Lear Corporation

05/01/2026 | Press release | Distributed by Public on 05/01/2026 07:16

Quarterly Report for Quarter Ending April 4, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
EXECUTIVE OVERVIEW
Lear Corporation is a global automotive technology leader in Seating and E-Systems, enabling superior in-vehicle experiences for consumers around the world. We supply complete seat systems, key seat components, complete electrical distribution and connection systems, high-voltage power distribution products, including battery disconnect units ("BDUs"), and low-voltage power distribution products and electronic controllers to all of the world's major automotive manufacturers.
Lear is built on a foundation and strong culture of innovation, operational excellence, and engineering and program management capabilities. We use our product and process design and technological expertise, as well as our global reach and competitive manufacturing footprint, to achieve our financial goals and objectives. These financial goals and objectives include continuing to deliver profitable growth while balancing risks and returns, investing in product and process innovations to drive business growth and profitability, maintaining a strong balance sheet with investment grade credit metrics, and generating strong cash flow and returning excess cash to shareholders. Further, we have aligned our strategy with key trends affecting our business. At Lear, we are Making every drive betterTM by providing technology for safer, smarter and more comfortable journeys, while adhering to our values - Be Inclusive. Be Inventive. Get Results the Right Way.
Our business is organized under two reporting segments: Seating and E-Systems. Each of these segments has a varied product and technology portfolio across a number of component categories. Further, we continuously evaluate this portfolio, aligning it with industry trends while balancing risk-adjusted returns, which allows us to offer value-added solutions to our customers.
Our Seating business consists of the design, development, engineering and manufacture of complete seat systems and key seat components. Our capabilities in operations and supply chain management enable synchronized assembly and just-in-time delivery of complex complete seat systems at high volumes to our customers. As the most vertically integrated global seat supplier, our key seat component product offerings include seat trim covers; surface materials such as leather and fabric; seat mechanisms; seat cushioning; headrests; and thermal comfort systems such as seat heating, ventilation, active cooling, pneumatic lumbar and massage products. All of these products are compatible with traditional internal combustion engine ("ICE") architectures and electrified powertrains, including the full range of hybrid, plug-in hybrid and battery electric architectures. Our thermal comfort systems are facilitated by our seat system, component and integration capabilities, together with our competencies in electronics, sensors, software and algorithms.
Our E-Systems business consists of the design, development, engineering and manufacture of complete electrical distribution and connection systems; high-voltage power distribution products, including BDUs; and low-voltage power distribution products and electronic controllers. These capabilities enable us to provide our customers with customizable solutions with optimized designs at competitive costs for both low-voltage and high-voltage vehicle architectures.
•Electrical distribution and connection systems utilize low-voltage and high-voltage wire and high-speed data cables to connect networks' electrical signals and manage electrical power within the vehicle for all types of powertrains - from traditional ICE architectures to the full range of electrified powertrains that require management of higher voltage and power. Key components of our electrical distribution and connection systems portfolio include wire harnesses, terminals and connectors, high-voltage battery connection systems and engineered components. High-voltage battery connection systems include intercell connect boards, bus bars and main battery interface connection systems.
•High-voltage power distribution products control the flow and distribution of high-voltage power throughout electric and hybrid vehicles and include BDUs, which control all electrical energy flowing into and out of high-voltage batteries in electrified vehicles.
•Low-voltage power distribution products and electronic controllers facilitate signal, data and/or power management within the vehicle and include the associated software required to facilitate these functions. Key components of this portfolio include zonal controllers, body domain control modules, and smart and passive power distribution modules. Our software offerings include embedded control, cybersecurity software and software to control hardware devices. Our customers traditionally have sourced our electronic hardware together with the software that we integrate and embed in it.
We serve all of the world's major automotive manufacturers through both our Seating and E-Systems businesses, and we have automotive content on more than 500 vehicle nameplates worldwide. It is common for us to have both seating and electrical and/or electronic content on the same vehicle platform.
Our businesses benefit globally from leveraging common operating standards and disciplines, including world-class product development and manufacturing processes, as well as common customer support and regional infrastructures, all of which
contribute to our reputation for operational excellence. Our core capabilities are shared across component categories and include high-precision manufacturing and assembly with short lead times, complex, global supply chain management, global engineering and program management, the agility to establish and/or transfer production between facilities, and a unique, customer-focused culture. In select instances, we are able to manufacture both Seating and E-Systems components in the same facility. Our businesses also utilize proprietary, industry-specific processes and standards, leverage common low-cost engineering centers and share centralized operating support functions. These functions include logistics, as well as all major administrative functions, such as corporate finance, executive administration, health and safety, human resources, information technology and legal.
We continue to build on our reputation for operational excellence through organic and inorganic investments in automation and other advanced manufacturing technologies and the digital transformation of both our operations and administrative functions. These investments and transformation involve the integration of new technologies, such as artificial intelligence ("AI"), machine learning and advanced automation, into production facilities and business operations. These technologies enable smart and automated machines and smart factories to communicate, analyze and optimize products and processes, resulting in higher efficiency, quality and responsiveness to customers.
IDEA by LearTM - Innovative. Digital. Engineered. Automated. - reflects our commitment to continue to strengthen our competitive position in both of our business segments and to enhance the efficiency of our administrative functions. IDEA by LearTM supports our strategy to drive growth and improve profitability through the development of innovative products and the utilization of advanced technologies and process automation that increase efficiency and extend our leadership position in operational excellence. We are leveraging our internal capabilities through strategic partnerships (e.g., Palantir Technologies, Inc.) and acquisitions to rapidly develop and deploy automation and AI solutions. Our strategic acquisitions of ASI Automation, InTouch Automation, StoneShield Engineering, Thagora Technology SRL and WIP Industrial Automation are further enhancing our automation system integration expertise. Our new facility in Rochester Hills, Michigan is an industry first site, capable of fully automated manufacturing of ComfortFlex by LearTM and ComfortMax Seat by LearTM seating systems. These strategic initiatives further advance our leadership in automotive technology and enable greater efficiency, superior quality and faster execution.
Through our products, processes, technology and strategic initiatives, we are well-positioned to capitalize on business growth opportunities. We are focused on profitably growing our businesses and have implemented a strategy designed to deliver industry-leading, long-term financial returns. This strategy is based on the following four pillars designed to drive growth and profitability in both of our business segments:
•Extend our market leadership position in Seating through differentiated product offerings and industry-leading vertical integration capabilities;
•Expand margins in E-Systems through a focused portfolio that leverages our strong operating capabilities and customer relationships;
•Build on our reputation for operational excellence through organic and inorganic investments, including partnerships, in automation and digital technologies; and
•Prioritize our employee and sustainability initiatives that drive business growth, cost reductions and improved workforce retention.
For further information related to our strategy, see Item 1, "Business," in our Annual Report on Form 10-K for the year ended December 31, 2025.
Industry Overview
We supply all vehicle segments of the automotive light vehicle original equipment market in every major automotive producing region in the world. Our sales are driven by the number of vehicles produced by the automotive manufacturers and our content per vehicle.
Since 2020, the global economy, as well as the automotive industry, have been influenced directly and indirectly by macroeconomic events resulting in unfavorable conditions, including the imposition of or increases in tariffs, shortages of semiconductor chips and other components, elevated inflation levels on commodities and labor, higher interest rates, and labor and energy shortages in certain markets. Certain of these factors, among others, continue to impact consumer demand. Our strategy to mitigate these impacts encompasses our comprehensive cost management process, including cost technology optimization, actions to further align our manufacturing capacity to the current industry production environment and investments in automation and other advanced manufacturing technologies, as well as commercial recovery mechanisms. This will allow us to enhance operational efficiencies, improve the utilization of existing facilities and equipment to reduce future expenditures, and streamline administrative functions.
Due to the interconnectedness of the global economy, policy changes in one area of the world can have an immediate and material impact on markets around the world. Since his inauguration in January 2025, U.S. President Donald J. Trump has announced various tariffs that impact industries around the world, including the automotive industry. As of the date of this Report, many of the tariffs announced, implemented or threatened by the current U.S. administration apply to (a) the countries in which we do business or from which we purchase, either directly or indirectly, materials or components, including Mexico, Canada and China, and (b) the materials or components that we purchase, either directly or indirectly, or produce, including steel, aluminum and automobile parts, among others, and therefore could adversely impact our business by increasing our operating costs, requiring us to incur significant costs to transition to alternative suppliers if our mitigation efforts are unsuccessful, or negatively impacting our customers' production. In addition to tariffs, the U.S. and foreign governments have implemented sanctions, export controls and other trade restrictions that impact industries around the world, including the automotive industry.
Although U.S. tariffs did not have a material impact on our gross profit in the first quarter of 2026, the tariff and trade landscape continues to evolve, including with respect to the type of tariff or export control, the tariff rates, the countries, components and materials to which such tariffs apply, and the existence and applicability of any exemptions, refunds or credits.
On February 20, 2026, the U.S. Supreme Court issued an opinion invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). After the U.S. Supreme Court opinion, the Court of International Trade ordered U.S. Customs and Border Protection to develop a process to refund tariffs imposed under IEEPA. In 2025, we paid approximately $80 million of IEEPA tariffs, nearly all of which were recovered from our customers. Following the U.S. Supreme Court opinion, the U.S. administration imposed a temporary 10% general tariff under Section 122 of the Trade Act of 1974 to replace the IEEPA tariffs, though the scope and duration of future tariffs remain uncertain. Further, in April 2025, and revised in October 2025, the U.S. administration implemented a policy allowing U.S. automotive manufacturers to offset a portion of the cost related to tariffs imposed under Section 232 of the Trade Expansion Act of 1962 ("Section 232") through government-provided import adjustment offset amounts ("tariff offset credits"). In the first quarter of 2026, certain of our customers allocated a portion of their Section 232 tariff offset credits to us, allowing us to recover a portion of our 2025 and 2026 Section 232 tariff costs from the government (for those tariff costs already paid) and avoid a portion of our Section 232 tariff costs going forward. In 2025, we paid approximately $100 million of Section 232 tariffs, for which we were allocated Section 232 tariff offset credits by our customers in the first quarter of 2026. As a result of the U.S. Supreme Court opinion and the allocation of Section 232 tariff offset credits by our customers, certain 2025 tariff amounts are now recoverable from the government and no longer due from our customers, which resulted in lower first quarter 2026 sales and cost of sales corresponding to our 2025 IEEPA and certain Section 232 tariff costs.
In addition to tariffs in the United States and other countries, the United States-Mexico-Canada Agreement ("USMCA") is subject to trilateral review and renewal in 2026. There can be no assurances that the USMCA will be renewed or, if renewed, any newly negotiated terms in the USMCA will not adversely affect our business. Also, China presents unique risks to U.S. automotive manufacturers due to the strain in U.S.-China relations and the level of integration with key components in our global supply chain. It remains unclear what additional actions the current U.S. administration may take with respect to trade issues involving China and other countries.
Further, the U.S. and other governments could impose additional sanctions, export controls or other trade restrictions that could restrict us from doing business directly or indirectly in or with certain countries or parties, which could include affiliates (e.g., China has imposed tariffs and taken other retaliatory actions). The current trade environment could impact the status of other trade agreements between the United States and countries other than Canada and Mexico.
We are monitoring the evolving trade landscape, as the actual impacts of tariffs and other trade restrictions on our business, financial condition and results of operations continue to be subject to a number of factors that are not yet known or are subject to change, including the effect such tariffs or restrictions may have on consumer demand and global automotive production volumes, the duration of such tariffs or trade restrictions, future changes in the amounts and scope of tariffs, the potential withdrawal of such tariffs or restrictions, in whole or in part, the scope and effective date of any exemptions or credits with respect to such tariffs, countermeasures that target countries may take in response to such tariffs, the impact such tariffs may have on our customers and our supply chain, and whether and to what extent such tariffs are impacted by judicial review. To mitigate the impact of tariffs, we have entered into contractual agreements with our customers to recover substantially all tariff costs incurred to date; however, no assurance can be provided that our customers will continue to provide such recovery. In addition, we have implemented certain actions, and continue to consider others, to counter the potential impact of such tariffs on our business, financial condition and results of operations, including, without limitation, participating in efforts to inform the U.S. and certain foreign administrations and legislatures of the impact of current trade and tariff policies on the automotive industry and evaluating our production footprint and alternatives in our supply chain. To date, our mitigation efforts have been successful; however, no assurance can be given that future government actions will not adversely impact our customers' production or undermine our mitigation efforts, which could in turn adversely impact our business, financial condition and results of operations.
In addition to the above, the ongoing conflict in Iran and geopolitical tensions in the region could lead to significant disruption of global energy supplies and increases in global energy prices, adversely affect global supply chains, and heighten inflationary pressures on our costs and supply chain. We are continuing to evaluate the evolving macroeconomic environment; however, at this time, these factors have not had a material impact on our operations, our financial condition or our operating results. Any of the above factors could impact our supply chain, as well as our operations, and adversely affect our financial condition and operating results.
Although industry production returned to pre-pandemic levels in 2023, industry production in 2025 remained approximately 2% below 2017 peak levels, and 2025 industry production levels in North America and Europe, our two largest markets, remained approximately 11% and 24%, respectively, below prior peak levels. Industry production in 2026 is expected to decrease approximately 2% as compared to 2025 (based on April 2026 S&P Global Mobility projections). On a Lear sales-weighted basis(1), industry production in 2026 is expected to decrease approximately 2% as compared to 2025.
(1) The production change on a Lear sales-weighted basis is calculated using Lear's prior year regional sales mix. Management believes this provides a more meaningful comparison of our global revenue growth relative to global vehicle production.
For a description of risks related to tariffs and other trade restrictions, see Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2025.
Global automotive industry production volumes in certain key regions in the first three months of 2026, as compared to the first three months of 2025, are shown below (in thousands of units):
Three Months Ended
April 4,
2026 (1)
March 29,
2025 (1) (2)
% Change
North America 3,691.6 3,767.3 (2) %
Europe and Africa 4,422.6 4,471.1 (1) %
Asia 12,022.0 12,482.3 (4) %
South America 697.3 674.6 3 %
Other 344.6 528.5 (35) %
Global automotive industry production 21,178.1 21,923.8 (3) %
(1) Production data based on S&P Global Mobility.
(2) Production data for 2025 has been updated from our first quarter 2025 Quarterly Report on Form 10-Q to reflect actual production levels.
Automotive sales and production can also be affected by the age of the vehicle fleet and related scrappage rates, labor relations issues, labor shortages, fuel prices, regulatory requirements, government initiatives and incentives, trade agreements, tariffs and other non-tariff trade barriers (including recent U.S. tariffs imposed or threatened to be imposed on Mexico, Canada and China, as well as other countries and any retaliatory actions taken by such countries), the availability and cost of raw materials and critical components, logistics issues, cybersecurity incidents, and the availability and cost of credit, as well as vehicle affordability and consumer preferences regarding vehicle powertrains (including preferences regarding electric and hybrid vehicles), size, configuration and features, among other factors. The impact of potential tariffs on our business and financial condition, if any, is subject to a number of factors that are not yet known or are subject to change, including the effective date and duration of such tariffs, the scope and nature of any tariffs, the amount of any tariffs, any countermeasures that the target countries may take in response to such tariffs. In light of these uncertainties, we can provide no assurances that any mitigating actions that may become available to us, such as our ability to pass along some or all of the costs of any tariffs to some or all of our customers, will continue to be successful. Our sales and production may be further affected by new entrants to the industry, as well as various automakers and suppliers entering or expanding in certain regions, and the restructuring actions, including facility closures, of our customers and suppliers. Our operating results are also significantly impacted by the overall commercial success of the vehicle platforms for which we supply particular products, as well as the profitability of the products that we supply for these platforms, which is determined, in part, by the level of vertical integration. The loss of business with respect to any vehicle model for which we are a significant supplier, or a decrease in the production levels of any such models, could adversely affect our operating results. In addition, larger cars and light trucks, as well as vehicle platforms that offer more features and functionality, such as luxury, sport utility and crossover vehicles, typically have more content and, therefore, tend to have a more significant impact on our operating results.
Our percentage of consolidated net sales by region in the first three months of 2026 and 2025 is shown below:
Three Months Ended
April 4,
2026 		March 29,
2025
North America 38 % 40 %
Europe and Africa 40 % 37 %
Asia 19 % 20 %
South America 3 % 3 %
Total 100 % 100 %
Our ability to reduce the risks inherent in certain concentrations of our business, and thereby maintain our financial performance in the future, will depend, in part, on our ability to continue to diversify our sales on a customer, product, platform and geographic basis to better reflect the market overall.
The automotive industry, and our business, continue to be shaped by the broad trend of electrification. The adoption of electrified vehicles has been slower than anticipated, particularly in the United States. Demand for, and regulatory developments related to, improved energy efficiency and sustainability (e.g., government mandates related to fuel economy and carbon emissions) have also had a significant impact on this trend.
Our material cost as a percentage of net sales was 62.8% in the first three months of 2026, as compared to 63.5% in the first three months of 2025. Raw material, energy, commodity and product component costs can be volatile, reflecting, among other things, changes in supply and demand, logistics issues, global trade and tariff policies (including recent U.S. tariffs imposed or threatened to be imposed on Mexico, Canada and China, as well as other countries and any retaliatory actions taken by such countries), and geopolitical issues. We have commodity price risk with respect to purchases of certain raw materials, including steel, copper, diesel fuel, chemicals, resins and leather. Our primary commodity cost exposures relate to steel, copper and leather. Our exposure to changes in steel prices is primarily indirect, through purchased components, and a significant portion of our copper, leather and direct steel purchases are subject to price index agreements with our customers and suppliers. We have developed and implemented additional strategies to mitigate the impact of any such cost increases, including the selective in-sourcing of components, the continued consolidation of our supply base, longer-term purchase commitments, commercial recovery mechanisms and the selective expansion of low-cost country sourcing and engineering, as well as value engineering and product benchmarking. Certain of these strategies may limit our opportunities in a declining commodity price environment. In the current environment of elevated raw material, energy, commodity and product component costs, these strategies, together with commercial negotiations with our customers and suppliers and improved manufacturing productivity through automation and other advanced technologies, have more than offset the adverse impact. In addition, the availability of raw materials, energy, commodities and product components fluctuates from time to time due to factors outside of our control. If these costs increase further or availability is restricted, it could have an adverse impact on our operating results in the foreseeable future. See "- Forward-Looking Statements" below and Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2025.
Our customers typically require us to reduce our prices over the life of a vehicle model and, at the same time, assume significant responsibility for the design, development and engineering of our products. Our financial performance is largely dependent on our ability to offset these price reductions with product cost reductions through product design enhancements, supply chain management, manufacturing efficiencies and restructuring actions. We also seek to enhance our financial performance by investing in product development, design capabilities and new product initiatives that respond to and anticipate the needs of our customers and consumers. We continually evaluate operational and strategic alternatives to improve our business structure and align our business with the changing needs of our customers and major industry trends affecting our business.
Financial Measures
In evaluating our financial condition and operating performance, we focus primarily on earnings, operating margins, cash flows and return on invested capital. Our strategy includes expanding our business with new and existing customers globally through new products and our reputation for operational excellence and cost competitiveness. We have also increased our vertical integration capabilities globally, as well as expanded our component manufacturing capacity in Asia, Central America, Eastern Europe, Mexico and Northern Africa and our low-cost engineering capabilities in Asia, Eastern Europe and Northern Africa.
Our success in generating cash flow will depend, in part, on our ability to manage working capital effectively. Working capital can be significantly impacted by the timing of cash flows from sales, purchases, and tariff costs and recoveries. Historically, we generally have been successful in aligning our supplier payment terms with our customer payment terms. However, our ability to continue to do so may be impacted by adverse automotive industry conditions, including inconsistent production schedules
due to supply shortages and lower consumer demand, changes to our customers' payment terms and the financial condition of our suppliers. In addition, our cash flow is impacted by our ability to manage our inventory and capital spending effectively. We utilize return on invested capital as a measure of the efficiency with which our assets generate earnings. Improvements in our return on invested capital will depend on our ability to maintain an appropriate asset base for our business and to increase productivity and operating efficiency.
Operational Restructuring
In the first three months of 2026, we incurred pretax restructuring costs of $42 million and related manufacturing inefficiency and other charges of approximately $1 million, as compared to pretax restructuring costs of $84 million and related manufacturing inefficiency and other charges of approximately $4 million in the first three months of 2025. None of the individual restructuring actions initiated in the first three months of 2026 were material. Further, there have been no changes in previously initiated restructuring actions that have resulted (or will result) in a material change to our restructuring costs.
Our restructuring actions include plant closures and workforce reductions and are initiated to maintain our competitive footprint or are in response to customer initiatives or changes in global and regional automotive markets. Our restructuring actions are designed to maintain or improve our operating results and profitability throughout the automotive industry cycles. Restructuring actions are generally funded within twelve months of initiation and are funded by cash flows from operating activities and existing cash balances. We expect to incur approximately $45 million of additional restructuring costs related to activities initiated as of April 4, 2026, all of which are expected to be incurred in the next twelve months. We plan to implement additional restructuring actions in order to align our manufacturing capacity and other costs with prevailing regional automotive production levels. Such future restructuring actions are dependent on market conditions, customer actions and other factors.
For further information, see Note 2, "Restructuring," to the condensed consolidated financial statements included in this Report.
Common Stock Share Repurchase Program and Quarterly Cash Dividends
We may implement share repurchases through a variety of methods, including, but not limited to, open market purchases, accelerated stock repurchase programs and structured repurchase transactions. The extent to which we may repurchase our outstanding common stock and the timing of such repurchases will depend upon our financial condition, results of operations, capital requirements, prevailing market conditions, alternative uses of capital and other factors. See "- Forward-Looking Statements" below.
Since the first quarter of 2011, our Board of Directors (the "Board") has authorized $6.7 billion in share repurchases under our common stock share repurchase program (the "Repurchase Program"). As of April 4, 2026, we have repurchased, in aggregate, $6.0 billion of our outstanding common stock, at an average price of $95.25 per share, excluding commissions and related fees, and have a remaining repurchase authorization of $700 million, which expires on December 31, 2026. In the first three months of 2026, we repurchased $75 million of our outstanding common stock.
Our Board declared a quarterly cash dividend of $0.77 per share of common stock in the first quarter of 2026.
For further information related to our common stock share repurchase program and our quarterly cash dividends, see "- Liquidity and Capital Resources - Capitalization" below and Note 14, "Comprehensive Income and Equity," to the condensed consolidated financial statements included in this Report.
Other Matters
In the three months ended April 4, 2026 and March 29, 2025, we recognized net tax benefits of $17 million and $9 million, respectively, related to restructuring charges and various other items.
Our results for the three months ended April 4, 2026 and March 29, 2025, reflect the following items (in millions):
Three Months Ended
April 4,
2026 		March 29,
2025
Costs related to restructuring actions, including manufacturing inefficiencies and other charges of $1 million and $4 million in the three months ended April 4, 2026 and March 29, 2025, respectively
$ 43 $ 88
Loss related to disposal of a non-core business - 3
Disposal costs - 1
Recoveries related to Russian operations, net - (1)
Foreign exchange losses due to foreign exchange rate volatility related to Russia 1 -
Tax benefit, net (17) (9)
For further information regarding these items, see Note 2, "Restructuring," Note 11, "Other Expense, Net," and Note 12, "Income Taxes," to the condensed consolidated financial statements included in this Report.
This Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," includes forward-looking statements that are subject to risks and uncertainties. For further information regarding these and other factors that have had, or may have in the future, a significant impact on our business, financial condition or results of operations, see "- Forward-Looking Statements" below and Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2025.
RESULTS OF OPERATIONS
A summary of our operating results in millions of dollars and as a percentage of net sales is shown below:
Three Months Ended
April 4, 2026 March 29, 2025
Net sales
Seating $ 4,404.4 75.6 % $ 4,151.1 74.7 %
E-Systems 1,418.4 24.4 1,409.2 25.3
Net sales 5,822.8 100.0 5,560.3 100.0
Cost of sales 5,372.5 92.3 5,201.1 93.5
Gross profit 450.3 7.7 359.2 6.5
Selling, general and administrative expenses 190.3 3.3 172.4 3.1
Amortization of intangible assets 5.0 0.1 5.2 0.1
Interest expense, net 25.6 0.4 25.8 0.4
Other expense, net 12.7 0.2 20.4 0.4
Provision for income taxes 38.4 0.7 45.2 0.8
Equity in net income of affiliates (14.4) (0.3) (12.3) (0.2)
Net income attributable to noncontrolling interests 20.4 0.3 21.8 0.4
Net income attributable to Lear $ 172.3 3.0 % $ 80.7 1.5 %
Three Months Ended April 4, 2026 vs. Three Months Ended March 29, 2025
Net sales in the first quarter of 2026 were $5.8 billion, as compared to $5.6 billion in the first quarter of 2025, an increase of $263 million or 5%. The impact of foreign exchange rate fluctuations and higher production volumes on Lear platforms in North America and Europe/Africa increased net sales by $274 million and $250 million, respectively. These increases were partially offset by the reversal of certain 2025 tariff recoveries and the impact of selling price reductions.
(in millions) Cost of Sales
First quarter 2025 $ 5,201.1
Material cost 126.3
Labor cost 92.7
Depreciation 2.9
Other (50.5)
First quarter 2026 $ 5,372.5
Cost of sales was $5.4 billion in the first quarter of 2026, as compared to $5.2 billion in the first quarter of 2025. The impact of foreign exchange rate fluctuations and higher production volumes on Lear platforms increased costs of sales. These increases were partially offset by the reversal of certain 2025 tariff costs, which reduced cost of sales.
Gross profit and gross margin were $450 million and 7.7% of net sales, respectively, in the first quarter of 2026, as compared to $359 million and 6.5% of net sales, respectively, in the first quarter of 2025. Higher production volumes on Lear platforms in North America and Europe/Africa and the impact of foreign exchange rate fluctuations increased gross profit by $41 million and $16 million, respectively. The impact of favorable operating performance, including the benefit of restructuring actions, and lower restructuring costs was partially offset by selling price reductions. These factors had a corresponding impact on gross margin. Although the reversal of certain 2025 tariff recoveries and tariff costs did not have a significant impact on gross profit, gross margin was positively impacted, as net sales decreased without a corresponding decrease in gross profit.
Selling, general and administrative expenses, including engineering and development expenses, were $190 million in the first quarter of 2026, as compared to $172 million in the first quarter of 2025. As a percentage of net sales, selling, general and administrative expenses were 3.3% in the first quarter of 2026, as compared to 3.1% in the first quarter of 2025.
Amortization of intangible assets was $5 million in the first quarters of 2026 and 2025.
Interest expense, net was $26 million in the first quarters of 2026 and 2025.
Other expense, net, which includes non-income related taxes, foreign exchange gains and losses, gains and losses related to certain derivative instruments and hedging activities, gains and losses on certain disposals of assets, the non-service cost components of net periodic benefit cost and other miscellaneous income and expense, was $13 million in the first quarter of 2026, as compared to $20 million in the first quarter of 2025. In the first quarters of 2026 and 2025, we recognized foreign exchange losses of $5 million and $10 million, respectively, including losses of $2 million in the first quarter of 2025 related to the hyper-inflationary environment and significant currency devaluation in Argentina. In the first quarter of 2025, we also recognized a loss of $3 million on the disposal of a non-core business.
In the first quarter of 2026, the provision for income taxes was $38 million, representing an effective tax rate of 17.7% on pretax income before equity in net income of affiliates of $217 million. In the first quarter of 2025, the provision for income taxes was $45 million, representing an effective tax rate of 33.4% on pretax income before equity in net income of affiliates of $135 million, for the reasons described below. For further information, see Note 12, "Income Taxes," to the condensed consolidated financial statements included in this Report.
In the first quarters of 2026 and 2025, the provision for income taxes was primarily impacted by the level and mix of earnings among tax jurisdictions. In the first quarters of 2026 and 2025, we recognized net tax benefits of $17 million and $9 million, respectively, related to restructuring charges and various other items.
Excluding these items, the effective tax rate for the first quarters of 2026 and 2025 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.
Equity in net income of affiliates was $14 million in the first quarter of 2026, as compared to $12 million in the first quarter of 2025.
Net income attributable to Lear was $172 million, or $3.34 per diluted share, in the first quarter of 2026, as compared to $81 million, or $1.49 per diluted share, in the first quarter of 2025. Net income and diluted net income per share increased for the reasons described above.
Reportable Operating Segments
We have two reportable operating segments: Seating and E-Systems. For a description of our reportable operating segments, see "Executive Overview" above.
The financial information presented below is for our two reportable operating segments and our other category for the periods presented. 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, corporate finance, legal, executive administration and human resources. Financial measures regarding each segment's pretax income before equity in net income of affiliates, interest expense, net and other expense, net ("segment earnings") and segment earnings divided by net sales ("margin") are not measures of performance under accounting principles generally accepted in the United States ("GAAP"). Segment earnings and the related margin are used by management to evaluate the performance of our reportable operating segments. Segment earnings should not be considered in isolation or as a substitute for net income attributable to Lear, net cash provided by operating activities or other income statement or cash flow statement data prepared in accordance with GAAP or as measures of profitability or liquidity. In addition, segment earnings, as we determine it, may not be comparable to related or similarly titled measures reported by other companies.
For a reconciliation of consolidated segment earnings to consolidated income before provision for income taxes and equity in net income of affiliates, see Note 16, "Segment Reporting," to the condensed consolidated financial statements included in this Report.
Seating
A summary of the financial measures for our Seating segment is shown below (dollar amounts in millions):
Three Months Ended
April 4,
2026 		March 29,
2025
Net sales $ 4,404.4 $ 4,151.1
Segment earnings (1)
277.4 215.7
Margin 6.3 % 5.2 %
(1) See definition above.
Seating net sales were $4.4 billion in the first quarter of 2026, as compared to $4.2 billion in the first quarter of 2025, an increase of $253 million or 6%. The impact of foreign exchange rate fluctuations, higher production volumes on Lear platforms and new business increased net sales by $194 million, $128 million and $59 million, respectively. These increases were partially offset by the reversal of certain 2025 tariff recoveries and the impact of selling price reductions.
Segment earnings, including restructuring costs, and the related margin on net sales were $277 million and 6.3% in the first quarter of 2026, as compared to $216 million and 5.2% in the first quarter of 2025. Higher production volumes on Lear platforms and the impact of foreign exchange rate fluctuations increased segment earnings by $24 million. The impact of favorable operating performance, including the benefit of operational restructuring actions, and lower restructuring costs was partially offset by selling price reductions.
E-Systems
A summary of financial measures for our E-Systems segment is shown below (dollar amounts in millions):
Three Months Ended
April 4,
2026 		March 29,
2025
Net sales $ 1,418.4 $ 1,409.2
Segment earnings (1)
73.3 55.5
Margin 5.2 % 3.9 %
(1) See definition above.
E-Systems net sales in the first quarter of both 2026 and 2025 were $1.4 billion, an increase of $9 million or 1%. The impact of foreign exchange rate fluctuations, higher production volumes on Lear platforms increased net sales by $80 million and $61 million, respectively. These increases were largely offset by the reversal of certain 2025 tariff recoveries and the impact of selling price reductions.
Segment earnings, including restructuring costs, and the related margin on net sales were $73 million and 5.2% in the first quarter of 2026, as compared to $56 million and 3.9% in the first quarter of 2025. Higher production volumes on Lear platforms and the impact of foreign exchange rate fluctuations increased segment earnings by $18 million. The impact of favorable operating performance, including the benefit of operational restructuring actions, and lower restructuring costs was offset by selling price reductions.
A summary of financial measures for our other category, which is not an operating segment, is shown below (dollar amounts in millions):
Three Months Ended
April 4,
2026 		March 29,
2025
Net sales $ - $ -
Segment earnings (1)
(95.7) (89.6)
Margin N/A N/A
(1) See definition above.
Segment earnings related to our other category were ($96) million in the first quarter of 2026, as compared to ($90) million in the first quarter of 2025.
LIQUIDITY AND CAPITAL RESOURCES
Our primary liquidity needs are to fund general business requirements, including working capital requirements, capital expenditures, operational restructuring actions and debt service requirements. Our principal sources of liquidity are cash flows from operating activities, borrowings under available credit facilities and our existing cash balance.
Cash Provided by Subsidiaries
A substantial portion of our operating income is generated by our subsidiaries. As a result, we are dependent on the earnings and cash flows of and the combination of dividends, royalties, intercompany loan repayments and other distributions and advances from our subsidiaries to provide the funds necessary to meet our obligations.
As of April 4, 2026 and December 31, 2025, cash and cash equivalents of $645 million and $741 million, respectively, were held in foreign subsidiaries and can be repatriated, primarily through the repayment of intercompany loans and the payment of dividends. There are no restrictions on the ability of our subsidiaries to pay dividends or make other distributions to Lear that would have a material impact on Lear.
For further information related to potential dividends from our non-U.S. subsidiaries, see Note 7, "Income Taxes," to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025.
Adequacy of Liquidity Sources
As of April 4, 2026, we had $0.9 billion of cash and cash equivalents on hand and $2.0 billion in available borrowing capacity under our unsecured revolving credit agreement. Together with cash provided by operating activities, we believe that this will enable us to meet our liquidity needs for the foreseeable future and to satisfy ordinary course business obligations. In addition, we expect to continue to pay quarterly cash dividends and repurchase shares of our common stock pursuant to our Repurchase Program, although such actions are at the discretion of our Board and will depend upon our financial condition, results of operations, capital requirements, prevailing market conditions, alternative uses of capital and other factors that our Board may consider at its discretion.
Our future financial results and our ability to continue to meet our liquidity needs are subject to, and will be affected by, cash flows from operations, as well as restructuring activities, automotive industry conditions, the financial condition of our customers and suppliers, supply chain disruptions and other related factors. Additionally, an economic downturn or further reduction in production levels could negatively impact our financial condition.
For further discussion of the risks and uncertainties affecting our cash flows from operations and our overall liquidity, see "- Executive Overview" above, "- Forward-Looking Statements" below and Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2025.
Cash Flows
A summary of net cash provided by (used in) operating activities is shown below (in millions):
Three Months Ended
April 4,
2026 		March 29,
2025 		Increase (Decrease) in
Cash Flow
Consolidated net income and depreciation and amortization $ 343 $ 250 $ 93
Net change in working capital items:
Accounts receivable (292) (566) 274
Inventories (65) (48) (17)
Accounts payable 369 324 45
Accrued liabilities and other (221) (103) (118)
Net change in working capital items (209) (393) 184
Other (36) 15 (51)
Net cash provided by (used in) operating activities $ 98 $ (128) $ 226
Net cash used in investing activities $ (119) $ (67) $ (52)
Net cash used in financing activities $ (138) $ (84) $ (54)
Operating Activities
Operating cash flow was a source of $98 million of cash in the first three months of 2026, as compared to a use of $128 million of cash in the first three months of 2025. The increase in operating cash flow reflects higher earnings and a decrease in working capital cash usage in the first three months of 2026, as compared to the first three months of 2025.
Investing Activities
Net cash used in investing activities was $119 million in the first three months of 2026, as compared to $67 million in the first three months of 2025. In the first three months of 2025, we received proceeds of $36 million related to the sale of a non-core business in the Company's Seating segment. Capital spending was $125 million in the first three months of 2026, as compared to $104 million in the first three months of 2025. Capital spending is estimated to be $660 million in 2026.
Financing Activities
Net cash used in financing activities was $138 million in the first three months of 2026, as compared to $84 million in the first three months of 2025. In the first three months of 2026, we paid $75 million for repurchases of our common stock and $43 million in dividends to Lear shareholders. In the first three months of 2025, we paid $25 million for repurchases of our common stock, $43 million in dividends to Lear shareholders and $6 million in dividends to noncontrolling interest holders.
Capitalization
Short-Term Borrowings
We utilize uncommitted lines of credit as needed for our short-term working capital fluctuations. As of April 4, 2026 and December 31, 2025, we had lines of credit from banks totaling $378 million and $383 million, respectively. As of April 4, 2026 and December 31, 2025, we had short-term debt balances outstanding related to draws on our lines of credit of $28 million.
Senior Notes and Credit Agreement
For further information related to our senior notes and credit agreement, see Note 7, "Debt," to the condensed consolidated financial statements included in this Report and Note 5, "Debt," to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025.
Common Stock Share Repurchase Program and Quarterly Cash Dividends
For information related to our common stock share repurchase program and dividends, see "- Executive Overview - Share Repurchase Program and Quarterly Cash Dividends" above, Note 14, "Comprehensive Income and Equity," to the condensed consolidated financial statements included in this Report and Note 10, "Capital Stock, Accumulated Other Comprehensive Loss and Equity," to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025.
Commodity Prices
Raw material, energy and commodity costs can be volatile, reflecting, among other things, changes in supply and demand, logistics issues, global trade and tariff policies (including recent U.S. tariffs imposed or threatened to be imposed on Mexico, Canada and China, as well as other countries and any retaliatory actions taken by such countries), and geopolitical issues. We have commodity price risk with respect to purchases of certain raw materials, including steel, copper, diesel fuel, chemicals, resins and leather. Our primary commodity cost exposures relate to steel, copper and leather. The majority of the steel used in our products is comprised of fabricated components that are integrated into a seat system, such as seat frames, recliner mechanisms, seat tracks and other mechanical components. Therefore, our exposure to changes in steel prices is primarily indirect, through purchased components. Additionally, approximately 85% of our copper purchases and a significant portion of our leather and direct steel purchases are subject to price index agreements with our customers and suppliers. We have developed and implemented additional strategies to mitigate the impact of any such cost increases, including the selective in-sourcing of components, the continued consolidation of our supply base, longer-term purchase commitments, commercial recovery mechanisms and the selective expansion of low-cost country sourcing and engineering, as well as value engineering and product benchmarking. Certain of these strategies may limit our opportunities in a declining commodity price environment. In the current environment of elevated raw material, energy and commodity costs, these strategies, together with commercial negotiations with our customers and suppliers and improved manufacturing productivity through automation and other advanced technologies, have more than offset the adverse impact. However, no assurances can be provided that these costs will continue to be offset in the future. If these costs increase further, it could have an adverse impact on our operating results in the foreseeable future.
See "- Forward-Looking Statements" below and Item 1A, "Risk Factors - Increases in the costs and restrictions on the availability of raw materials, energy, commodities, product components and labor could adversely affect our financial performance," in our Annual Report on Form 10-K for the year ended December 31, 2025.
For further information related to the financial instruments described above, see Note 17, "Financial Instruments," to the condensed consolidated financial statements included in this Report.
OTHER MATTERS
Legal and Environmental Matters
We are involved from time to time in various legal proceedings and claims, including, without limitation, commercial and contractual disputes, product liability claims, and environmental and other matters. As of April 4, 2026, we had recorded reserves for pending legal disputes, including commercial and contractual disputes, product liability claims and other legal matters of $14 million. In addition, as of April 4, 2026, we had recorded reserves for warranty and recall matters of $38 million and environmental matters of $5 million. We carry insurance for certain legal matters, including product liability claims, but such coverage may be limited. We do not maintain insurance for warranty and recall matters. Although these reserves were determined in accordance with GAAP, the ultimate outcomes of these matters are inherently uncertain, and actual results may differ significantly from current estimates. For a description of risks related to various legal proceedings and claims, see Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2025. For a more complete description of our outstanding material legal proceedings, see Note 15, "Legal and Other Contingencies," to the condensed consolidated financial statements included in this Report.
Critical Accounting Estimates
Certain of our accounting policies require management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on our historical experience, the terms of existing contracts, our evaluation of trends in the industry, information provided by our customers and suppliers and information available from other outside sources, as appropriate. However, these estimates and assumptions are subject to an inherent degree of uncertainty. Accordingly, actual results in these areas may differ significantly from our estimates.
For a discussion of our significant accounting policies and critical accounting estimates, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Other Matters - Critical Accounting Estimates," and Note 2, "Summary of Significant Accounting Policies," to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no significant changes in our significant accounting policies or critical accounting estimates during the first three months of 2026.
Recently Issued Accounting Pronouncements
For information on the impact of recently issued accounting pronouncements, see Note 18, "Accounting Pronouncements," to the condensed consolidated financial statements included in this Report.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. The words "may," "designed to," "outlook," "believes," "should," "anticipates," "plans," "expects," "intends," "estimates," "forecasts" and similar expressions identify certain of these forward-looking statements. We also may provide forward-looking statements in oral statements or other written materials released to the public. All such forward-looking statements contained or incorporated in this Report or in any other public statements which address operating performance, events or developments that we expect or anticipate may occur in the future, including, without limitation, statements related to business opportunities, awarded sales contracts, sales backlog and ongoing commercial arrangements, or statements expressing views about future operating results, are forward-looking statements. Actual results may differ materially from any or all forward-looking statements made by us. Important factors, risks and uncertainties that may cause actual results to differ materially from anticipated results include, but are not limited to:
•general economic conditions in the markets in which we operate, including changes in interest rates or currency exchange rates;
•the impact of administrative policy, including trade policies and tariffs, in the United States and related actions by countries in which we do business;
•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;
•increases in the costs and restrictions on the availability of raw materials, energy, commodities, product components and labor and our ability to mitigate such costs and insufficient availability;
•disruptions in relationships with our customers and suppliers;
•the financial condition of and adverse developments affecting our customers and suppliers;
•risks associated with conducting business in foreign countries, including the risk of war (including the war with Iran) or other geopolitical conflicts;
•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, including disruptions, involving us or our significant customers or suppliers or that otherwise affect us or our significant customers or suppliers;
•the consequences of violations of law by our employees, agents or business partners, including violations related to anti-bribery, competition, export and import, trade sanctions, data privacy, environmental, human rights and other laws;
•the operational and financial success of our joint ventures;
•our ability to attract, develop, engage and retain qualified employees;
•our ability to respond to the evolution of the global transportation industry;
•the outcome of an increased emphasis on global climate change and other sustainability matters by stakeholders;
•the impact of global climate change;
•the impact of pandemics, epidemics, disease outbreaks and other public health crises on our business;
•the impact and timing of program launch costs and our management of new program launches;
•the impact of delayed program launches due to customer planning decisions;
•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;
•limitations imposed by our existing indebtedness and our ability to access capital markets on commercially reasonable terms;
•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 changes in our effective tax rate, the adoption of new tax legislation or exposure to additional income tax liabilities on our profitability; and
•other risks, described in Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2025, and in our other Securities and Exchange Commission filings.
The forward-looking statements in this Report are made as of the date hereof, and we do not assume any obligation to update, amend or clarify them to reflect events, new information or circumstances occurring after the date hereof.
Lear Corporation published this content on May 01, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 01, 2026 at 13:16 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]