Comprehensive Income and Equity

Comprehensive Income

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

A summary of comprehensive income and reconciliations of equity, Lear Corporation stockholders’ equity and noncontrolling interests for the three and six months ended July 2, 2016, is shown below (in millions):



	Three Months Ended July 2, 2016									Six Months Ended July 2, 2016
	Equity			Lear Corporation Stockholders' Equity			Non- controlling Interests			Equity			Lear Corporation Stockholders' Equity			Non- controlling Interests
Beginning equity balance	$	3,144.4		$	3,037.6		$	106.8		$	3,017.7		$	2,927.4		$	90.3
Stock-based compensation transactions	18.7			18.7			—			(8.9		)	(8.9		)	—
Repurchase of common stock	(250.2		)	(250.2		)	—			(405.0		)	(405.0		)	—
Dividends declared to Lear Corporation stockholders	(22.5		)	(22.5		)	—			(45.6		)	(45.6		)	—
Dividends declared to noncontrolling interest holders	(12.8		)	—			(12.8		)	(12.8		)	—			(12.8		)
Consolidation of affiliate	40.0			—			40.0			40.0			—			40.0
Non-controlling interests — other	—			—			—			—			(2.2		)	2.2
Comprehensive income:
Net income	294.5			282.4			12.1			557.0			530.8			26.2
Other comprehensive income (loss), net of tax:
Defined benefit plan adjustments	1.1			1.1			—			(1.7		)	(1.7		)	—
Derivative instruments and hedging activities	(13.4		)	(13.4		)	—			(11.4		)	(11.4		)	—
Foreign currency translation adjustments	(43.7		)	(40.9		)	(2.8		)	26.8			29.4			(2.6		)
Other comprehensive income (loss)	(56.0		)	(53.2		)	(2.8		)	13.7			16.3			(2.6		)
Comprehensive income	238.5			229.2			9.3			570.7			547.1			23.6
Ending equity balance	$	3,156.1		$	3,012.8		$	143.3		$	3,156.1		$	3,012.8		$	143.3

A summary of changes, net of tax, in accumulated other comprehensive loss for the three and six months ended July 2, 2016, is shown below (in millions):



	Three Months Ended July 2, 2016			Six Months Ended July 2, 2016
Defined benefit plans:
Balance at beginning of period	$	(197.4	)	$	(194.6	)
Reclassification adjustments (net of tax expense of $0.5 million and $0.7 million for the three and six months ended July 2, 2016, respectively)	0.6			1.7
Other comprehensive income (loss) recognized during the period (net of tax impact of $— million for the three and six months ended July 2, 2016)	0.5			(3.4		)
Balance at end of period	$	(196.3	)	$	(196.3	)

Derivative instruments and hedging:
Balance at beginning of period	$	(36.7	)	$	(38.7	)
Reclassification adjustments (net of tax expense of $5.8 million and $10.7 million for the three and six months ended July 2, 2016, respectively)	15.5			29.1
Other comprehensive loss recognized during the period (net of tax benefit of $10.3 million and $14.5 million for the three and six months ended July 2, 2016, respectively)	(28.9		)	(40.5		)
Balance at end of period	$	(50.1	)	$	(50.1	)

Foreign currency translation:
Balance at beginning of period	$	(426.5	)	$	(496.8	)
Other comprehensive income (loss) recognized during the period (net of tax impact of $— million for the three and six months ended July 2, 2016)	(40.9		)	29.4
Balance at end of period	$	(467.4	)	$	(467.4	)

For the three months ended July 2, 2016, foreign currency translation adjustments are related primarily to the weakening of the Chinese renminbi and 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 the six months ended July 2, 2016, foreign currency translation adjustments are related primarily to the strengthening of the Euro and Brazilian real relative to the U.S. dollar, partially offset by the weakening of the Chinese renminbi relative to the U.S. dollar. Foreign currency translation adjustments include pretax losses of $0.5 million related to intercompany transactions for which settlement is not planned or anticipated in the foreseeable future.

A summary of comprehensive income and reconciliations of equity, Lear Corporation stockholders’ equity and noncontrolling interests for the three and six months ended June 27, 2015, is shown below (in millions):



	Three Months Ended June 27, 2015									Six Months Ended June 27, 2015
	Equity			Lear Corporation Stockholders' Equity			Non- controlling Interests			Equity			Lear Corporation Stockholders' Equity			Non- controlling Interests
Beginning equity balance	$	2,891.8		$	2,812.1		$	79.7		$	3,029.3		$	2,958.8		$	70.5
Stock-based compensation transactions	18.3			18.3			—			(15.2		)	(15.2		)	—
Repurchase of common stock	(122.4		)	(122.4		)	—			(234.8		)	(234.8		)	—
Dividends declared to Lear Corporation stockholders	(20.1		)	(20.1		)	—			(40.4		)	(40.4		)	—
Dividends declared to noncontrolling interest holders	(11.8		)	—			(11.8		)	(11.9		)	—			(11.9		)
Comprehensive income:
Net income	192.9			181.9			11.0			349.6			329.2			20.4
Other comprehensive income (loss), net of tax:
Defined benefit plan adjustments	2.3			2.3			—			10.0			10.0			—
Derivative instruments and hedging activities	(3.9		)	(3.9		)	—			1.8			1.8			—
Foreign currency translation adjustments	31.2			31.2			—			(110.1		)	(110.0		)	(0.1		)
Other comprehensive income (loss)	29.6			29.6			—			(98.3		)	(98.2		)	(0.1		)
Comprehensive income	222.5			211.5			11.0			251.3			231.0			20.3
Ending equity balance	$	2,978.3		$	2,899.4		$	78.9		$	2,978.3		$	2,899.4		$	78.9

A summary of changes, net of tax, in accumulated other comprehensive loss for the three and six months ended June 27, 2015, is shown below (in millions):



	Three Months Ended June 27, 2015			Six Months Ended June 27, 2015
Defined benefit plans:
Balance at beginning of period	$	(211.5	)	$	(219.2	)
Reclassification adjustments (net of tax expense of $0.5 million and $0.9 million for the three and six month ended June 27, 2015, respectively)	1.1			2.3
Other comprehensive income recognized during the period (net of tax expense of $1.1 million for the three and six months ended June 27, 2015)	1.2			7.7
Balance at end of period	$	(209.2	)	$	(209.2	)

Derivative instruments and hedging:
Balance at beginning of period	$	(27.5	)	$	(33.2	)
Reclassification adjustments (net of tax expense of $1.9 million and $3.2 million for the three and six months ended June 27, 2015, respectively)	5.3			8.7
Other comprehensive loss recognized during the period (net of tax benefit of $3.6 million and $2.5 million for the three and six months ended June 27, 2015, respectively)	(9.2		)	(6.9		)
Balance at end of period	$	(31.4	)	$	(31.4	)

Foreign currency translation:
Balance at beginning of period	$	(390.8	)	$	(249.6	)
Other comprehensive income (loss) recognized during the period (net of tax expense (benefit) of $0.1 million and ($4.0) million for the three and six months ended June 27, 2015, respectively)	31.2			(110.0		)
Balance at end of period	$	(359.6	)	$	(359.6	)

For the three months ended June 27, 2015, foreign currency translation adjustments are related primarily to the strengthening of the Euro relative to the U.S. dollar and include pretax gains of $2.8 million related to intercompany transactions for which settlement is not planned or anticipated in the foreseeable future.

For the six months ended June 27, 2015, foreign currency translation adjustments are related primarily to the weakening of the Euro relative to the U.S. dollar and include pretax losses of $10.6 million related to intercompany transactions for which settlement is not planned or anticipated in the foreseeable future.

Lear Corporation Stockholders’ Equity

Common Stock Share Repurchase Program

In February 2016, the Company's Board of Directors authorized a $487.4 million increase to the existing common stock share repurchase program to provide for a remaining aggregate repurchase authorization of $1.0 billion, while maintaining the program expiration date of December 31, 2017. In the first half of 2016, the Company repurchased, in aggregate, $405.0 million of its outstanding common stock (3,693,281 shares at an average purchase price of $109.65 per share, excluding commissions), of which $367.1 million was paid in cash with the remaining amount to be paid in the third quarter of 2016. As of the date of this Report, the Company has a remaining repurchase authorization of $595.0 million under its ongoing common stock share repurchase program. The Company may implement these 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, the Company’s Credit Agreement places certain limitations on the Company’s ability to repurchase its common stock.

Since the first quarter of 2011, the Company's Board of Directors has authorized $3.4 billion in share repurchases under its common stock share repurchase program. As of the date of this Report, the Company has repurchased, in aggregate, $2.8 billion of its outstanding common stock, at an average price of $72.06 per share, excluding commissions and related fees, since the first quarter of 2011.

In addition to shares repurchased under the Company’s common stock share repurchase program described in the preceding paragraphs, the Company classified shares withheld from the settlement of the Company’s restricted stock unit and performance share awards to cover minimum tax withholding requirements as common stock held in treasury in the accompanying condensed consolidated balance sheets as of July 2, 2016 and December 31, 2015.

Quarterly Dividend

In the first half of 2016 and 2015, the Company’s Board of Directors declared quarterly cash dividends of $0.30 and $0.25 per share of common stock, respectively. In the first half of 2016, declared dividends totaled $45.6 million, and dividends paid totaled $47.0 million. In the first half of 2015, declared dividends totaled $40.4 million, and dividends paid totaled $41.1 million. 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.

Noncontrolling Interests

In the first half of 2016, the Company gained control of and consolidated an affiliate. For further information related to the consolidation, see Note 5, "Long-Term Assets."