operating leases:
Accrued liabilities	$	113.9			$	113.9
Other long-term liabilities	434.0				422.4
	$	547.9			$	536.3

---

Maturities of lease obligations as of July 4, 2020, are shown below (in millions):

	July 4, 2020
2020 (1)	$	69.3
2021	121.9
2022	97.5
2023	76.2
2024	63.4
Thereafter	208.9
Total undiscounted cash flows	637.2
Less: Imputed interest	(89.3		)
Lease obligations under operating leases	$	547.9

⁽¹⁾ For the remaining six months

The Company has entered into one lease contract which is expected to commence in the third quarter of 2021 with a lease term of approximately ten years. The aggregate right-of-use asset and related lease obligation are expected to be approximately $50 million.

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

	Six Months Ended
	July 4, 2020				June 29, 2019
Non-cash activity:
Right-of-use assets obtained in exchange for operating lease obligations	$	83.2			$	66.1
Operating cash flows:
Cash paid related to operating lease obligations	$	70.9			$	66.5

Lease expense included in the accompanying condensed consolidated statements of comprehensive income (loss) is shown below (in millions):

	Three Months Ended								Six Months Ended
	July 4, 2020				June 29, 2019				July 4, 2020				June 29, 2019
Operating lease expense	$	35.3			$	35.0			$	71.6			$	67.5
Short-term lease expense	3.9				4.6				8.0				9.0
Variable lease expense	1.8				1.2				3.7				1.8
Total lease expense	$	41.0			$	40.8			$	83.3			$	78.3

In the six months ended July 4, 2020, the Company recognized an impairment charge of $2.0 million related to its right-of-use assets in conjunction with its restructuring actions (Note 3, "Restructuring").

The weighted average lease term and discount rate for operating leases are shown below:

	July 4, 2020
Weighted average remaining lease term (in years)	7.1
Weighted average discount rate	3.4	%

For further information related to the Company's leases, see Note 7, "Leases," to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

---

The Company sponsors defined benefit pension plans and other postretirement benefit plans (primarily for the continuation of medical benefits) for eligible employees in the United States and certain other countries.

Net Periodic Pension and Other Postretirement Benefit (Credit) Cost

The components of the Company’s net periodic pension benefit (credit) cost are shown below (in millions):

	Three Months Ended																Six Months Ended
	July 4, 2020								June 29, 2019								July 4, 2020								June 29, 2019
	U.S.				Foreign				U.S.				Foreign				U.S.				Foreign				U.S.				Foreign
Service cost	$	—			$	1.2			$	—			$	1.6			$	—			$	2.4			$	—			$	3.2
Interest cost	4.1				3.0				4.7				3.6				8.2				6.1				9.3				7.3
Expected return on plan assets	(5.3		)		(4.9		)		(5.1		)		(5.2		)		(10.6		)		(9.9		)		(10.1		)		(10.4		)
Amortization of actuarial loss	0.5				1.2				0.4				1.9				1.1				2.3				0.9				3.9
Settlement loss	—				—				—				—				0.3				—				0.1				—
Net periodic benefit (credit) cost	$	(0.7	)		$	0.5			$	—			$	1.9			$	(1.0	)		$	0.9			$	0.2			$	4.0

The components of the Company’s net periodic other postretirement benefit (credit) cost are shown below (in millions):

	Three Months Ended																Six Months Ended
	July 4, 2020								June 29, 2019								July 4, 2020								June 29, 2019
	U.S.				Foreign				U.S.				Foreign				U.S.				Foreign				U.S.				Foreign
Service cost	$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	0.1
Interest cost	0.4				0.2				0.6				0.4				0.8				0.4				1.1				0.7
Amortization of actuarial gain	(0.4		)		—				(0.5		)		—				(0.8		)		—				(1.1		)		—
Amortization of prior service credit	(0.1		)		—				(0.1		)		(0.1		)		(0.1		)		—				(0.1		)		(0.1		)
Net periodic benefit (credit) cost	$	(0.1	)		$	0.2			$	—			$	0.3			$	(0.1	)		$	0.4			$	(0.1	)		$	0.7

Contributions

In the six months ended July 4, 2020, employer contributions to the Company’s domestic and foreign defined benefit pension plans were $5.1 million.

The Company enters into contracts with its customers to provide production parts generally at the beginning of a vehicle’s life cycle. Typically, these contracts do not provide for a specified quantity of products, but once entered into, the Company is often expected to fulfill its customers’ purchasing requirements for the production life of the vehicle. Many of these contracts may be terminated by the Company’s customers at any time. Historically, terminations of these contracts have been minimal. The Company receives purchase orders from its customers, which provide the commercial terms for a particular production part, including price (but not quantities). Contracts may also provide for annual price reductions over the production life of the vehicle, and prices may be adjusted on an ongoing basis to reflect changes in product content/cost and other commercial factors.

Revenue is recognized at a point in time when control of the product is transferred to the customer under standard commercial terms, as the Company does not have an enforceable right to payment prior to such transfer. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to in exchange for those products based on the annual purchase orders, annual price reductions and ongoing price adjustments. In the first half of 2020, revenue recognized related to prior years represented approximately 1% of consolidated net sales. The Company's customers pay for products received in accordance with payment terms that are customary within the industry. The Company's contracts with its customers do not have significant financing components.

---

The Company records a contract liability for advances received from its customers. As of July 4, 2020 and December 31, 2019, there were no significant contract liabilities recorded. Further, there were no significant contract liabilities recognized in revenue during the first six months of 2020.

Amounts billed to customers related to shipping and handling costs are included in net sales in the condensed consolidated statements of comprehensive income (loss). Shipping and handling costs are accounted for as fulfillment costs and are included in cost of sales in the condensed consolidated statements of comprehensive income (loss).

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

A summary of the Company’s revenue by reportable operating segment and geography is shown below (in millions):

	Three Months Ended
	July 4, 2020												June 29, 2019
	Seating				E-Systems				Total				Seating				E-Systems				Total
North America	$	614.8			$	125.1			$	739.9			$	1,597.9			$	274.5			$	1,872.4
Europe and Africa	550.1				273.5				823.6				1,461.5				537.9				1,999.4
Asia	557.9				283.0				840.9				659.2				306.6				965.8
South America	32.1				8.0				40.1				120.8				49.2				170.0
	$	1,754.9			$	689.6			$	2,444.5			$	3,839.4			$	1,168.2			$	5,007.6

	Six Months Ended
	July 4, 2020												June 29, 2019
	Seating				E-Systems				Total				Seating				E-Systems				Total
North America	$	2,188.5			$	432.6			$	2,621.1			$	3,189.0			$	559.5			$	3,748.5
Europe and Africa	1,786.1				790.1				2,576.2				3,015.8				1,155.0				4,170.8
Asia	1,015.3				501.9				1,517.2				1,310.6				610.9				1,921.5
South America	131.6				56.1				187.7				237.7				89.2				326.9
	$	5,121.5			$	1,780.7			$	6,902.2			$	7,753.1			$	2,414.6			$	10,167.7

Other (income) 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.

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

	Three Months Ended								Six Months Ended
	July 4, 2020				June 29, 2019				July 4, 2020				June 29, 2019
Other expense	$	4.4			$	16.7			$	43.6			$	27.3
Other income	(7.6		)		(2.9		)		(6.3		)		(9.1		)
Other (income) expense, net	$	(3.2	)		$	13.8			$	37.3			$	18.2

In the three months ended July 4, 2020, other income includes net foreign currency transaction gains of $1.0 million. In the six months ended July 4, 2020, other expense includes net foreign currency transaction losses of $16.7 million and a loss of $21.1 million on the extinguishment of debt (Note 8, "Debt").

In the three and six months ended June 29, 2019, other expense includes net foreign currency transaction losses of $1.4 million and $7.2 million, respectively, and a loss of $10.6 million on the extinguishment of debt.

---

A summary of the provision (benefit) for income taxes and the corresponding effective tax rate for the three and six months ended July 4, 2020 and June 29, 2019, is shown below (in millions, except effective tax rates):

	Three Months Ended								Six Months Ended
	July 4, 2020				June 29, 2019				July 4, 2020				June 29, 2019
Provision (benefit) for income taxes	$	(41.0	)		$	73.3			$	(14.5	)		$	116.4
Pretax income (loss) before equity in net income of affiliates	$	(318.3	)		$	266.9			$	(209.8	)		$	553.8
Effective tax rate	12.9		%		27.5		%		6.9		%		21.0		%

In the first six months of 2020 and 2019, the provision for income taxes was primarily impacted by the level and mix of earnings among tax jurisdictions. In addition, the Company recognized tax benefits (expense) related to the significant, discrete items shown below (in millions):

	Six Months Ended
	July 4, 2020				June 29, 2019
Restructuring charges and various other items	$	31.1			$	26.6
Valuation allowances on deferred tax assets of foreign subsidiaries	(22.0		)		(10.4		)
Share-based compensation	(0.2		)		3.2
Change in tax status of certain affiliates	—				18.4
	$	8.9			$	37.8

Excluding the items above, the effective tax rate for the first six months of 2020 and 2019 approximated the U.S. federal statutory income tax rate of 21%, adjusted for income taxes on foreign earnings, losses and remittances, valuation allowances, tax credits, income tax incentives and other permanent items.

On March 27, 2020, the CARES Act was signed into law. A major provision of the CARES Act allows net operating losses from the 2018, 2019 and 2020 tax years to be carried back up to five years, including years in which the U.S. federal corporate income tax rate was 35%, as opposed to the current U.S federal corporate income tax rate of 21%. For the three and six months ended July 4, 2020, the Company recognized tax benefits of $28.0 million due to the five-year net operating loss carryback period provided under the CARES Act, which include the positive and negative tax rate impact of various U.S. permanent and temporary differences, including the negative tax rate impact from the inclusion of foreign branch income.

For the six months ended July 4, 2020, the Company utilized the discrete effective tax rate method, as allowed by Accounting Standards Codification ("ASC") 740, "Income Taxes," to calculate its interim income tax provision. The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis. The Company believes that, as a result of the current uncertainty due to the COVID-19 pandemic, the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate as minor changes in annual forecasted pre-tax income or income tax expense or benefit can produce significant changes in the estimated annual effective tax rate. For the six months ended June 29, 2019, the Company calculated its interim income tax provision based on the estimated annual effective rate. 

The Company’s current and future provision for income taxes is impacted by the initial recognition of and changes in valuation allowances in certain countries. The Company intends to maintain these allowances until it is more likely than not that the deferred tax assets will be realized. The Company’s future provision for income taxes will include no tax benefit with respect to losses incurred and, except for certain jurisdictions, no tax expense with respect to income generated in these countries until the respective valuation allowances are eliminated. Accordingly, income taxes are impacted by changes in valuation allowances and the mix of earnings among jurisdictions. The Company evaluates the realizability of its deferred tax assets on a quarterly basis. In completing this evaluation, the Company considers all available evidence in order to determine whether, based on the weight of the evidence, a valuation allowance for its deferred tax assets is necessary. Such evidence includes historical results, future reversals of existing taxable temporary differences and expectations for future taxable income (exclusive of the reversal of temporary differences and carryforwards), as well as the implementation of feasible and prudent tax planning strategies. If, based on the weight of the evidence, it is more likely than not that all or a portion of the Company’s deferred tax assets will not

---

be realized, a valuation allowance is recorded. 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.

Basic net income (loss) per share available to Lear common stockholders is computed using the two-class method by dividing net income (loss) attributable to Lear, after deducting the redemption adjustment related to the redeemable noncontrolling interest, by the average number of common shares outstanding during the period. Common shares issuable upon the satisfaction of certain conditions pursuant to a contractual agreement are considered common shares outstanding and are included in the computation of basic net income (loss) per share available to Lear common stockholders.

Diluted net income per share available to Lear common stockholders is computed using the two-class method by dividing net income attributable to Lear, after deducting the redemption adjustment related to the redeemable noncontrolling interest, by the average number of common shares outstanding, including the dilutive effect of common stock equivalents computed using the treasury stock method and the average share price during the period. The computation of diluted net loss per share available to Lear common stockholders excludes the effect of common stock equivalents as such effect would be anti-dilutive. 

A summary of information used to compute basic and diluted net income (loss) per share available to Lear common stockholders is shown below (in millions, except share and per share data):

	Three Months Ended								Six Months Ended
	July 4, 2020				June 29, 2019				July 4, 2020				June 29, 2019
Net income (loss) attributable to Lear	$	(293.9	)		$	182.8			$	(217.5	)		$	411.7
Redeemable noncontrolling interest adjustment	—				(0.9		)		—				5.8
Net income (loss) available to Lear common stockholders	$	(293.9	)		$	181.9			$	(217.5	)		$	417.5
Average common shares outstanding	60,102,925				62,191,022				60,310,559				62,501,419
Dilutive effect of common stock equivalents	—				163,312				—				233,075
Average diluted shares outstanding	60,102,925				62,354,334				60,310,559				62,734,494
Basic net income (loss) per share available to Lear common stockholders	$	(4.89	)		$	2.92			$	(3.61	)		$	6.68
Diluted net income (loss) per share available to Lear common stockholders	$	(4.89	)		$	2.92			$	(3.61	)		$	6.66

For further information related to the redeemable noncontrolling interest adjustment, see Note 15, "Comprehensive Income (Loss) and Equity."

---

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as all changes in the Company’s net assets except changes resulting from transactions with stockholders. It differs from net income (loss) in that certain items recorded in equity are included in comprehensive income (loss).

Accumulated Other Comprehensive Loss

A summary of changes, net of tax, in accumulated other comprehensive loss for the three and six months ended July 4, 2020, is shown below (in millions):

	July 4, 2020
	Three Months Ended				Six Months Ended
Defined benefit plans:
Balance at beginning of period	$	(208.7	)		$	(217.6	)
Reclassification adjustments (net of tax expense of $0.4 million and $0.7 million in the three and six months ended July 4, 2020, respectively)	0.8				2.1
Other comprehensive income (loss) recognized during the period (net of tax impact of $— million in the three and six months ended July 4, 2020)	(3.8		)		3.8
Balance at end of period	$	(211.7	)		$	(211.7	)
Derivative instruments and hedging:
Balance at beginning of period	$	(111.3	)		$	9.8
Reclassification adjustments (net of tax expense of $3.1 million and $1.7 million in the three and six months ended July 4, 2020, respectively)	11.0				5.3
Other comprehensive income (loss) recognized during the period (net of tax benefit (expense) of ($12.0) million and $15.9 million in the three and six months ended July 4, 2020, respectively)	49.9				(65.5		)
Balance at end of period	$	(50.4	)		$	(50.4	)
Foreign currency translation:
Balance at beginning of period	$	(729.3	)		$	(564.9	)
Other comprehensive income (loss) recognized during the period (net of tax benefit (expense) of $2.6 million and ($2.2) million in the three and six months ended July 4, 2020, respectively)	68.4				(96.0		)
Balance at end of period	$	(660.9	)		$	(660.9	)
Total accumulated other comprehensive loss	$	(923.0	)		$	(923.0	)

In the three months ended July 4, 2020, foreign currency translation adjustments are primarily related to the strengthening of the Euro relative to the U.S. dollar. In the six months ended July 4, 2020, foreign currency translation adjustments are primarily related to the weakening of the Brazilian real and the Chinese renminbi relative to the U.S. dollar.

In the three and six months ended July 4, 2020, foreign currency translation adjustments include pretax (gains) losses of ($0.5) million and $1.1 million, respectively, related to intercompany transactions for which settlement is not planned or anticipated in the foreseeable future.

---

A summary of changes, net of tax, in accumulated other comprehensive loss for the three and six months ended June 29, 2019, is shown below (in millions):

	June 29, 2019
	Three Months Ended				Six Months Ended
Defined benefit plans:
Balance at beginning of period	$	(172.5	)		$	(172.8	)
Reclassification adjustments (net of tax expense of $— million and $0.4 million in the three and six months ended June 29, 2019, respectively)	1.6				3.2
Other comprehensive loss recognized during the period (net of tax impact of $— million in the three and six months ended June 29, 2019)	(3.0		)		(4.3		)
Balance at end of period	$	(173.9	)		$	(173.9	)
Derivative instruments and hedging:
Balance at beginning of period	$	(9.0	)		$	(9.7	)
Reclassification adjustments (net of tax benefit of $2.7 million and $4.8 million in the three and six months ended June 29, 2019, respectively)	(10.0		)		(17.1		)
Other comprehensive income recognized during the period (net of tax expense of $5.0 million and $7.3 million in the three and six months ended June 29, 2019, respectively)	17.8				25.6
Balance at end of period	$	(1.2	)		$	(1.2	)
Foreign currency translation:
Balance at beginning of period	$	(530.0	)		$	(523.3	)
Other comprehensive income recognized during the period (net of tax impact of $— million in the three and six months ended June 29, 2019)	6.9				0.2
Balance at end of period	$	(523.1	)		$	(523.1	)
Total accumulated other comprehensive loss	$	(698.2	)		$	(698.2	)

In the three months ended June 29, 2019, foreign currency translation adjustments are primarily related to the weakening of the Chinese renminbi relative to the U.S. dollar. In the six months ended June 29, 2019, foreign currency translation adjustments are primarily related to the weakening of the Euro relative to the U.S. dollar and include pretax gains of $0.1 million related to intercompany transactions for which settlement is not planned or anticipated in the foreseeable future.

For further information regarding reclassification adjustments related to the Company's defined benefit plans, see Note 10, "Pension and Other Postretirement Benefit Plans." For further information regarding reclassification adjustments related to the Company's derivative and hedging activities, see Note 18, "Financial Instruments."

Lear Corporation Stockholders’ Equity

Common Stock Share Repurchase Program

In March 2020, as a proactive measure in response to the COVID-19 pandemic, the Company suspended share repurchases under its share repurchase program. Share repurchases prior to the suspension are shown below (in millions except for shares and per share amounts):

Six Months Ended														As of
July 4, 2020														July 4, 2020
Aggregate Repurchases				Cash paid for Repurchases				Number of Shares		Average Price per Share (1)				Remaining Purchase Authorization
$	70.0			$	70.0			641,149		$	109.22			$	1,430.0

⁽¹⁾ Excludes commissions

---

Since the first quarter of 2011, the Company's Board of Directors has authorized $6.1 billion in share repurchases under the common stock share repurchase program. As of the end of the second quarter of 2020, the Company has repurchased, in aggregate, $4.7 billion of its outstanding common stock, at an average price of $90.07 per share, excluding commissions and related fees.

The Company may implement share repurchases through a variety of methods, including, but not limited to, open market purchases, accelerated stock repurchase programs and structured repurchase transactions. The extent to which the Company will repurchase its outstanding common stock and the timing of such repurchases will depend upon its financial condition, prevailing market conditions, alternative uses of capital and other factors.

In addition to shares repurchased under the Company’s common stock share repurchase program described above, the Company classified 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 accompanying condensed consolidated balance sheets as of July 4, 2020 and December 31, 2019.

Quarterly Dividend

In March 2020, as a proactive measure in response to the COVID-19 pandemic, the Company suspended its quarterly cash dividend. Prior to the suspension, the Company’s Board of Directors declared a cash dividend of $0.77 per share of common stock in the first quarter of 2020 and quarterly cash dividends of $0.75 per share of common stock in the first half of 2019. Dividends declared and paid are shown below (in millions):

	Six Months Ended
	July 4, 2020				June 29, 2019
Dividends declared	$	46.8			$	94.6
Dividends paid	47.9				95.6

Dividends payable on common shares to be distributed under the Company’s stock-based compensation program and common shares contemplated as part of the Company’s emergence from Chapter 11 bankruptcy proceedings will be paid when such common shares are distributed.

Redeemable Noncontrolling Interest

In accordance with GAAP, the Company records redeemable noncontrolling interests at the greater of (1) the initial carrying amount adjusted for the noncontrolling interest holder’s share of total comprehensive income or loss and dividends ("noncontrolling interest carrying value") or (2) the redemption value as of and based on conditions existing as of the reporting date. Required redeemable noncontrolling interest adjustments are recorded as an increase to redeemable noncontrolling interests, with an offsetting adjustment to retained earnings. The redeemable noncontrolling interest is classified in mezzanine equity in the accompanying condensed consolidated balance sheets as of July 4, 2020 and December 31, 2019.

In the second quarter of 2020, the noncontrolling interest holder in Shanghai Lear STEC Automotive Parts Co., Ltd. exercised its option requiring the Company to purchase its 45% redeemable noncontrolling interest for RMB 626.0 million ($88.6 million at July 4, 2020) plus undistributed retained earnings of RMB 175.5 million ($24.8 million at July 4, 2020). The transaction is subject to regulatory approval and is expected to close in the second half of 2020. Approximately 50% of the purchase price and undistributed retained earnings is expected to be paid at closing, with remaining amounts paid in 2021.

For further information related to the redeemable noncontrolling interest adjustment, see Note 14, "Net Income (Loss) Per Share Attributable to Lear," herein, as well as Note 5, "Investments in Affiliates and Other Related Party Transactions," to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

---

As of July 4, 2020 and December 31, 2019, the Company had recorded reserves for pending legal disputes, including commercial disputes and other matters, of $15.1 million and $14.0 million, respectively. Such reserves reflect amounts recognized in accordance with GAAP and typically exclude the cost of legal representation. Product liability and warranty reserves are recorded separately from legal reserves, as described below.

Commercial Disputes

The Company is involved from time to time in legal proceedings and claims, including, without limitation, commercial or contractual disputes with its customers, suppliers and competitors. These disputes vary in nature and are usually resolved by negotiations between the parties.

Product Liability and Warranty Matters

In the event that use of the Company’s products results in, or is alleged to result in, bodily injury and/or property damage or other losses, the Company may be subject to product liability lawsuits and other claims. Such lawsuits generally seek compensatory damages, punitive damages and attorneys’ fees and costs. In addition, if any of the Company’s products are, or are alleged to be, defective, the Company may be required or requested by its customers to participate in a recall or other corrective action involving such products. Certain of the Company’s customers have asserted claims against the Company for costs related to recalls or other corrective actions involving its products. The Company can provide no assurances that it will not experience material claims in the future or that it will not incur significant costs to defend such claims.

To a lesser extent, the Company is a party to agreements with certain of its customers, whereby these customers may pursue claims against the Company for contribution of all or a portion of the amounts sought in connection with product liability and warranty claims.

In certain instances, allegedly defective products may be supplied by Tier 2 suppliers. The Company may seek recovery from its suppliers of materials or services included within the Company’s products that are associated with product liability and warranty claims. The Company carries insurance for certain legal matters, including product liability claims, but such coverage may be limited. The Company does not maintain insurance for product warranty or recall matters. Future dispositions with respect to the Company’s product liability claims that were subject to compromise under the Chapter 11 bankruptcy proceedings will be satisfied out of a common stock and warrant reserve established for that purpose.

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

A summary of the changes in reserves for product liability and warranty claims for the six months ended July 4, 2020, is shown below (in millions):

Balance at January 1, 2020	$	32.0
Expense, net (including changes in estimates)	6.8
Settlements	(4.2		)
Foreign currency translation and other	(0.5		)
Balance at July 4, 2020	$	34.1

Environmental Matters

The Company is subject to local, state, federal and foreign laws, regulations and ordinances which govern activities or operations that may have adverse environmental effects and which impose liability for clean-up costs resulting from past spills, disposals or other releases of hazardous wastes and environmental compliance. The Company’s policy is to comply with all applicable environmental laws and to maintain an environmental management program based on ISO 14001 to ensure compliance with this standard. 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 July 4, 2020 and December 31, 2019, the Company had recorded environmental reserves of $9.2 million and $9.3 million, respectively. 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; however, no assurances can be given in this regard.

---

Other Matters

The Company is involved from time to time in various other legal proceedings and claims, including, without limitation, intellectual property matters, tax claims and employment matters. Although the outcome of any legal matter cannot be predicted with certainty, the Company does not believe that any of the other legal proceedings or claims in which the Company is currently involved, either individually or in the aggregate, will have a material adverse impact on its business, financial condition, results of operations or cash flows. However, no assurances can be given in this regard.

Although the Company records reserves for legal disputes, product liability and warranty claims and environmental and other matters in accordance with GAAP, the ultimate outcomes of these matters are inherently uncertain. Actual results may differ significantly from current estimates.

The Company has two reportable operating segments: Seating, which includes complete seat systems and all major seat components, including seat covers and surface materials such as leather and fabric, seat structures and mechanisms, seat foam and headrests, and E-Systems, which includes complete electrical distribution systems, as well as sophisticated electronic control modules, electrification products and connectivity products. Key components in the Company's electrical distribution portfolio include wire harnesses, terminals and connectors and junction boxes for both internal combustion engine and electrification architectures that require management of higher voltage and power. Key components in the Company's electronic control module portfolio include body control modules, wireless receiver and transmitter technology and lighting and audio control modules, as well as products specific to electrification and connectivity trends. Electrification products include charging systems (onboard charging modules and cord set charging equipment), battery electronics (battery disconnect units, cell monitoring supervisory systems and integrated total battery control modules) and other power management modules, including converter and inverter systems. Connectivity products include gateway modules and communication modules to manage both wired and wireless networks and data in vehicles. The other category includes unallocated costs related to corporate headquarters, regional headquarters and the elimination of intercompany activities, none of which meets the requirements for being classified as an operating segment. 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, as well as advanced engineering expenses.

Each of the Company’s operating segments reports its results from operations and makes its requests for capital expenditures directly to the chief 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. 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 (loss) before equity in net income of affiliates, interest expense and other (income) expense ("segment earnings") and (iii) cash flows, being defined as segment earnings less capital expenditures plus depreciation and amortization.

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

	Three Months Ended July 4, 2020
	Seating				E-Systems				Other				Consolidated
Revenues from external customers	$	1,754.9			$	689.6			$	—			$	2,444.5
Segment earnings(1)	(116.4		)		(113.4		)		(64.5		)		(294.3		)
Depreciation and amortization	83.8				42.6				3.9				130.3
Capital expenditures	47.0				37.1				2.0				86.1
Total assets	6,687.7				2,901.2				2,680.1				12,269.0

---

	Three Months Ended June 29, 2019
	Seating				E-Systems				Other				Consolidated
Revenues from external customers	$	3,839.4			$	1,168.2			$	—			$	5,007.6
Segment earnings(1)	283.2				84.7				(62.7		)		305.2
Depreciation and amortization	83.4				40.9				4.0				128.3
Capital expenditures	80.0				52.5				4.0				136.5
Total assets	7,714.0				3,093.2				2,040.5				12,847.7

	Six Months Ended July 4, 2020
	Seating				E-Systems				Other				Consolidated
Revenues from external customers	$	5,121.5			$	1,780.7			$	—			$	6,902.2
Segment earnings(1)	69.7				(81.0		)		(109.6		)		(120.9		)
Depreciation and amortization	167.3				85.7				7.8				260.8
Capital expenditures	113.2				78.8				3.2				195.2

	Six Months Ended June 29, 2019
	Seating				E-Systems				Other				Consolidated
Revenues from external customers	$	7,753.1			$	2,414.6			$	—			$	10,167.7
Segment earnings (1)	535.5				213.0				(131.1		)		617.4
Depreciation and amortization	166.3				77.7				7.9				251.9
Capital expenditures	160.2				91.6				7.5				259.3

⁽¹⁾ See definition above

For the three months ended July 4, 2020, segment earnings include restructuring charges of $13.4 million, $20.9 million and $0.6 million in the Seating and E-Systems segments and in the other category, respectively. For the six months ended July 4, 2020, segment earnings include restructuring charges of $25.7 million, $41.2 million and $0.6 million in the Seating and E-Systems segments and in the other category, respectively. The Company expects to incur approximately $20 million, $23 million and $5 million of additional restructuring costs in the Seating and E-Systems segments and in the other category, respectively, related to activities initiated as of July 4, 2020, and expects that the components of such costs will be consistent with its historical experience.

For the three months ended June 29, 2019, segment earnings include restructuring charges of $28.3 million, $8.3 million and $0.1 million in the Seating and E-Systems segments and in the other category, respectively. For the six months ended June 29, 2019, segment earnings include restructuring charges of $73.5 million, $17.2 million and $0.3 million in the Seating and E-Systems segments and in the other category, respectively.

For further information, see Note 3, "Restructuring."

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

	Three Months Ended								Six Months Ended
	July 4, 2020				June 29, 2019				July 4, 2020				June 29, 2019
Segment earnings	$	(294.3	)		$	305.2			$	(120.9	)		$	617.4
Interest expense	27.2				24.5				51.6				45.4
Other (income) expense, net	(3.2		)		13.8				37.3				18.2
Consolidated income (loss) before provision (benefit) for income taxes and equity in net income of affiliates	$	(318.3	)		$	266.9			$	(209.8	)		$	553.8

---

Debt Instruments

The carrying values of the Notes vary from their fair values. The fair values of the Notes were determined by reference to the quoted market prices of these securities (Level 2 input based on the GAAP fair value hierarchy). The carrying value of the Company’s Term Loan Facility approximates its fair value (Level 3 input based on the GAAP fair value hierarchy). The estimated fair value, as well as the carrying value, of the Company's debt instruments are shown below (in millions):

	July 4, 2020				December 31, 2019
Estimated aggregate fair value (1)	$	2,373.5			$	2,384.6
Aggregate carrying value (1)(2)	2,328.1				2,334.4

⁽¹⁾ Includes Term Loan Facility and Notes

⁽²⁾ Excludes the impact of unamortized debt issuance costs and unamortized original issue premium (discount)

Cash, Cash Equivalents and Restricted Cash

The Company has on deposit, cash that is legally restricted as to use or withdrawal. A reconciliation of cash, cash equivalents and restricted cash reported on the accompanying condensed consolidated balance sheets to cash, cash equivalents and restricted cash reported on the accompanying condensed consolidated statements of cash flows is shown below (in millions):

	July 4, 2020				June 29, 2019
Balance sheet - cash and cash equivalents	$	1,775.5			$	1,269.0
Restricted cash included in other current assets	36.0				15.5
Restricted cash included in other long-term assets	1.6				6.4
Statement of cash flows - cash, cash equivalents and restricted cash	$	1,813.1			$	1,290.9

Accounts Receivable

On January 1, 2020, the Company adopted Accounting Standards Update ("ASU") 2016-13, "Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments," using a modified retrospective approach. The standard amends several aspects of the measurement of credit losses related to certain financial instruments, including the replacement of the existing incurred credit loss model and other models with the current expected credit losses ("CECL") model. The cumulative effect of adoption resulted in an increase of $0.8 million in the allowance for credit loss and a corresponding decrease in retained earnings as of January 1, 2020.

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 in earnings. The Company also considers geographic and segment specific risk factors in the development of expected credit losses. As of July 4, 2020 and December 31, 2019, accounts receivable are reflected net of reserves of $36.7 million and $36.0 million, respectively. Changes in expected credit losses were not significant in the first six months of 2020.

Accounts Receivable Factoring

During the second quarter of 2020, the Company entered into an uncommitted factoring arrangement which provides for aggregate purchases of specified customer accounts in North America. The factoring arrangement results in true sales of the factored receivables, which are excluded from amounts reported in the consolidated balance sheets when the receivables are factored in accordance with ASC 860, "Transfers and Servicing." There were no receivables factored during the second quarter of 2020. The Company cannot provide any assurances that the factoring arrangement will be available or utilized in the future.

---

Marketable Equity Securities

Marketable equity securities, which the Company accounts for under the fair value option, are included in the accompanying condensed consolidated balance sheets as shown below (in millions):

	July 4, 2020				December 31, 2019
Current assets	$	7.6			$	17.1
Other long-term assets	39.7				42.1
	$	47.3			$	59.2

Unrealized gains and losses arising from changes in the fair value of the marketable equity securities are recognized in the condensed consolidated statements of comprehensive income (loss) as a component of other expense, net. The fair value of the marketable equity securities is determined by reference to quoted market prices in active markets (Level 1 input based on the GAAP fair value hierarchy).

Equity Securities Without Readily Determinable Fair Values

As of July 4, 2020 and December 31, 2019, investments in equity securities without readily determinable fair values of $15.2 million are included in other long-term assets in the accompanying condensed consolidated balance sheets. Such investments are valued at cost, less any impairment, and adjusted for changes resulting from observable, orderly transactions for identical or similar securities.

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. The Company is not a party to leveraged derivatives. The Company’s derivative financial instruments are subject to master netting arrangements that provide for the net settlement of contracts, by counterparty, in the event of default or termination. On the date that a derivative contract for a hedging instrument is entered into, the Company designates the derivative as either (1) a hedge of the exposure to changes in the fair value of a recognized asset or liability or of an unrecognized firm commitment (a fair value hedge), (2) a hedge of the exposure of a forecasted transaction or of the variability in the cash flows of a recognized asset or liability (a cash flow hedge), (3) a hedge of a net investment in a foreign operation (a net investment hedge) or (4) a contract not designated as a hedging instrument.

For a fair value hedge, the change in the fair value of the derivative is recorded in earnings and reflected in the condensed consolidated statements of comprehensive income (loss) on the same line as the gain or loss on the hedged item attributable to the hedged risk. For a cash flow hedge, the change in the fair value of the derivative is recorded in accumulated other comprehensive loss in the condensed consolidated balance sheets. When the underlying hedged transaction is realized, the gain or loss included in accumulated other comprehensive loss is recorded in earnings and reflected in the condensed consolidated statements of comprehensive income (loss) on the same line as the gain or loss on the hedged item attributable to the hedged risk. For a net investment hedge, the change in the fair value of the derivative is recorded in cumulative translation adjustment, which is a component of accumulated other comprehensive loss in the condensed consolidated balance sheets. When the related currency translation adjustment is required to be reclassified, usually upon sale or liquidation of the investment, the gain or loss included in accumulated other comprehensive loss is recorded in earnings. Changes in the fair value of contracts not designated as hedging instruments are recorded in earnings and reflected in the condensed consolidated statements of comprehensive income (loss) as other expense, net. Cash flows attributable to derivatives used to manage foreign currency risks are classified on the same line as the hedged item attributable to the hedged risk in the condensed consolidated statements of cash flows. Upon settlement, cash flows attributable to derivatives designated as net investment hedges are classified as investing activities in the consolidated statements of cash flows. Cash flows attributable to forward starting interest rate swaps are classified as financing activities in the condensed consolidated statements of cash flows.

The Company formally documents its hedge relationships, including the identification of the hedge instruments and the related hedged items, as well as its 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 balance sheet. 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. When it is determined that a hedged transaction is no longer probable to occur, the Company discontinues hedge accounting.

---

Foreign Exchange

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 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 Thai baht, the Japanese yen, the Philippine peso and the Chinese renminbi.

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

Net Investment Hedges

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. In the first half of 2020, interest expense in the accompanying consolidated statement of comprehensive income (loss) was offset by $3.2 million related to contra interest expense on these net investment hedges.

Balance Sheet Classification

The notional amount, estimated aggregate fair value and related balance sheet classification of the Company's foreign currency derivative contracts and net investment hedges are shown below (in millions, except for maturities):

	July 4, 2020				December 31, 2019
Fair value of foreign currency contracts designated as cash flow hedges:
Other current assets	$	10.8			$	44.0
Other long-term assets	3.3				7.3
Other current liabilities	(33.8		)		(4.5		)
Other long-term liabilities	(9.3		)		(0.2		)
	(29.0		)		46.6
Notional amount	$	1,162.6			$	1,465.8
Outstanding maturities in months, not to exceed	24				24
Fair value of derivatives designated as net investment hedges:
Other long-term assets	$	6.0			$	—
Other long-term liabilities	—				(4.4		)
	6.0				(4.4		)
Notional amount	$	300.0			$	300.0
Outstanding maturities in months, not to exceed	51				57
Fair value of foreign currency contracts not designated as hedging instruments:
Other current assets	$	4.1			$	6.9
Other current liabilities	(4.2		)		(3.2		)
	(0.1		)		3.7
Notional amount	$	1,366.9			$	697.0
Outstanding maturities in months, not to exceed	12				12
Total fair value	$	(23.1	)		$	45.9
Total notional amount	$	2,829.5			$	2,462.8

---

Accumulated Other Comprehensive Loss - Derivative Instruments and Hedging

Pretax amounts related to foreign currency, net investment hedge and interest rate swap contracts that were recognized in and reclassified from accumulated other comprehensive loss are shown below (in millions):

	Three Months Ended								Six Months Ended
	July 4, 2020				June 29, 2019				July 4, 2020				June 29, 2019
Gains (losses) recognized in accumulated other comprehensive loss:
Foreign currency contracts	$	61.9			$	17.6			$	(81.4	)		$	42.4
Net investment hedge contracts	(12.6		)		—				10.4				—
Interest rate swap contracts	—				5.2				—				(9.5		)
	49.3				22.8				(71.0		)		32.9
(Gains) losses reclassified from accumulated other comprehensive loss to:
Net sales	(0.4		)		0.5				(0.5		)		1.0
Cost of sales	14.1				(13.2		)		6.5				(22.9		)
Interest expense	0.6				0.3				1.2				0.3
Other (income) expense	(0.2		)		—				(0.2		)		—
	14.1				(12.4		)		7.0				(21.6		)
Comprehensive income (loss)	$	63.4			$	10.4			$	(64.0	)		$	11.3

As of July 4, 2020 and December 31, 2019, pretax net gains (losses) of ($44.6) million and $19.4 million, respectively, related to the Company’s derivative instruments and hedging 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):

Net losses related to foreign currency contracts	$	23.0
Net losses related to interest rate swap contracts	2.4
Total	$	25.4

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

Fair Value Measurements

GAAP provides that fair value is an exit price, defined as a market-based measurement that represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value measurements are based on one or more of the following three valuation techniques:

Market:		This approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Income:		This approach uses valuation techniques to convert future amounts to a single present value amount based on current market expectations.
Cost:		This approach is based on the amount that would be required to replace the service capacity of an asset (replacement cost).

---

Further, GAAP prioritizes the inputs and assumptions used in the valuation techniques described above into a three-tier fair value hierarchy as follows:

Level 1:		Observable inputs, such as quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date.
Level 2:		Inputs, other than quoted market prices included in Level 1, that are observable either directly or indirectly for the asset or liability.
Level 3:		Unobservable inputs that reflect the entity’s own assumptions about the exit price of the asset or liability. Unobservable inputs may be used if there is little or no market data for the asset or liability at the measurement date.

The Company discloses fair value measurements and the related valuation techniques and fair value hierarchy level for its assets and liabilities that are measured or disclosed at fair value.

Items Measured at Fair Value on a Recurring Basis

Fair value measurements and the related valuation techniques and fair value hierarchy level for the Company’s assets and liabilities measured at fair value on a recurring basis as of July 4, 2020 and December 31, 2019, are shown below (in millions):

	July 4, 2020
	Frequency		Asset (Liability)				Valuation Technique		Level 1				Level 2				Level 3
Foreign currency contracts, net	Recurring		$	(29.1	)		Market/ Income		$	—			$	(29.1	)		$	—
Net investment hedges	Recurring		$	6.0			Market/ Income		$	—			$	6.0			$	—
Marketable equity securities	Recurring		$	47.3			Market		$	47.3			$	—			$	—

	December 31, 2019
	Frequency		Asset (Liability)				Valuation Technique		Level 1			Level 2			Level 3
Foreign currency contracts, net	Recurring		$	50.3			Market/ Income		—			50.3			—
Net investment hedges	Recurring		$	(4.4	)		Market/ Income		—			(4.4	)		—
Marketable equity securities	Recurring		$	59.2			Market		59.2			—			—

The Company determines the fair value of its derivative contracts using quoted market prices to calculate the forward values and then discounts such forward values to the present value. The discount rates used are based on quoted bank deposit or swap interest rates. If a derivative contract is in a net liability position, the Company adjusts these discount rates, if required, by an estimate of the credit spread that would be applied by market participants purchasing these contracts from the Company’s counterparties. If an estimate of the credit spread is required, the Company uses significant assumptions and factors other than quoted market rates, which would result in the classification of its derivative liabilities within Level 3 of the fair value hierarchy. As of July 4, 2020 and December 31, 2019, there were no derivative contracts that were classified within Level 3 of the fair value hierarchy. In addition, there were no transfers in or out of Level 3 of the fair value hierarchy in the first half of 2020.

Items Measured at Fair Value on a Non-Recurring Basis

The Company measures certain assets and liabilities at fair value on a non-recurring basis, which are not included in the table above. As these non-recurring fair value measurements are generally determined using unobservable inputs, these fair value measurements are classified within Level 3 of the fair value hierarchy.

In the first quarter of 2020, the Company completed a quantitative goodwill impairment assessment for one of its reporting units. The fair value estimate of the reporting unit was based on a third-party valuation and management's estimates, using a combination of the discounted cash flow method and guideline public company method.

---

As of July 4, 2020, there were no additional significant assets or liabilities measured at fair value on a non-recurring basis.

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

The Company considered the ASUs summarized below, effective for 2020:

Measurement of Credit Losses on Financial Instruments

See Note 18, "Financial Instruments — Accounts Receivable."

Simplifying the Test for Goodwill Impairment

Effective January 1, 2020, the standard simplifies the accounting for goodwill impairments and allows a goodwill impairment charge to be based on the amount of a reporting unit's carrying value in excess of its fair value. This eliminates the requirement to calculate the implied fair value of goodwill (i.e., "Step 2" under current guidance).

Reference Rate Reform

In March 2020, the FASB issued guidance related to reference rate reform. The guidance provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and generally can be applied to applicable contract modifications and hedge relationships prospectively through December 31, 2022. The adoption of this guidance is not expected to have a significant impact on the Company's financial statements.

The Company considered the ASUs summarized below, effective after 2020:

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." The standard simplifies the accounting for income taxes by eliminating certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The adoption of this standard is not expected to have a significant impact on the Company's financial statements.

Disclosure Requirements for Defined Benefit Plans

In August 2018, the FASB issued ASU 2018-14, "Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans," which provides minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. This standard is effective for fiscal years ending after December 15, 2020, and early adoption is permitted. The adoption of this standard is not expected to have a significant impact on the Company's financial statements.

---

---

---

---

---

---

---

---

---

---

•	Aggressively reducing operating costs, capital expenditures and working capital, including reducing discretionary spending and adjusting production activity

•	Reducing salaried employee costs throughout the organization through salary reductions and deferrals

•	Suspending share repurchases and quarterly dividends

•	Maximizing opportunities offered under government incentive programs throughout the world

•	Reducing the compensation of the Board of Directors

•	Reducing hourly factory worker costs through temporary layoffs

•	Delaying planned pension funding and deferring other retirement plan contributions

---

---

---

---

---

---

•	general economic conditions in the markets in which we operate, including changes in interest rates or currency exchange rates;

•	the impact of the COVID-19 pandemic on our business and the global economy;

•	changes in actual industry vehicle production levels from our current estimates;

•	fluctuations in the production of vehicles or the loss of business with respect to, or the lack of commercial success of, a vehicle model for which we are a significant supplier;

•	the outcome of customer negotiations and the impact of customer-imposed price reductions;

•	the cost and availability of raw materials, energy, commodities and product components and our ability to mitigate such costs;

•	disruptions in relationships with our suppliers;

•	the financial condition of and adverse developments affecting our customers and suppliers;

•	risks associated with conducting business in foreign countries;

•	currency controls and the ability to economically hedge currencies;

•	global sovereign fiscal matters and creditworthiness, including potential defaults and the related impacts on economic activity, including the possible effects on credit markets, currency values, monetary unions, international treaties and fiscal policies;

•	competitive conditions impacting us and our key customers and suppliers;

•	labor disputes involving us or our significant customers or suppliers or that otherwise affect us;

•	the operational and financial success of our joint ventures;

•	the impact and timing of program launch costs and our management of new program launches;

•	limitations imposed by our existing indebtedness and our ability to access capital markets on commercially reasonable terms;

•	changes affecting the availability of LIBOR;

•	changes in discount rates and the actual return on pension assets;

•	impairment charges initiated by adverse industry or market developments;

•	our ability to execute our strategic objectives;

•	disruptions to our information technology systems, or those of our customers or suppliers, including those related to cybersecurity;

•	increases in our warranty, product liability or recall costs;

•	the outcome of legal or regulatory proceedings to which we are or may become a party;

•	the impact of pending legislation and regulations or changes in existing federal, state, local or foreign laws or regulations;

•	the impact of regulations on our foreign operations;

•	costs associated with compliance with environmental laws and regulations;

•	developments or assertions by or against us relating to intellectual property rights;

•	the impact of potential changes in tax and trade policies in the United States and related actions by countries in which we do business;

•	the anticipated changes in economic and other relationships between the United Kingdom and the European Union; and

---

•	other risks described in Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2019, as supplemented and updated by Part II — Item 1A, "Risk Factors," in our Quarterly Report on Form 10-Q for the quarter ended April 4, 2020, and this Report, and our other Securities and Exchange Commission ("SEC") filings.

(a)	Disclosure Controls and Procedures

(b)	Changes in Internal Control over Financial Reporting

•	Pandemics or disease outbreaks, such as COVID-19, have disrupted, and may continue to disrupt, our business, which could adversely affect our financial performance.

---

---

---

---