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 nine months ended September 29, 2018, is shown below (in millions):



	Three Months Ended September 29, 2018									Nine Months Ended September 29, 2018
	Equity			Lear Corporation Stockholders' Equity			Non- controlling Interests			Equity			Lear Corporation Stockholders' Equity			Non- controlling Interests
Beginning equity balance	$	4,427.4		$	4,299.9		$	127.5		$	4,292.6		$	4,150.5		$	142.1
Stock-based compensation transactions	12.4			12.4			—			(6.3		)	(6.3		)	—
Repurchase of common stock	(195.0		)	(195.0		)	—			(490.7		)	(490.7		)	—
Dividends declared to Lear Corporation stockholders	(46.4		)	(46.4		)	—			(141.1		)	(141.1		)	—
Dividends declared to noncontrolling interest holders	(0.1		)	—			(0.1		)	(59.7		)	—			(59.7		)
Adoption of ASU 2016-16 (Note 11, "Taxes")	—			—			—			2.3			2.3			—
Affiliate transaction (Note 5, "Long-Term Assets")	—			—			—			14.0			—			14.0
Redeemable non-controlling interest adjustment	(2.3		)	(2.3		)	—			(16.9		)	(16.9		)	—
Acquisition of outstanding non-controlling interest	—			—			—			(3.4		)	—			(3.4		)
Comprehensive income:
Net income	272.2			252.5			19.7			994.1			937.6			56.5
Other comprehensive income (loss), net of tax:
Defined benefit plan adjustments	0.2			0.2			—			5.8			5.8			—
Derivative instruments and hedging activities	42.4			42.4			—			46.6			46.6			—
Foreign currency translation adjustments	(75.1		)	(70.8		)	(4.3		)	(201.6		)	(194.9		)	(6.7		)
Other comprehensive loss	(32.5		)	(28.2		)	(4.3		)	(149.2		)	(142.5		)	(6.7		)
Comprehensive income	239.7			224.3			15.4			844.9			795.1			49.8
Ending equity balance	$	4,435.7		$	4,292.9		$	142.8		$	4,435.7		$	4,292.9		$	142.8

A summary of comprehensive income and a reconciliation of Lear's redeemable non-controlling interests for the three and nine months ended September 29, 2018, is shown below (in millions):



	Three Months Ended September 29, 2018			Nine Months Ended September 29, 2018
Beginning redeemable noncontrolling interest balance	$	167.5		$	153.4
Dividends declared to noncontrolling interest holders	(4.6		)	(9.3		)
Redeemable noncontrolling interest adjustment	2.3			16.9
Comprehensive income (loss):
Net income	2.5			9.8
Foreign currency translation adjustments	(6.1		)	(9.2		)
Comprehensive income (loss)	(3.6		)	0.6
Ending redeemable noncontrolling interest balance	$	161.6		$	161.6

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 September 29, 2018 and December 31, 2017.

For further information related to the redeemable noncontrolling interest adjustment, see Note 12, "Net Income Per Share Attributable to Lear," 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, 2017.

A summary of changes, net of tax, in accumulated other comprehensive loss for the three and nine months ended September 29, 2018, is shown below (in millions):



	Three Months Ended September 29, 2018			Nine Months Ended September 29, 2018
Defined benefit plans:
Balance at beginning of period	$	(178.4	)	$	(184.0	)
Reclassification adjustments (net of tax expense of $0.3 million and $0.9 million in the three and nine months ended September 29, 2018, respectively)	1.2			3.6
Other comprehensive income (loss) recognized during the period (net of tax impact of $— million)	(1.0		)	2.2
Balance at end of period	$	(178.2	)	$	(178.2	)

Derivative instruments and hedging:
Balance at beginning of period	$	(18.7	)	$	(22.9	)
Reclassification adjustments (net of tax benefit of $1.8 million and $2.7 million in the three and nine months ended September 29, 2018, respectively)	(6.4		)	(9.9		)
Other comprehensive income recognized during the period (net of tax expense of $13.4 million and $15.5 million in the three and nine months ended September 29, 2018, respectively)	48.8			56.5
Balance at end of period	$	23.7		$	23.7

Foreign currency translation:
Balance at beginning of period	$	(430.6	)	$	(306.5	)
Other comprehensive loss recognized during the period (net of tax benefit of $2.4 million in the three and nine months ended September 29, 2018)	(70.8		)	(194.9		)
Balance at end of period	$	(501.4	)	$	(501.4	)

In the three and nine months ended September 29, 2018, foreign currency translation adjustments are primarily related to the weakening of the Euro, the Chinese renminbi and the Brazilian real relative to the U.S. dollar and include pretax losses of $0.8 million and $1.7 million, respectively, related to intercompany transactions for which settlement is not planned or anticipated in the foreseeable future.



	Three Months Ended September 30, 2017									Nine Months Ended September 30, 2017
	Equity			Lear Corporation Stockholders' Equity			Non- controlling Interests			Equity			Lear Corporation Stockholders' Equity			Non- controlling Interests
Beginning equity balance	$	3,756.2		$	3,621.9		$	134.3		$	3,192.9		$	3,057.2		$	135.7
Stock-based compensation transactions	14.9			14.9			—			8.4			8.4			—
Repurchase of common stock	(77.9		)	(77.9		)	—			(332.2		)	(332.2		)	—
Dividends declared to Lear Corporation stockholders	(34.8		)	(34.8		)	—			(105.8		)	(105.8		)	—
Dividends declared to noncontrolling interest holders	(0.7		)	—			(0.7		)	(33.2		)	—			(33.2		)
Adoption of ASU 2016-09	—			—			—			54.5			54.5			—
Redeemable non-controlling interest adjustment	(22.7		)	(22.7		)	—			(22.7		)	(22.7		)	—
Comprehensive income:
Net income	315.0			295.2			19.8			960.5			912.9			47.6
Other comprehensive income (loss), net of tax:
Defined benefit plan adjustments	(1.8		)	(1.8		)	—			(3.0		)	(3.0		)	—
Derivative instruments and hedging activities	(10.8		)	(10.8		)	—			57.2			57.2			—
Foreign currency translation adjustments	89.9			87.1			2.8			250.7			244.6			6.1
Other comprehensive income	77.3			74.5			2.8			304.9			298.8			6.1
Comprehensive income	392.3			369.7			22.6			1,265.4			1,211.7			53.7
Ending equity balance	$	4,027.3		$	3,871.1		$	156.2		$	4,027.3		$	3,871.1		$	156.2

A summary of changes, net of tax, in accumulated other comprehensive loss for the three and nine months ended September 30, 2017, is shown below (in millions):



	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
Defined benefit plans:
Balance at beginning of period	$	(194.0	)	$	(192.8	)
Reclassification adjustments (net of tax expense of $0.3 million and $1.2 million in the three and nine months ended September 30, 2017, respectively)	0.9			3.4
Other comprehensive loss recognized during the period (net of tax impact of $— million)	(2.7		)	(6.4		)
Balance at end of period	$	(195.8	)	$	(195.8	)

Derivative instruments and hedging:
Balance at beginning of period	$	22.9		$	(45.1	)
Reclassification adjustments (net of tax benefit of $1.0 million and tax expense of $1.9 million in the three and nine months ended September 30, 2017, respectively)	(3.1		)	5.7
Other comprehensive income (loss) recognized during the period (net of tax benefit of $3.2 million and tax expense of $16.6 million in the three and nine months ended September 30, 2017, respectively)	(7.7		)	51.5
Balance at end of period	$	12.1		$	12.1

Foreign currency translation:
Balance at beginning of period	$	(440.2	)	$	(597.7	)
Other comprehensive income recognized during the period (net of tax impact of $— million)	87.1			244.6
Balance at end of period	$	(353.1	)	$	(353.1	)

In the three and nine months ended September 30, 2017, foreign currency translation adjustments are primarily related to the strengthening of the Euro and, to a lesser extent, the Chinese renminbi relative to the U.S. dollar and include pretax losses of $0.2 million and pretax gains of $0.6 million, respectively, 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 8, "Pension and Other Postretirement Benefit Plans." For further information regarding reclassification adjustments related to the Company's derivative and hedging activities, see Note 16, "Financial Instruments."

Lear Corporation Stockholders’ Equity

Common Stock Share Repurchase Program

On February 13, 2018, the Company's Board of Directors authorized an increase to the existing common stock share repurchase program to provide for a remaining aggregate repurchase authorization of $1.5 billion and extended the term of the program to December 31, 2020.

Share repurchases in the first nine months of 2018 are shown below (in millions except for shares and per share amounts):



Nine Months Ended							As of
September 29, 2018							September 29, 2018
Aggregate Repurchases ⁽¹⁾		Cash paid for Repurchases		Number of Shares	Average Price per Share ⁽²⁾		Remaining Purchase Authorization
$	490.7	$	488.1	2,697,188	$	181.93	$	1,014.4

⁽¹⁾Includes $5.1 million of purchases prior to the increased authorization

⁽²⁾ Excludes commissions

Since the first quarter of 2011, the Company's Board of Directors has authorized $5.0 billion in share repurchases under the common stock share repurchase program. As of the end of the third quarter of 2018, the Company has repurchased, in aggregate, $4.0 billion of its outstanding common stock, at an average price of $85.62 per share, excluding commissions and related fees.

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 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 September 29, 2018 and December 31, 2017.

Quarterly Dividend

In the first nine months of 2018 and 2017, the Company’s Board of Directors declared quarterly cash dividends of $0.70 and $0.50 per share of common stock, respectively. Dividends declared and paid are shown below (in millions):



	Nine Months Ended
	September 29, 2018		September 30, 2017
Dividends declared	$	141.1	$	105.8
Dividends paid	142.1		104.4

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 nine months of 2018, the Company gained control of an affiliate and acquired the outstanding non-controlling interest of another affiliate. For further information related to the affiliate transaction, see Note 5, "Long-Term Assets."