Lear Corporation (LEA) Earnings Call Transcript & Summary

Good morning, and welcome to the Lear Corporation 2021 Annual Meeting of Stockholders. I would now like to introduce the first presenter, Greg Smith.

Good morning, and I'd add my welcome to this year's annual meeting. I am Greg Smith, Lear's non-Executive Chair of the Board. I'm also the presiding Officer at this annual meeting. Harry Kemp, the Corporate Secretary of the company, will act as the secretary of today's meeting. We have chosen to hold our annual meeting virtually in light of the public health concerns related to the coronavirus outbreak and out of concern for the health and safety of our stockholders, directors and members of management. We've also adopted a series of safeguards that we believe provide all stockholders the same rights and opportunities to participate in this meeting as they would at an in-person meeting. I would like to take a moment to address some administrative matters. In order to conduct a fair, orderly and constructive meeting, this meeting will follow the agenda and be governed by the rules and procedures of conduct for this meeting. A copy of the agenda and the rules and procedures of conduct can be found on the virtual meeting portal. Stockholders have the opportunity to submit questions in advance of the meeting. If you have a question on one of the proposals or other procedural matters related to the meeting during the meeting, please submit your questions through the virtual meeting portal as outlined in the rules and procedures of conduct for this meeting. These questions will be reviewed by management and will be addressed in accordance with the rules and procedures of conduct for this meeting. I would also like to remind you that we released our first quarter results on May 7, 2021, and followed with the filing of our quarterly report on Form 10-Q. We refer you to our first quarter earnings presentation and accompanying webcast, which are posted on our website, for further information regarding our financial condition. We appreciate your cooperation in helping us conduct an orderly meeting. The polls for voting on the agenda items opened today at 9 o'clock. I would like to take this opportunity to introduce our other directors that are participating via teleconference. Tom Capo. Tom is the former Chairman of Dollar Thrifty Automotive Group and the Chair of our Compensation Committee. Mei-Wei Cheng. Mei-Wei is the former Chief Executive Officer of Siemens Northeast Asia and former Chairman and Chief Executive Officer of Ford Motor China Limited. Jon Foster. Jon is a Managing Director of Current Capital Partners, LLC, a private equity and portfolio company management firm, and Jon is the Chair of our Audit Committee. Brad Halverson. Brad is the former Group President and Chief Financial Officer of Caterpillar. Dr. Mary Lou Jepsen. Dr. Jepsen is the founder of Openwater and the former Executive Director of Engineering at Facebook and Former Head of Display Technologies at Oculus VR LLC. Roger Krone. Roger is the Chief Executive Officer and Chair of the Board at Leidos Holdings. Patricia Lewis. Patricia is the Executive Vice President and Chief Human Resources Officer at UnitedHealth Group Incorporated. Kathleen Ligocki. Kathleen is the former Chief Executive Officer of Agility Fuel Solutions, the leading provider of natural gas fuel systems. She is also the chair of our Nominating and Corporate Governance committee. Justice Conrad Mallett. Justice Mallett is the Deputy Mayor of the City of Detroit. Justice Mallett is the former Chief Justice of the Michigan Supreme Court. Ray Scott. Ray is Lear's President and Chief Executive Officer and also serves as a Director. He has been with the company in various positions since 1988, most recently as Executive Vice President and President, Seating. I would also like to introduce some of our other senior executives who are participating via teleconference. Harry Kemp. Harry is our Senior Vice President, General Counsel and Corporate Secretary; Jason Cardew. Jason is our Senior Vice President and Chief Financial Officer; Frank Orsini. Frank is our Executive Vice President and President, Seating; Carl Esposito. Carl is our Senior Vice President and President, E-Systems; Tom DiDonato. Tom is our Senior Vice President and Chief Administrative Officer; Alicia Davis. Alicia is our Senior Vice President, Strategy and Corporate Development; Derrick Mitchell. Derrick is our Vice President of diversity, equity and inclusion, nonproduction purchasing and minority business enterprises; John Absmeier. John is our Chief Technology Officer and General Manager of Xevo. Now I'll turn it over to Harry Kemp to conduct the voting.

Thank you, Greg. Beth VanDerbeck, agent for Broadridge, is participating via teleconference as our inspector of elections and will assist us in certifying the voting results for all proposals. I will now briefly discuss the procedures for this meeting. We will shortly review each item of business on the agenda. After all of the items of business on the agenda have been completed, we will read and respond to stockholder questions related to the proposals and other procedural matters related to the meeting. March 26, 2021 was the record date for this stockholders' meeting. We have a list of stockholders of record on that date available on the website that you logged onto to access this meeting. This list has been available for inspection at our offices for the last 10 days. Quorum report. A majority of the company's shares are represented here today, and therefore, a quorum is present. We will now present the matters to be voted on. All stockholders entitled to vote at this meeting have the ability to do so online from now until the closing of the polls. If you have previously voted by proxy, it is not necessary to vote again unless you wish to change your vote. You are entitled to 1 vote for each share registered in your name. We will read and respond to stockholder questions or comments on the proposals and other procedural matters related to the meeting in accordance with the rules and procedures of conduct of the meeting after all proposals have been presented. After we have reviewed all proposals on the agenda and answered any questions regarding the proposals or other procedural matters related to the meeting, we will close the polls, and the inspector of election will provide her preliminary report. The first item for business today is to elect 10 individuals to our Board of Directors who will serve until the 2022 annual meeting of stockholders. Mei-Wei Cheng, Jon Foster, Brad Halverson, Mary Lou Jepson, Roger Krone, Patricia Lewis, Kathleen Ligocki, Conrad Mallett, Ray Scott and Greg Smith have been nominated. The Board recommends that you vote for the election of each nominee. Additionally, Tom Capo has served as a member of our Board since 2009 and will not be standing for reelection. The Board would like to thank Tom for his years of dedicated service to the company. The second item on the agenda is the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the current year. I'd like to introduce Dave Hoogendoorn, Lear's Global Coordinating Partner at Ernst & Young, LLP, who is participating via teleconference and will be pleased to answer any appropriate stockholder questions during the question-and-answer period. The Board recommends that you vote for the ratification of the appointment of Ernst & Young as our independent registered public accounting firm. The third item on the agenda is an advisory vote on the company's executive compensation program and practices. As set forth in the company's proxy statement, this vote is being conducted pursuant to the requirements of Section 14(a) of the Exchange Act. While this vote is advisory and not binding on the Board, it will provide information to the Board and to the compensation committee regarding investor sentiment about our executive compensation program and practices. The Board recommends that you vote for the approval of executive compensation set forth in the proxy statement. We will now read and respond to stockholder questions on the proposals or other procedural matters related to the meeting in accordance with the rules and procedures of conduct for the meeting. We'll take a look at those questions right now and be with [Audio Gap]

Okay. The question that we received involved executive compensation. The question is, describe the company's executive compensation philosophy and links between compensation and performance and specifically the link to the company's business strategy. I'm going to ask Mr. Greg Smith, Chairman of our Board of Directors, to respond to this question.

Thanks, Harry. As in prior years -- and thanks to the folks that sent in the question. As in prior years, our proxy statement filed with the Securities and Exchange Commission on April 5 this year contains an extensive discussion of our executive compensation philosophy and practice. This discussion includes a description of the incentive plan performance measures utilized by Lear in awarding compensation to its executives and how such measures align with our business strategy and total shareholder return. Compensation decisions for Lear's senior executives are made by the independent Compensation Committee of our Board of Directors, which has reviewed and commented on the compensation discussion appearing in the proxy. To assist it in making these compensation determinations, the Compensation Committee engages an independent compensation consultant to advise it. Finally, we will shortly disclose to you the preliminary results of this year's stockholders meeting, but we presently expect that, as in prior years, our stockholders will approve, on a wide margin, the compensation programs described in our proxy. There was a question pertaining to the link between our compensation and strategy. We mentioned this in our proxy but I would add a couple of comments. We do need to be cognizant of compensation plans of our peers for a number of reasons. However, we do tailor our compensation plans for our senior executives and our CEO to be very responsive to our specific circumstances and our business strategy. With that, I will turn it back over to Harry.

Thank you, Greg. All matters to be voted on have now been presented. The polls are about to close. So if you have not yet voted, please do so. Again, you are entitled to one vote for each share registered in your name. Thank you for your participation. The polls are now closed. We will now read and respond to stockholder questions that were submitted in advance of the meeting. As mentioned in my opening comments, there were 3 questions submitted by stockholders in advance of the meeting, one of which we have already answered regarding executive compensation. In order to assure compliance with our rules and procedures for this meeting, I will summarize each question, and then myself or another representative of the company will provide Lear's response. Our first question involved political contributions made by the company. The question was, what is the company's official policy as to donations to individuals holding or seeking political office? I will respond to this question on behalf of Lear. Lear's code of business conduct and ethics prohibits any employee for making any political contribution in the name of the company or utilizing any Lear funds, assets, services or facilities to make a political contribution for any local, state or federal candidate for political office. Our second question involved our connectivity business. The question was, what are the company's plans for its connectivity business? I'm going to ask Ray Scott, our President and CEO, to respond to this question.

Thanks, Harry. Lear continues to actively participate in the connectivity business, manufacturing first to market 5G telematics in connectivity units and advanced vehicle gateway products. In addition, we have recently been named a finalist for a PACE Award, a prestigious honor designated by the Automotive News for leading technology, for our innovation for multiple -- multifrequency antenna and connectivity electronics offering. Furthermore, Lear continues evaluating and developing, both organically and through strategic partnerships, unique applications of connectivity hardware and software technology for future business opportunities.

Thank you, Ray. We will now announce the voting results. Mei-Wei Cheng, Jon Foster, Brad Halverson, Mary Lou Jepsen, Roger Krone, Patricia Lewis, Kathleen Ligocki, Conrad Mallet, Ray Scott and Greg Smith have been elected directors of the company. The appointment of Ernst & Young LLP to act as our independent registered public accounting firm for the fiscal year 2021 has been ratified. The company's executive compensation program and policies have been approved. We will include a written report on the matters voted on today in a Form 8-K to be filed with the United States Securities and Exchange Commission following the close of this meeting. I would now like to turn the meeting back to Greg Smith.

Thanks, Harry. I want to thank all of you for attending and participating in today's meeting and for the interest you've shown in your company. I'd also like to thank Tom Capo for his terrific service to the company and to this Board. He contributed significantly to the company's success. This meeting is now adjourned.

Thank you. The Lear Corporation 2021 Annual Meeting of Stockholders has now come to an end. Thank you for attending. You may now disconnect.