UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



			FORM			10-Q

x ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, ~~2018~~2019

¨ ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-37757

Adient plc

(exact name of Registrant as specified in its charter)

Ireland

98-1328821

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer

Identification No.)

25-28 North Wall Quay, IFSC, Dublin 1, Ireland D01 H104

(Address of principal executive offices)

734-254-5000

(Registrant's telephone number, including area ~~code: 734-254-5000~~code)

Securities registered pursuant to Section 12(b) of the Act:

(

Title of ~~class)~~each class

Trading symbol

(Name of exchange on which ~~registered)~~

registered

Ordinary Shares, par value $0.001

ADNT

New York Stock Exchange

~~Securities registered pursuant to Section 12(g) of the Act:~~ ~~None~~

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Large accelerated filer	~~Yes~~ x ☑	No ¨ Accelerated filer	☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Non-accelerated filer	~~Yes~~ x ☐	No ¨ Smaller reporting company	☐
~~Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting~~	☐	Emerging growth company ~~or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.~~	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

At December 31, 2019, 93,793,433 ordinary shares were outstanding.

Adient plc

Form 10-Q

For the Three Months Ended December 31, 2019

TABLE OF CONTENTS

~~Large accelerated filer~~ xPART I - FINANCIAL INFORMATION

~~Accelerated filer~~ ¨

~~Non-accelerated filer~~ ¨

~~Smaller reporting company~~ ¨

~~Emerging growth company~~ ¨



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			¨



~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).~~	~~Yes~~ ¨	No x

~~At December 31, 2018, 93,518,237 ordinary shares were outstanding.~~

~~Adient plc~~

~~Form 10-Q~~

~~For the Three Months Ended December 31, 2018~~

~~TABLE OF CONTENTS~~

Adient plc | Form 10-Q | 2


PART I - FINANCIAL INFORMATION

Item 1.

Unaudited Financial Statements

Adient plc

Consolidated Statements of Income (Loss)

(unaudited)


	Three Months Ended December 31,
(in millions, except per share data)	2019		2018
Net sales	$	3,936	$	4,158
Cost of sales	3,673		3,978
Gross profit	263		180
Selling, general and administrative expenses	165		178
Loss on business divestitures - net	25		—
Restructuring and impairment costs	2		31
Equity income (loss)	(113)		83
Earnings (loss) before interest and income taxes	(42)		54
Net financing charges	48		35
Other pension expense (income)	(2)		(2)
Income (loss) before income taxes	(88)		21
Income tax provision (benefit)	54		10
Net income (loss)	(142)		11
Income (loss) attributable to noncontrolling interests	25		28
Net income (loss) attributable to Adient	$	(167)	$	(17)

Earnings per share:
Basic	$	(1.78)	$	(0.18)
Diluted	$	(1.78)	$	(0.18)

Shares used in computing earnings per share:
Basic	93.7		93.5
Diluted	93.7		93.5

Three Months Ended
December 31,
(in millions, except per share data) 2018 2017
Net sales $ 4,158
$ 4,204
Cost of sales 3,978
4,003
Gross profit 180
201
Selling, general and administrative expenses 178
196
Restructuring and impairment costs 31
—
Equity income (loss) 83
96
Earnings (loss) before interest and income taxes 54
101
Net financing charges 35
33
Other pension expense (income) (2 ) (1 )
Income (loss) before income taxes 21
69
Income tax provision (benefit) 10
265
Net income (loss) 11
(196 )
Income (loss) attributable to noncontrolling interests 28
20
Net income (loss) attributable to Adient $ (17 ) $ (216 )

Earnings per share:
Basic $ (0.18 ) $ (2.32 )
Diluted $ (0.18 ) $ (2.32 )

Cash dividends declared per share $ 0.275
$ 0.275

Shares used in computing earnings per share:
Basic 93.5
93.2
Diluted 93.5
93.2

The accompanying notes are an integral part of the consolidated financial statements.

Adient plc | Form 10-Q | 3

Adient plc

Consolidated Statements of Comprehensive Income (Loss)

(unaudited)


	Three Months Ended December 31,
(in millions)	2019		2018
Net income (loss)	$	(142)	$	11
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	59		16
Realized and unrealized gains (losses) on derivatives	15		(3)

Other comprehensive income (loss)	74		13
Total comprehensive income (loss)	(68)		24
Comprehensive income (loss) attributable to noncontrolling interests	34		28
Comprehensive income (loss) attributable to Adient	$	(102)	$	(4)

Three Months Ended
December 31,
(in millions) 2018 2017
Net income (loss) $ 11
$ (196 )
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 16
76
Realized and unrealized gains (losses) on derivatives (3 ) (10 )
Other comprehensive income (loss) 13
66
Total comprehensive income (loss) 24
(130 )
Comprehensive income (loss) attributable to noncontrolling interests 28
25
Comprehensive income (loss) attributable to Adient $ (4 ) $ (155 )

The accompanying notes are an integral part of the consolidated financial statements.

Adient plc | Form 10-Q | 4

Adient plc

Consolidated Statements of Financial Position

(unaudited)


(in millions, except share and per share data)	December 31, 2019		September 30, 2019
Assets
Cash and cash equivalents	$	965	$	924
Accounts receivable - net	1,522		1,905
Inventories	772		793
Other current assets	540		494
Current assets	3,799		4,116
Property, plant and equipment - net	1,690		1,671
Goodwill	2,157		2,150
Other intangible assets - net	395		405
Investments in partially-owned affiliates	1,321		1,399

Other noncurrent assets	1,002		601
Total assets	$	10,364	$	10,342
Liabilities and Shareholders' Equity
Short-term debt	$	6	$	22
Current portion of long-term debt	8		8
Accounts payable	2,511		2,709
Accrued compensation and benefits	305		364
Restructuring reserve	109		123
Other current liabilities	744		609
Current liabilities	3,683		3,835
Long-term debt	3,740		3,708
Pension and postretirement benefits	146		151
Other noncurrent liabilities	673		408
Long-term liabilities	4,559		4,267
Commitments and Contingencies (Note 17)
Redeemable noncontrolling interests	38		51
Preferred shares issued, par value $0.001; 100,000,000 shares authorized, NaN shares issued and outstanding at December 31, 2019	—		—
Ordinary shares issued, par value $0.001; 500,000,000 shares authorized, 93,793,433 shares issued and outstanding at December 31, 2019	—		—
Additional paid-in capital	3,963		3,962
Accumulated deficit	(1,716)		(1,545)
Accumulated other comprehensive income (loss)	(504)		(569)
Shareholders' equity attributable to Adient	1,743		1,848
Noncontrolling interests	341		341
Total shareholders' equity	2,084		2,189
Total liabilities and shareholders' equity	$	10,364	$	10,342

(in millions, except share and per share data) December 31, 2018 September 30, 2018
Assets
Cash and cash equivalents $ 406
$ 687
Accounts receivable - net 1,766
2,091
Inventories 839
824
Other current assets 657
707
Current assets 3,668
4,309
Property, plant and equipment - net 1,695
1,683
Goodwill 2,175
2,182
Other intangible assets - net 449
460
Investments in partially-owned affiliates 1,489
1,407
Assets held for sale —
37
Other noncurrent assets 882
864
Total assets $ 10,358
$ 10,942
Liabilities and Shareholders' Equity
Short-term debt $ 8
$ 6
Current portion of long-term debt 2
2
Accounts payable 2,590
3,101
Accrued compensation and benefits 316
331
Restructuring reserve 150
141
Other current liabilities 609
611
Current liabilities 3,675
4,192
Long-term debt 3,399
3,422
Pension and postretirement benefits 119
124
Other noncurrent liabilities 414
440
Long-term liabilities 3,932
3,986
Commitments and Contingencies (Note 16)

Redeemable noncontrolling interests 27
47
Preferred shares issued, par value $0.001; 100,000,000 shares authorized
Zero shares issued and outstanding at December 31, 2018 —
—
Ordinary shares issued, par value $0.001; 500,000,000 shares authorized
93,518,237 shares issued and outstanding at December 31, 2018 —
—
Additional paid-in capital 3,954
3,951
Retained earnings (accumulated deficit) (1,070 ) (1,028 )
Accumulated other comprehensive income (loss) (518 ) (531 )
Shareholders' equity attributable to Adient 2,366
2,392
Noncontrolling interests 358
325
Total shareholders' equity 2,724
2,717
Total liabilities and shareholders' equity $ 10,358
$ 10,942

The accompanying notes are an integral part of the consolidated financial statements.

Adient plc | Form 10-Q | 5

Adient plc

Consolidated Statements of Cash Flows

(unaudited)


	Three Months Ended December 31,
(in millions)	2019		2018
Operating Activities
Net income (loss) attributable to Adient	$	(167)	$	(17)
Income attributable to noncontrolling interests	25		28
Net income (loss)	(142)		11
Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:
Depreciation	75		65
Amortization of intangibles	9		10
Pension and postretirement benefit expense (benefit)	—		1
Pension and postretirement contributions, net	(4)		(6)
Equity in earnings of partially-owned affiliates, net of dividends received (includes purchase accounting amortization of $1, and $0, respectively)	(102)		(82)
Impairment of nonconsolidated partially-owned affiliate	216		—

Deferred income taxes	(5)		(2)


Loss (gain) on divestitures - net	25		—
Equity-based compensation	4		6
Other	3		7
Changes in assets and liabilities:
Receivables	395		320
Inventories	23		(19)
Other assets	(2)		35
Restructuring reserves	(18)		(14)
Accounts payable and accrued liabilities	(267)		(451)
Accrued income taxes	29		(9)
Cash provided (used) by operating activities	239		(128)
Investing Activities
Capital expenditures	(91)		(144)
Sale of property, plant and equipment	—		37


Changes in long-term investments	(37)		—
Loans to affiliates	—		(11)

Cash provided (used) by investing activities	(128)		(118)
Financing Activities



Increase (decrease) in short-term debt	(17)		2
Repayment of long-term debt	(2)		—
Debt financing costs	—		(4)




Cash dividends	—		(26)
Dividends paid to noncontrolling interests	(54)		(36)
Formation of consolidated joint venture	—		28
Other	(1)		(2)
Cash provided (used) by financing activities	(74)		(38)
Effect of exchange rate changes on cash and cash equivalents	4		3
Increase (decrease) in cash and cash equivalents	41		(281)
Cash and cash equivalents at beginning of period	924		687
Cash and cash equivalents at end of period	$	965	$	406

Three Months Ended
December 31,
(in millions) 2018 2017
Operating Activities
Net income (loss) attributable to Adient $ (17 ) $ (216 )
Income attributable to noncontrolling interests 28
20
Net income (loss) 11
(196 )
Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:
Depreciation 65
96
Amortization of intangibles 10
12
Pension and postretirement benefit expense (benefit) 1
1
Pension and postretirement contributions, net (6 ) 13
Equity in earnings of partially-owned affiliates, net of dividends received (includes purchase accounting amortization of $0, and $5, respectively) (82 ) (90 )
Deferred income taxes (2 ) 260
Equity-based compensation 6
16
Other 7
2
Changes in assets and liabilities:
Receivables 320
170
Inventories (19 ) (22 )
Other assets 35
(23 )
Restructuring reserves (14 ) (32 )
Accounts payable and accrued liabilities (451 ) (296 )
Accrued income taxes (9 ) (38 )
Cash provided (used) by operating activities (128 ) (127 )
Investing Activities
Capital expenditures (144 ) (143 )
Sale of property, plant and equipment 37
2
Changes in long-term investments —
(5 )
Loans to affiliates (11 ) —
Cash provided (used) by investing activities (118 ) (146 )
Financing Activities
Increase (decrease) in short-term debt 2

1
Debt financing costs (4 ) —
Cash dividends (26 )
(26 )
Dividends paid to noncontrolling interests (36 )
(20 )
Formation of consolidated joint venture 28
—
Other (2 )
(4 )
Cash provided (used) by financing activities (38 ) (49 )
Effect of exchange rate changes on cash and cash equivalents 3
3
Increase (decrease) in cash and cash equivalents (281 ) (319 )
Cash and cash equivalents at beginning of period 687
709
Cash and cash equivalents at end of period $ 406
$ 390

The accompanying notes are an integral part of the consolidated financial statements.

Adient plc | Form 10-Q | 6

Adient plc

Notes to Consolidated Financial Statements

(unaudited)

1. Basis of Presentation and Summary of Significant Accounting Policies

Adient is a global leader in the automotive seating supplier industry. Adient has a leading market position in the Americas, Europe and China, and has longstanding relationships with the largest global original equipment manufacturers, or OEMs, in the automotive space. Adient's proprietary technologies extend into virtually every area of automotive seating solutions, including complete seating systems, frames, mechanisms, foam, head restraints, armrests, trim covers and fabrics. Adient is an independent seat supplier with global scale and the capability to design, develop, engineer, manufacture, and deliver complete seat systems and components in every major automotive producing region in the world. Adient also participates in the automotive interiors market primarily through its global automotive interiors joint venture in China, Yanfeng Global Automotive Interior Systems Co., Ltd., or ~~YFAI.~~YFAI (refer to Note 3, "Acquisitions and Divestitures," of the notes to consolidated financial statements for recent developments regarding Adient's YFAI investment).

Basis of Presentation

The unaudited consolidated financial statements of Adient have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet data as of September 30, 2019 was derived from audited financial statements, but does not include all disclosures required by GAAP. These interim consolidated financial statements include all adjustments (consisting of normal recurring adjustments, except as otherwise disclosed) that management believes are necessary for a fair statement of the results of operations, financial position and cash flows of Adient for the interim periods presented. Interim results are not necessarily indicative of full-year results.

Principles of Consolidations

Adient consolidates its wholly-owned subsidiaries and those entities in which it has a controlling interest. Investments in partially-owned affiliates are accounted for by the equity method when Adient's interest exceeds 20% and does not have a controlling interest.

Consolidated VIEs

Based upon the criteria set forth in the Financial Accounting Standards Board (the FASB) Accounting Standards Codification (ASC) 810, "Consolidation," Adient has determined that it was the primary beneficiary in ~~two~~2 variable interest entities (VIEs) for the reporting periods ended December 31, ~~2018~~2019, and September 30, ~~2018,~~2019, respectively, as Adient absorbs significant economics of the entities and has the power to direct the activities that are considered most significant to the entities.

The ~~two~~2 VIEs manufacture seating products in North America for the automotive industry. Adient funds the entities' short-term liquidity needs through revolving credit facilities and has the power to direct the activities that are considered most significant to the entities through its key customer supply relationships.

Adient plc | Form 10-Q | 7

The carrying amounts and classification of assets (none of which are restricted) and liabilities included in Adient's consolidated statements of financial position for the consolidated VIEs are as follows:


	December 31,		September 30,			December 31,		September 30,
(in millions)	2018		2018		(in millions)	2019		2019
Current assets	$	221	$	270	Current assets	$	226	$	236
Noncurrent assets	42		43		Noncurrent assets	61		40
Total assets	$	263	$	313	Total assets	$	287	$	276

Current liabilities	$	197	$	252	Current liabilities	$	215	$	235
Noncurrent liabilities					Noncurrent liabilities	17		—
Total liabilities	$	197	$	252	Total liabilities	$	232	$	235

Earnings Per Share

The following table shows the computation of basic and diluted earnings per share:


	Three Months Ended December 31,							Three Months Ended December 31,
(in millions, except per share data)	2018			2017			(in millions, except per share data)	2019		2018
Numerator:							Numerator:
Net income (loss) attributable to Adient	$	(17	)	$	(216	)	Net income (loss) attributable to Adient	$	(167)	$	(17)

Denominator:							Denominator:
Shares outstanding	93.5			93.2			Shares outstanding	93.7		93.5
Effect of dilutive securities	—			—			Effect of dilutive securities	—		—
Diluted shares	93.5			93.2			Diluted shares	93.7		93.5

Earnings per share:							Earnings per share:
Basic	$	(0.18	)	$	(2.32	)	Basic	$	(1.78)	$	(0.18)
Diluted	$	(0.18	)	$	(2.32	)	Diluted	$	(1.78)	$	(0.18)

Potentially dilutive securities whose effect would have been antidilutive are excluded from the computation of diluted earnings per ~~share. The impact~~share, which is a result of ~~excluding antidilutive securities was insignificant for all~~both periods ~~presented.~~presented being in a loss position.

New Accounting Pronouncements

Standards Adopted During Fiscal ~~2019~~2020

~~ASU 2014-09, Revenue - Revenue from Contracts with Customers.~~On October 1, ~~2018,~~2019, Adient adopted Accounting Standards Codification Topic ~~606, Revenue from Contracts~~842, "Leases" ("ASC 842"). The guidance requires lessees to recognize a lease liability and a right-of-use (ROU) asset for all leases with ~~Customers ("ASC 606"), and all~~ the ~~related amendments using~~exception of short-term leases whose terms are twelve months or less. By applying the optional modified retrospective method, ~~as applied to all customer contracts that were not completed~~Adient recorded an adjustment as of October 1, 2018. As a result, financial information for reporting periods beginning on or after October 1, 2018 are presented in accordance with ASC 606. Comparative financial information for reporting periods beginning prior to October 1, 2018 has not been adjusted and continues to be reported in accordance with Adient's revenue recognition policies prior to the adoption date without any retrospective adjustments to comparative financial information. Additionally, Adient elected the package of practical expedients permitted under ASC ~~606.~~842, and accordingly, did not reassess whether existing contracts contain leases, lease classifications, or the treatment of initial direct costs capitalized under the previous standard ("ASC 840"). Adient did not ~~record a cumulative adjustment related~~apply the "hindsight" practical expedient upon adoption. Adient did elect to apply the ~~adoption of ASC 606, and the effects of adoption were~~practical expedient to not ~~significant.~~separate nonlease components from associated lease components. Refer to Note ~~2, "Revenue Recognition,~~7, "Leases," of the notes to ~~the~~ consolidated financial statements for ~~information related~~additional information.

ASU 2018-07, Compensation-Stock Compensation: Improvements to ~~Adient's~~Nonemployee Share-Based Payment Accounting, expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which the grantor

Adient plc | Form 10-Q | 8

acquires goods and services to be used or consumed in its own operations by issuing share-based payment awards. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606. The adoption of ~~ASU 2014-09.~~

~~ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.~~ Onthis guidance on October 1, 2018, Adient adopted the amendments to ASU 2017-07 that improve the presentation of net periodic pension and postretirement benefit costs and retrospectively adopted the presentation of service cost separate from the other components of net periodic costs. The interest cost, expected return on assets, amortization of prior service costs, net remeasurement, and other costs have been reclassified from cost of sales and selling, general and administrative expenses to other pension expense (income). Adient elected to apply the practical expedient which allows reclassification of amounts previously disclosed in the retirement benefits note as the basis for applying retrospective presentation for comparative periods as it is impracticable to determine the disaggregation of the cost components for amounts capitalized and amortized in those periods. On a prospective basis, the other components of net periodic benefit costs will2019 did not ~~be included in amounts capitalized in inventory or property, plant, and equipment.~~

~~The effect of the retrospective presentation change related to the net periodic cost of~~impact Adient's ~~defined benefit pension and other postretirement employee benefits ("OPEB") plans on the~~ consolidated financial statements ~~of income (loss)~~ for the ~~three months~~quarter ended December 31, 2017 resulted in a $1 million increase to cost of sales, a $1 million decrease to gross profit, a $1 million decrease to earnings (loss) before interest and income taxes and a $1 million increase to other pension expense (income) line items in the condensed consolidated statements of income. As a result of presenting certain pension costs as non-operating items, adjusted EBITDA decreased by $1 million in the Seating segment for the three months ended December 31, 2017.2019.

~~Adient also adopted the following standards during fiscal 2019, none of which had a material impact to the consolidated financial statements or consolidated financial statement disclosures:~~



~~Standard Adopted~~	~~Description~~	~~Date~~ ~~Effective and Adopted~~
~~ASU 2016-01 and ASU 2018-03, Recognition and Measurement of Financial Assets and Financial Liabilities~~	~~ASU 2016-01 amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments.~~	~~October 1, 2018~~

~~ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments~~	~~ASU 2016-clarifies how certain cash receipts and cash payments are presented and classified in the statement of cash flows.~~	~~October 1, 2018~~

~~ASU 2016-18, Statement of Cash Flows: Restricted Cash~~	~~ASU 2016-18 clarifies the classification and presentation of restricted cash on the statement of cash flows.~~	~~October 1, 2018~~

~~ASU 2017-01, Clarifying the Definition of a Business~~	~~ASU 2017-01 clarifies the definition of a business as it relates to the acquisition or sale of assets or businesses.~~	~~October 1, 2018~~

~~ASU 2017-05, Gains and Losses from the Derecognition of Nonfinancial Assets~~	~~ASU 2017-05 will follow the same implementation guidelines as ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606).~~	~~October 1, 2018~~

~~ASU 2017-09, Stock Compensation - Scope of Modification Accounting~~	~~ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718.~~	~~October 1, 2018~~

~~ASU 2018-08, Not for Profit Entities: Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made~~	ASU 2018-08 is intended to clarify and improve the scope and the accounting guidance for contributions received and contributions made. The amendments in ASU No. 2018-08 should assist entities in (1) evaluating whether transactions should be accounted for as contributions (nonreciprocal transaction) within the scope of Topic 958, Not-for-Profit Entities, or as exchange (reciprocal) transactions subject to other guidance and (2) determining whether a contribution is conditional. This amendment applies to all entities that make or receive grants or contributions.	~~October 1, 2018~~

~~ASU 2018-15, Intangibles-Goodwill and Other-Internal Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract~~	The amendments in ASU 2018-15 require implementation costs incurred by customers in cloud computing arrangements to be deferred and recognized over the term of the arrangement, if those costs would be capitalized by the customer in a software licensing arrangement under the internal-use software guidance. The amendments also require an entity to disclose the nature of its hosting arrangements and adhere to certain presentation requirements in its balance sheet, income statement and statement of cash flows.	~~ASU No. 2018-15 is effective for Adient for the quarter ending December 31, 2019, with early adoption permitted. Adient early adopted ASU No. 2018-15 effective October 1, 2018.~~

~~ASU 2018-16, Derivatives and Hedging: Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes~~	The amendments in this Update permit use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the UST, the LIBOR swap rate, the OIS rate based on the Fed Funds Effective Rate, and the SIFMA Municipal Swap Rate.	~~October 1, 2018~~

Standards Effective After Fiscal ~~2019~~2020

~~Adient believes that the ASU summarized below, which is effective fiscal 2020, could significantly impact the consolidated financial statements:~~

Adient has considered the ASUs summarized below, effective after fiscal ~~2019,~~2020, none of which are expected to significantly impact the consolidated financial statements:

Standard Adopted

Description

Date Effective

ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments

ASU 2016-13 changes the impairment model for financial assets measured at amortized cost, requiring presentation at the net amount expected to be collected. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts. Available-for-sale debt securities with unrealized losses will now be recorded through an allowance for credit losses.

October 1, 2020

~~ASU 2018-07, Compensation-Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting~~

ASU 2018-07 expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which the grantor acquires goods and services to be used or consumed in its own operations by issuing share-based payment awards. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606.

~~October 1, 2019~~

~~ASU~~ 2018-13, Fair Value ~~Measurement:~~Measurement (Topic 820): Disclosure ~~Framework-Changes~~Framework - Changes to the Disclosure Requirements for Fair Value Measurement

~~The amendments in~~ ASU 2018-13 ~~eliminate, add,~~eliminates, adds, and ~~modify~~modifies certain disclosure requirements for fair value measurements. ~~ASU 2018-13 will be effective for Adient for the quarter ending December 31, 2019, with early adoption permitted for either the entire ASU or only the provisions that eliminate or modify requirements.~~ The amendments with respect to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty are to be applied prospectively. All other amendments are to be applied retrospectively to all periods presented.

October 1, ~~2019~~2020

ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General: Disclosure Framework - Changes to the Disclosure Requirements for ~~Defned~~Defined Benefit Plans

The amendments in ASU 2018-14 eliminate, add, and modify certain disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The guidance is to be applied on a retrospective basis to all periods presented.

October 1, 2020

ASU 2018-17, ~~Consolidated:~~ Targeted Improvements to Related Party Guidance for Variable Interest Entities

~~The amendments in this Update affect~~ASU 2018-17 affects reporting entities that are required to determine whether they should consolidate a legal entity under the guidance within the Variable Interest Entities Subsections of Subtopic 810-10, Consolidation-Overall.

October 1, ~~2019~~2020

ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes

ASU ~~2018-18, Collaborative Arrangements: Clarifying the Interaction between Topic 808 and Topic 606~~

~~The amendments in this Update make targeted improvements to generally accepted~~2019-12 modifies ASC 740, Income Taxes, by simplifying accounting ~~principles (GAAP)~~ for collaborative arrangements as follows: 1) Clarify that certain transactions between collaborative arrangement participant is a customer in the context of a unit of account. In those situations, all the guidance in Topic 606 should be applied, including recognition, measurement, presentation, and disclosure requirements. 2) Add unit-of-account guidance in Topic 808 to align with the guidance in Topic 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or aincome taxes. As part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the ~~arrangement~~usefulness of the information provided to users of financial statements, the FASB’s amendments may impact both interim and annual reporting periods. ASU 2019-12 is ~~within~~effective at the ~~scope~~beginning of ~~Topic 606. 3) Require that~~fiscal 2022 for Adient although early adoption is permitted in ~~a transaction~~any interim or annual period, with ~~a collaborative arrangement participant that is not directly related to sales to third parties, presenting~~any adjustments reflected as of the ~~transaction together with revenue recognized under Topic 606 is precluded if~~beginning of the ~~collaborative arrangement participant is not a customer.~~fiscal year of adoption.

October 1, ~~2019~~2021

2. Revenue Recognition

Adient adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606), and all the related amendments using the modified retrospective method as applied to all customer contracts that were not completed as of October 1, 2018. As a result, financial information for reporting periods beginning on or after October 1, 2018 are presented in accordance with ASC 606. Comparative financial information for reporting periods beginning prior to October 1, 2018 has not been adjusted and continues to be reported in accordance with Adient's revenue recognition policies prior to the adoption of ASC 606. Adient did not record a cumulative adjustment related to the adoption of ASC 606 as the effects of adoption were not significant. The majority of Adient's nonconsolidated partially-owned affiliates ~~will adopt~~adopted ASC 606 on October 1, ~~2019.~~2019 which did not result in a significant impact.

Adient generates revenue through the sale of automotive seating solutions, including complete seating systems and the components of complete seating systems.

Adient plc | Form 10-Q | 9

In a typical arrangement with the customer, purchase orders are issued for pre-production activities which consist of engineering, design and development, tooling and prototypes for the manufacture and delivery of component parts. Adient has concluded that these activities are not in the scope of ASC 606 and for that reason, there have been no changes to how Adient accounts for reimbursable pre-production costs.

Adient provides production and service parts to its customers under awarded multi-year programs. The duration of a program is generally consistent with the life cycle of a vehicle, however, the program can be canceled at any time without cause by the customer. Programs awarded to Adient to supply parts to its customers do not contain a firm commitment by the customer for volume or price and do not reach the level of a performance obligation until Adient receives either a purchase order and/or a materials release from the customer for a specific number of parts at a specified price, at which point an enforceable contract exists. Sales revenue is generally recognized at the point in time when parts are shipped and control has transferred to the customer, at which point an enforceable right to payment exists. Contracts may provide for annual price reductions over the production life of the awarded program, and prices are adjusted on an ongoing basis to reflect changes in product content/cost and other commercial factors. The amount of revenue recognized reflects the consideration that Adient expects to be entitled to in exchange for such products based on purchase orders, annual price reductions and ongoing price adjustments (some of which are accounted for as variable consideration and subject to being constrained, but which are not expected to significantly change under ASC 606), net of the impact, if any, of consideration paid to the customer.

Adient has elected to continue to include shipping and handling fees billed to customers in revenue, while including costs of shipping and handling in cost of sales. Taxes collected from customers are excluded from revenue and credited directly to obligations to the appropriate government agencies. Payment terms with customers are established based on customary industry and regional practices. Adient has evaluated the terms of its arrangements and determined that they do not contain significant financing components.

Contract assets primarily relate to the right to consideration for work completed, but not billed at the reporting date on contracts with customers. The contracts assets are transferred to receivables when the rights become unconditional. Contract liabilities primarily relate to contracts where advance payments or deposits have been received, but performance obligations have not yet been satisfied and revenue has not been recognized. No significant contract assets or liabilities were identified upon adoption of ~~ASC606~~ASC 606 or at December 31, ~~2018.~~2019. As described above, the issuance of a purchase order and/or a materials release by the customer represents the point at which an enforceable contract with the customer exists. Therefore, Adient has elected to apply the practical expedient in ASC 606, paragraph 606-10-50-14 and does not disclose information about the remaining performance obligations that have an original expected duration of one year or less.

~~The following tables present~~ Refer to Note 15, "Segment Information," of the notes to consolidated financial statements for disaggregated revenue by geographical ~~market:~~market.

(in millions)
Three Months Ended
December 31, 2018
Seating SS&M Total
United States $ 1,183
$ 242
$ 1,425
Germany 212
111
323
Mexico 480
110
590
Other European countries 1,025
264
1,289
Other foreign 839
—
839
3,739
727
4,466
Elimination (1 ) (307 ) (308 )
Total $ 3,738
$ 420
$ 4,158

(in millions)
Three Months Ended
December 31, 2017
Seating SS&M Total
United States $ 1,067
$ 226
$ 1,293
Germany 285
139
424
Mexico 441
106
547
Other European countries 1,175
247
1,422
Other foreign 828
—
828
3,796
718
4,514
Elimination (1 ) (309 ) (310 )
Total $ 3,795
$ 409
$ 4,204

3. Acquisitions and Divestitures

~~Acquisitions~~Divestitures

~~Adient's consolidated affiliate,~~ Adient Aerospace, LLC ("Adient Aerospace"), became operational on October 11, 2018 ~~after securing regulatory approvals.~~with Adient's initial ownership position in Adient Aerospace isbeing 50.01%. Initial contributions of $28 million were made during the first quarter of fiscal 2019 by each partner. On October 25, 2019, Adient reached an agreement with Boeing in which Adient's ownership position was reduced to 19.99%, resulting in the deconsolidation of Adient Aerospace ~~will develop, manufacture,~~on that date, including $37 million of cash. Adient recorded a $4 million loss as a result of the transaction in the Americas segment, including $21 million of allocated goodwill. Adient Aerospace develops, manufactures, and ~~sell~~sells a portfolio of seating products to airlines and aircraft leasing companies for installation on Boeing and other OEM commercial airplanes, for both production line-fit and retrofit configurations.

On December 31, 2019, Adient ~~Aerospace's results are included within~~sold the ~~Seating segment. Initial contributions of $28 million were made during the first quarter of fiscal 2019.~~

~~Assets Held for Sale~~

~~During fiscal 2018, Adient committed~~RECARO automotive high performance seating systems business to a ~~plan to sell its Detroit, Michigan properties and its airplanes and actively marketed the sale~~group of ~~these assets.~~investors for de minimis proceeds. As a result ~~these assets were classified~~of the sale, Adient recorded a loss of $21 million during the quarter ending December 31, 2019. For the three months ended December 31, 2019 and 2018, the RECARO business recorded $34 million (Americas: $10 million, EMEA: $11 million, Asia: $13 million) and $32 million (Americas: $11 million, EMEA: $10 million, Asia: $11 million) of net sales and immaterial amounts of net income, respectively.

On January 31, 2020, Adient, Yanfeng Automotive Trim Systems Company Ltd. (“Yanfeng”), Adient Yanfeng Seating Mechanisms Co., Ltd. (“AYM”), a joint venture owned, directly or indirectly, by Yanfeng (50%) and Adient (50%), Yanfeng Adient Seating Co., Ltd. (“YFAS”), a joint venture owned, directly or indirectly, by Yanfeng (50.1%) and Adient (49.9%) and YFAI, a joint venture owned, directly or indirectly, by Yanfeng (70%) and Adient (30%), entered into a Master Agreement (the “Agreement”), pursuant to which the parties have agreed, among other things, that:

Adient plc | Form 10-Q | 10

•Adient will transfer all of the issued and outstanding equity interest in YFAI held, directly or indirectly, by Adient, which represents 30% of YFAI’s total issued and outstanding equity interest, to Yanfeng for $379 million;

•Adient and Yanfeng will amend the YFAS Joint Venture Contract, dated as ~~assets held~~of October 22, 1997, as amended, and the Articles of Association of YFAS, dated as of October 22, 1997, as amended, in each case in order to extend the term of the YFAS joint venture until December 31, 2038;

•Adient will transfer all patents, trademarks and copyrights, know-how, trade secrets and other intellectual property rights owned by Adient (or certain of its subsidiaries) and used exclusively in the conduct of Adient’s mechanism business as of the date of such transfer (the “Transferred IP”) to AYM for ~~sale~~$20 million, and ~~were required~~in connection with such transfer, (i) AYM will grant back to Adient a sole license with respect to the Transferred IP on a worldwide and royalty-free basis, (ii) Adient will grant AYM a worldwide and royalty-free license with respect to certain intellectual property rights owned by Adient (or certain of its subsidiaries) and used on a non-exclusive basis in the conduct of Adient’s mechanism business, and (iii) Adient and AYM will license to each other certain improvements to the Transferred IP, as well as certain other intellectual property rights developed or acquired by Adient, AYM or certain of their respective subsidiaries and relating to the mechanism business; and

•Adient and Yanfeng will amend the AYM Equity Joint Venture Contract, dated as of September 9, 2013, as amended, and the Articles of Association of AYM, dated as of September 9, 2013, as amended to, among other things, (i) make certain governance changes such that Yanfeng may control and consolidate the results of AYM for financial reporting and accounting purposes, and (ii) expand AYM’s business and customer scope such that it may carry out its seating mechanism business anywhere in and outside of the People’s Republic of China, in each case, on the terms and subject to the conditions set forth in the Agreement and the relevant definitive agreements to be ~~adjusted~~entered into in connection therewith.

The transactions described above are cross-conditioned on each other and closing is subject to regulatory approvals, including the State Administration for Market Regulation in the People’s Republic of China, and other customary closing conditions. The transactions are expected to be completed by the end of fiscal 2020. Proceeds from the transactions are expected to be used by Adient to pay down a portion of the company’s debt and for general corporate purposes. The terms of the Master Agreement as described above are consistent with non-binding terms reached in December 2019.

As a result of the transactions described above, Adient concluded that indicators of other-than-temporary impairment were present related to the ~~lower~~investment in YFAI as of ~~fair value less cost~~December 31, 2019. Upon entering into a formal agreement to sell ~~or carrying value. This resulted in an~~the YFAI investment, Adient determined that other-than-temporary impairment ~~charge~~did exist and recorded a $216 million non-cash impairment of ~~$49 million which was recorded within restructuring and impairment costs on~~Adient's YFAI investment during the ~~consolidated statement of income (loss) during fiscal 2018, of which $39 million related to Seating assets and $10 million related to corporate assets.~~quarter ended December 31, 2019. The impairment was ~~measured using third party sales pricing to determine~~determined based on combining the fair ~~values~~value of consideration received for all transactions contemplated within the Master Agreement, including an estimated fair value of the ~~assets.~~YFAS joint venture extension, and allocating the total consideration received to the individual transactions based on relative fair values. Adient estimated the fair value of the individual transactions using both an income approach and market approach. The inputs utilized in the fair value analyses of the transactions are classified as ~~Level~~level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value ~~Measurement." During~~Measurement" and primarily consisted of expected future operating margins and cash flows of YFAI, estimated production volumes, estimated dividend payments from YFAS over the ~~fourth quarter~~extension period, estimated terminal values of ~~fiscal 2018, one airplane was sold for $36 million. During~~YFAS, market comparables, weighted-average costs of capital (YFAI - 15.0%, YFAS - 10.5%), and noncontrolling interest discounts. As a result of the ~~first quarter~~pending divestiture of ~~fiscal 2019, both~~ the ~~Detroit, Michigan properties~~YFAI investment and ~~remaining airplane were sold for approximately $35 million.~~the corresponding impairment, Adient will cease recognizing equity income from YFAI subsequent to December 31, 2019. In addition, upon the closing of the transaction, an intangible asset of $92 million will be recorded associated with the YFAS joint venture extension to be amortized over the 18-year term of the extension.

4. Inventories

Inventories consisted of the following:


(in millions)	December 31, 2019		September 30, 2019
Raw materials and supplies	$	586	$	609
Work-in-process	29		32
Finished goods	157		152
Inventories	$	772	$	793

Adient plc | Form 10-Q | 11

(in millions) December 31, 2018 September 30, 2018
Raw materials and supplies $ 620
$ 626
Work-in-process 38
38
Finished goods 181
160
Inventories $ 839
$ 824

5. Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill are as follows:


(in millions)	Americas		EMEA		Asia		Total
Balance at September 30, 2019	$	638	$	429	$	1,083	$	2,150
Business divestitures	(21)		—		—		(21)
Currency translation and other	1		13		14		28
Balance at December 31, 2019	$	618	$	442	$	1,097	$	2,157

(in millions) Seating
Balance at September 30, 2018 $ 2,182
Currency translation and other (7 )
Balance at December 31, 2018 $ 2,175

~~The SS&M and Interiors segments maintained no goodwill as of December 31, 2018 and September 30, 2018, respectively.~~ Refer to Note ~~14,~~15, "Segment ~~Information"~~Information," of the notes to consolidated financial statements for more information on Adient's reportable segments.

Adient's other intangible assets, primarily from business acquisitions valued based on independent appraisals, consisted of:


	December 31, 2018							September 30, 2018								December 31, 2019										September 30, 2019
(in millions)	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net		(in millions)	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Intangible assets															Intangible assets
Patented technology	$	21	$	(14	)	$	7	$	21	$	(14	)	$	7	Patented technology	$	28	$	(18)	$	10	$	27	$	(17)	$	10
Customer relationships	511		(109		)	402		509		(101		)	408		Customer relationships	495		(133)		362		494		(129)		365
Trademarks	54		(30		)	24		58		(30		)	28		Trademarks	46		(31)		15		51		(32)		19
Miscellaneous	28		(12		)	16		29		(12		)	17		Miscellaneous	18		(10)		8		21		(10)		11
Total intangible assets	$	614	$	(165	)	$	449	$	617	$	(157	)	$	460	Total intangible assets	$	587	$	(192)	$	395	$	593	$	(188)	$	405

Amortization of other intangible assets for the three months ended December 31, 2019 and 2018 was $9 million and ~~2017 was~~ $10 million, ~~and $12 million,~~ respectively.

6. Product Warranties

Adient offers warranties to its customers depending upon the specific product and terms of the customer purchase agreement. A typical warranty program requires that Adient replace defective products within a specified time period from the date of sale. Adient records an estimate for future warranty-related costs based on actual historical return rates and other known factors. Based on analysis of return rates and other factors, Adient's warranty provisions are adjusted as necessary. Adient monitors its warranty activity and adjusts its reserve estimates when it is probable that future warranty costs will be different than those estimates. Adient's product warranty liability is recorded in the consolidated statements of financial position in other current liabilities.

The changes in Adient's total product warranty liability are as follows:


	Three Months Ended December 31,
(in millions)	2019		2018
Balance at beginning of period	$	22	$	11
Accruals for warranties issued during the period	4		3
Changes in accruals related to pre-existing warranties (including changes in estimates)	(1)		3

Settlements made (in cash or in kind) during the period	(2)		(2)

Balance at end of period	$	23	$	15

Adient plc | Form 10-Q | 12

Three Months Ended
December 31,
(in millions) 2018 2017
Balance at beginning of period $ 11
$ 19
Accruals for warranties issued during the period 3
2
Changes in accruals related to pre-existing warranties (including changes in estimates) 3
(2 )
Settlements made (in cash or in kind) during the period (2 ) (2 )
Balance at end of period $ 15
$ 17

7. Leases

Adient adopted Accounting Standards Codification Topic 842, Leases (ASC 842), and all the related amendments using the modified retrospective method, without adjusting the comparative financial information, on October 1, 2019. As a result, financial information for reporting periods beginning on or after October 1, 2019 are presented in accordance with ASC 842. Upon adoption, Adient recognized right-of-use (ROU) assets of $380 million and corresponding lease liabilities of $384 million on October 1, 2019. The adoption date ROU asset balance was adjusted by $4 million, reflecting impairment of ROU assets for certain real estate leases (within the North America and Europe asset groups) of which the Company determined the carrying value of the initial operating lease ROU asset exceeded its fair value. The adjustment was recorded as an increase to the opening accumulated deficits. The adoption of ASC 842 had negligible impact on the consolidated statement of income (loss) for the quarter ended December 31, 2019.

Adient's lease portfolio consists of operating leases for real estate including production facilities, warehouses and administrative offices, equipment such as forklifts and computer servers and laptops, and fleet vehicles. The Company has elected not to record leases with an initial term of 12 months or less on its consolidated statement of financial position.

A lease liability and corresponding right-of-use asset are recognized based on the present value of lease payments. To determine the present value of lease payments, the Company uses its incremental borrowing rate as of lease commencement. The incremental borrowing rate (IBR) is defined as the rate Adient would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Adient primarily derives its IBR from its debt portfolio, adjusted for collateralization, lease term and jurisdictional factors. Adient's finance leases are not significant and are not included in the following disclosures.

The components of lease costs for the first quarter of fiscal 2020 were as follows:


(in millions)	Three Months Ended December 31, 2019
Operating lease cost	$	33
Short-term lease cost	5

Total lease cost	$	38

Operating lease right-of-use assets and lease liabilities included in the consolidated statement of financial position were as follows:


(in millions)		December 31, 2019
Operating lease right-of-use assets	Other noncurrent assets	$	374

7.Operating lease liabilities - current	Other current liabilities	$	112
Operating lease liabilities - noncurrent	Other noncurrent liabilities	264
		$	376

Maturities of operating lease liabilities and minimum payments for operating leases having initial or remaining non-cancelable terms in excess of one year as of December 31, 2019 were as follows:

Adient plc | Form 10-Q | 13


Fiscal years (in millions)	December 31, 2019
2020 (excluding the three months ended December 31, 2019)	$	93
2021	94
2022	65
2023	51
2024	40
Thereafter	93
Total lease payments	436
Less: imputed interest	(60)
Present value of lease liabilities	$	376

Future minimum operating lease payments accounted for under ASC 840 at September 30, 2019 were as follows:


Fiscal years (in millions)	Operating leases
2020	$	119
2021	91
2022	64
2023	51
2024	40
After 2024	94
Total minimum lease payments	$	459

Supplemental cash flow information related to leases was as follows:


(in millions)	Three Months Ended December 31, 2019
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (non-cash activity)	$	12

Operating cash flows:
Cash paid for amounts included in the measurement of lease liabilities	$	32

The weighted average remaining lease term for the Company's operating leases as of December 31, 2019 was 6 years. The weighted average discount rate for the Company's operating leases as of December 31, 2019 was 5.5%.

Adient plc | Form 10-Q | 14

8. Debt and Financing Arrangements

Long-term debt consisted of the following:


								December 31,		September 30,
(in millions)	December 31, 2018			September 30, 2018			(in millions)	2019		2019
Term Loan A - LIBOR plus 1.75% due in 2021	$	1,200		$	1,200
Term Loan B - LIBOR plus 4.25% due in 2024							Term Loan B - LIBOR plus 4.25% due in 2024	$	796	$	798
4.875% Notes due in 2026	900			900			4.875% Notes due in 2026	900		900
3.50% Notes due in 2024	1,143			1,162			3.50% Notes due in 2024	1,121		1,094
European Investment Bank Loan - EURIBOR plus 0.90% due in 2022	189			192
Capital lease obligations	2			2
7.00% Notes due in 2026							7.00% Notes due in 2026	800		800
European Investment Bank Loan - EURIBOR plus 1.58% due in 2022							European Investment Bank Loan - EURIBOR plus 1.58% due in 2022	185		180

Less: debt issuance costs	(33		)	(32		)	Less: debt issuance costs	(54)		(56)
Gross long-term debt	3,401			3,424			Gross long-term debt	3,748		3,716
Less: current portion	2			2			Less: current portion	8		8
Net long-term debt	$	3,399		$	3,422		Net long-term debt	$	3,740	$	3,708

~~On July 27, 2016,~~

Adient ~~Global Holdings Ltd~~US LLC ("~~AGH"~~Adient US"), a wholly owned subsidiary of Adient, ~~entered into a credit agreement providing for commitments~~together with ~~respect to a $1.5 billion~~certain of Adient's other subsidiaries, maintains an asset-based revolving credit facility ~~(undrawn at December 31, 2018 and September 30, 2018, respectively)~~(the “ABL Credit Facility”), which provides for a revolving line of credit up to $1,250 million, including a North American subfacility of up to $950 million and a ~~$1.5 billion Term Loan A facility (the "Original~~European subfacility of up to $300 million, subject to borrowing base capacity. The ABL Credit ~~Facilities"). The Original Credit Facilities~~Facility will mature ~~in July 2021. Until~~on May 6, 2024, subject to a springing maturity date 91 days earlier if certain amounts remain outstanding at that time under the Term Loan ~~A maturity date, amortization~~B Agreement (defined below). Interest is payable on the ABL Credit Facility at a fluctuating rate of the funded Term Loan A is required in an amount per quarter equal to 1.25% of the original principal amount prior to July 27, 2019 and 2.5% in each quarter thereafter prior to final maturity. The Original Credit Facilities contain covenants that include, among other things and subject to certain significant exceptions, restrictions on Adient's ability to declare or pay dividends, make certain payments in respect of the notes, create liens, incur additional indebtedness, make investments, engage in transactions with affiliates, enter into agreements restricting Adient's subsidiaries' ability to pay dividends, dispose of assets and merge or consolidate with any other person. The Term Loan A facility also requires mandatory prepayments in connection with certain non-ordinary course asset sales and insurance recovery and condemnation events, among other things, and subject in each case to certain significant exceptions.

~~On November 6, 2018, Adient entered into an amendment~~interest determined by reference to the ~~Original Credit Facilities (“First Amended Credit Facilities") whereby the financial maintenance covenant was amended~~Eurodollar rate plus an applicable margin of 1.50% to ~~require~~2.00%. Adient to maintain a total net leverage ratio equal to or less than 4.5x adjusted EBITDA (previously 3.5x adjusted EBITDA), with step down provisions starting in the quarter ending December 31, 2020. The amendment also expanded the upper range of interest rate margins such that the drawn portion of the First Amended Credit Facilities will bear interest based on LIBOR plus a margin between 1.25% - 2.50% (previously 1.25% - 2.25%), based on Adient’s total net leverage ratio. No other terms were impacted by the first amendment. On February 6, 2019, Adient entered into an amendment to the First Amended Credit Facilities (“Second Amended Credit Facilities") whereby the financial maintenance covenant contained in the First Amended Credit Facilities was amended to require Adient to maintain a first lien secured net leverage ratio equal to or less than 2.5x adjusted EBITDA as of the last day of each quarter, with step down provisions starting on September 30, 2020. The amendment also added a new tier to the pricing schedule that will be applicable when the total net leverage ratio exceeds 4.0x adjusted EBITDA and amended certain other definitions, negative covenants and other terms within the credit facility.

The full amount of the Term Loan A facility was drawn in the fourth quarter of fiscal 2016. These funds were transferred to the former Parent at the time of the draw and were reflected within net transfers to the former Parent in the consolidated statement of cash flow during the fourth quarter of fiscal 2016. In February 2017, Adient repaid $100 million of the Term Loan A facility. In May 2017, Adient repaid another $200 million of the Term Loan A facility. The total amount repaid was treated as a prepayment of the quarterly mandatory principle amortization for the period between March 2017 and June 2020 resulting in no required principal payment until June 2020.

~~AGH~~ will pay a commitment fee of 0.25% to 0.375% on the unused portion of the commitments under the asset-based revolving credit facility based on average global availability. Letters of credit are limited to the ~~total~~lesser of (x) $150 million and (y) the aggregate unused amount of commitments under the ABL Credit Facility then in effect. Subject to certain conditions, the ABL Credit Facility may be expanded by up to $250 million in additional commitments. Loans under the ABL Credit Facility may be denominated, at the option of Adient, in U.S. dollars, Euros, Pounds Sterling or Swedish Kroner. The ABL Credit Agreement is secured on a first-priority lien on all accounts receivable, inventory and bank accounts (and funds on deposit therein) and a second-priority lien on all of the tangible and intangible assets of certain Adient subsidiaries. As of December 31, 2019, Adient's availability under this facility was $1,059 million.

In addition, Adient US and Adient Global Holdings S.à r.l., a wholly-owned subsidiary of Adient, maintain a term loan credit agreement (the “Term Loan B Agreement”) providing for a 5-year $800 million senior secured term loan facility that was fully drawn at closing. The Term Loan B Agreement amortizes in equal quarterly installments at a rate of 1.00% per annum of the original principal amount thereof, with the remaining balance due at final maturity on May 6, 2024. Interest on the Term Loan B Agreement accrues at the Eurodollar rate plus an applicable margin equal to 4.25% (with one 0.25% step down based on achievement of a specific secured net leverage level starting with the fiscal quarter ending December 31, 2019). The Term Loan B Agreement also permits Adient to incur incremental term loans in an aggregate amount not to exceed the greater of $750 million and an unlimited amount subject to a pro forma first lien secured net leverage ratio of not greater than 1.75 to 1.00 and certain other conditions.

Adient ~~ranging from 0.15%~~US also maintains an indenture relating to ~~0.45%~~the issuance of $800 million aggregate principal amount of Senior First Lien Notes (the “Notes”). The Notes mature on May 15, 2026 and bear interest at a rate of 7.00% per annum. Interest on the Notes is payable semi-annually in arrears on November 15 and May 15 of each year, commencing on November 15, 2019.

~~On August 19, 2016, AGH issued~~

The ABL Credit Facility, Term Loan B Agreement and the Notes contain covenants that are usual and customary for facilities and transactions of this type and that, among other things, restrict the ability of Adient and its restricted subsidiaries to: create certain liens and enter into sale and lease-back transactions; create, assume, incur or guarantee certain indebtedness; pay dividends or make other distributions on, or repurchase or redeem, Adient’s capital stock or certain other debt; make other restricted payments; and consolidate or merge with, or convey, transfer or lease all or substantially all of Adient’s and its restricted subsidiaries’ assets, to another person. These covenants are subject to a number of other limitations and exceptions set forth in the agreements. The agreements also provide for customary events of default, including, but not limited to, failure to

Adient plc | Form 10-Q | 15

pay principal and interest, failure to comply with covenants, agreements or conditions, and certain events of bankruptcy or insolvency involving Adient and its significant subsidiaries.

Adient Global Holdings Ltd., a wholly-owned subsidiary of Adient, maintains $0.9 billion aggregate principal amount of 4.875% USD-denominated unsecured notes due 2026 and €1.0 billion aggregate principal amount of 3.50% unsecured notes due 2024, in a private offering exempt from the registration requirements of the Securities Act of 1933, as amended. The proceeds of the notes were used, together with the Term Loan A facility, to pay a distribution to the former Parent, with the remaining proceeds used for working capital and general corporate purposes.

~~On May 29, 2017,~~2024. Adient Germany Ltd. & Co. KG, a wholly owned subsidiary of Adient, ~~borrowed~~maintains €165 million in an unsecured term loan from the European Investment Bank due in 2022. The loan bears interest at the 6-month EURIBOR rate plus 90158 basis points. ~~Loan proceeds were used to repay $200 million of the Term Loan A.~~

Net Financing Charges

Adient's net financing charges ~~line item~~ in the consolidated statements of income (loss) contained the following components:


	Three Months Ended December 31,
(in millions)	2019		2018
Interest expense, net of capitalized interest costs	$	48	$	36
Banking fees and debt issuance cost amortization	4		3
Interest income	(4)		(2)
Net foreign exchange	—		(2)
Net financing charges	$	48	$	35

Three Months Ended
December 31,
(in millions) 2018 2017
Interest expense, net of capitalized interest costs $ 36
$ 34
Banking fees and debt issuance cost amortization 3
2
Interest income (2 ) (1 )
Net foreign exchange (2 ) (2 )
Net financing charges $ 35
$ 33

8.9. Derivative Instruments and Hedging Activities

Adient selectively uses derivative instruments to reduce Adient's market risk associated with changes in foreign currency. Under Adient's policy, the use of derivatives is restricted to those intended for hedging purposes; the use of any derivative instrument for speculative purposes is strictly prohibited. A description of each type of derivative utilized to manage Adient's risk is included in the following paragraphs. In addition, refer to Note 9,10, "Fair Value Measurements," of the notes to consolidated financial statements for information related to the fair value measurements and valuation methods utilized by Adient for each derivative type.

Adient has global operations and participates in the foreign exchange markets to minimize its risk of loss from fluctuations in foreign currency exchange rates. Adient primarily uses foreign currency exchange contracts to hedge certain foreign exchange rate exposures. Adient hedges 70% to 90% of the nominal amount of each of its known foreign exchange transactional exposures. Gains and losses on derivative contracts offset gains and losses on underlying foreign currency exposures. These contracts have been designated as cash flow hedges under ASC 815, "Derivatives and Hedging," and the effective portion of the hedge gains or losses due to changes in fair value are initially recorded as a component of accumulated other comprehensive income (AOCI) and are subsequently reclassified into earnings when the hedged transactions occur and affect earnings. Any ineffective portion of the hedge is reflected in the consolidated statements of income. These contracts were highly effective in hedging the variability in future cash flows attributable to changes in currency exchange rates at December 31, ~~2018~~2019 and September 30, ~~2018,~~2019, respectively.

Adient selectively uses equity swaps to reduce market risk associated with certain of its stock-based compensation plans, such as its deferred compensation plans. The equity swaps are recorded at fair value. Changes in fair value of the equity swaps are reflected in the consolidated statements of income within selling, general and administrative expenses.

As of December 31, ~~2018,~~2019, the €1.0 billion aggregate principal amount of 3.50% euro-denominated unsecured notes due 2024 was designated as a net investment hedge to selectively hedge portions of Adient's net investment in Europe. The currency effects of Adient's euro-denominated bonds are reflected in AOCI account within shareholders' equity attributable to Adient where they offset gains and losses recorded on Adient's net investment in Europe.

Adient entered into cross-currency interest rate swaps during fiscal 2018 to selectively hedge portions of its net investment in Europe. The currency effects of the cross-currency interest rate swaps are reflected in the AOCI account within shareholders' equity attributable to Adient, where they offset gains and losses recorded on Adient's net investment in Europe. As of December 31, ~~2018,~~2019, Adient had ~~two~~1 cross-currency interest rate ~~swaps~~swap outstanding totaling approximately ~~€160~~€80 million designated as net investment hedges in Adient's net investment in Europe.

Adient entered into a cross-currency interest rate swap during fiscal 2019 to selectively hedge portions of its net investment in Japan. The currency effects of the cross-currency interest rate swap is reflected in the AOCI account within shareholders' equity attributable to Adient, where they offset gains and losses recorded on Adient's net investment in Japan. As of December 31,

Adient plc | Form 10-Q | 16

2019, Adient had 1 cross-currency interest rate swap outstanding totaling approximately ¥11 billion designated as a net investment hedge in Adient's net investment in Japan.

Adient purchased interest rate caps during fiscal 2019 to selectively limit the impact of USD LIBOR increases on its interest payments related to Company's Term Loan B Agreement. The interest rate caps are designated as cash flow hedges under ASC 815. As of December 31, 2019, Adient had 2 interest rate caps outstanding totaling approximately $200 million.

Adient entered into a ¥950 million foreign exchange forward contract during the first quarter of fiscal 2020 to selectively hedge portions of its net investment in China. The currency effects of the forward contract are reflected in the AOCI account within shareholders' equity attributable to Adient, where they offset gains and losses recorded on Adient’s net investment in China. The forward contract is set to mature in June 2020.

The following table presents the location and fair values of derivative instruments and other amounts used in hedging activities included in Adient's consolidated statements of financial position:


	Derivatives and Hedging Activities Designated as Hedging Instruments under ASC 815				Derivatives and Hedging Activities Not Designated as Hedging Instruments under ASC 815					Derivatives and Hedging Activities Designated as Hedging Instruments under ASC 815						Derivatives and Hedging Activities Not Designated as Hedging Instruments under ASC 815
(in millions)	December 31, 2018		September 30, 2018		December 31, 2018		September 30, 2018		(in millions)	December 31, 2019		September 30, 2019		December 31, 2019		September 30, 2019
Other current assets									Other current assets
Foreign currency exchange derivatives	$	2	$	4	$	5	$	4	Foreign currency exchange derivatives	$	16	$	5	$	1	$	3
Cross-currency interest rate swaps									Cross-currency interest rate swaps	10		12		—		—
Other noncurrent assets									Other noncurrent assets
Foreign currency exchange derivatives	—		—		1		2		Foreign currency exchange derivatives	1		—		—		1
Interest rate cap									Interest rate cap	—		1		—		—
Cross-currency interest rate swaps	17		13		—		—		Cross-currency interest rate swaps	2		1		—		—
Total assets	$	19	$	17	$	6	$	6	Total assets	$	29	$	19	$	1	$	4

Other current liabilities									Other current liabilities
Foreign currency exchange derivatives	$	14	$	11	$	—	$	—	Foreign currency exchange derivatives	$	5	$	12	$	—	$	—
Other noncurrent liabilities									Other noncurrent liabilities
Foreign currency exchange derivatives	2		2		—		—		Foreign currency exchange derivatives	—		3		—		—
Equity swaps	—		—		4		2

Long-term debt									Long-term debt
Foreign currency denominated debt	1,143		1,162		—		—		Foreign currency denominated debt	1,121		1,094		—		—
Total liabilities	$	1,159	$	1,175	$	4	$	2	Total liabilities	$	1,126	$	1,109	$	—	$	—

Adient enters into International Swaps and Derivatives Associations (ISDA) master netting agreements with counterparties that permit the net settlement of amounts owed under the derivative contracts. The master netting agreements generally provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event. Adient has not elected to offset the fair value positions of the derivative contracts recorded in the consolidated statements of financial position. Collateral is generally not required of Adient or the counterparties under the master netting agreements. As of both December 31, ~~2018~~2019 and September 30, ~~2018, no~~2019, 0 cash collateral was received or pledged under the master netting agreements.

The gross and net amounts of derivative instruments and other amounts used in hedging activities are as follows:


	Assets						Liabilities
(in millions)	December 31, 2019		September 30, 2019		December 31, 2019		September 30, 2019
Gross amount recognized	$	30	$	23	$	1,126	$	1,109
Gross amount eligible for offsetting	(4)		(9)		(4)		(9)
Net amount	$	26	$	14	$	1,122	$	1,100

Adient plc | Form 10-Q | 17

Assets Liabilities
(in millions) December 31, 2018 September 30, 2018 December 31, 2018 September 30, 2018
Gross amount recognized $ 25
$ 23
$ 1,163
$ 1,177
Gross amount eligible for offsetting (4 ) (5 ) (4 ) (5 )
Net amount $ 21
$ 18
$ 1,159
$ 1,172

The following table presents the effective portion of pretax gains (losses) recorded in other comprehensive income related to cash flow hedges:


(in millions)	Three Months Ended December 31,						(in millions)	Three Months Ended December 31,
	2018			2017						2019			2018
Foreign currency exchange derivatives	$	(4	)	$	(7	)	Foreign currency exchange derivatives	$	22		$	(4)

The following table presents the location and amount of the effective portion of pretax gains (losses) on cash flow hedges reclassified from AOCI into Adient's consolidated statements of income:


(in millions)		Three Months Ended December 31,				(in millions)		Three Months Ended December 31,
		2018		2017						2019		2018
Foreign currency exchange derivatives	Cost of sales	$	—	$	1	Foreign currency exchange derivatives	Cost of sales	$	2	$	—

The following table presents the location and amount of pretax gains (losses) on derivatives not designated as hedging instruments recognized in Adient's consolidated statements of income (loss):

(in millions) Three Months Ended
December 31,
2018 2017
Foreign currency exchange derivatives Cost of sales $ —
$ (2 )
Foreign currency exchange derivatives Net financing charges 1
(1 )
Equity swap Selling, general and administrative (17 ) (3 )
Total $ (16 ) $ (6 )


(in millions)		Three Months Ended December 31,
				2019		2018
Foreign currency exchange derivatives	Cost of sales	$	(1)	$	—
Foreign currency exchange derivatives	Net financing charges	—		1
Equity swap	Selling, general and administrative	—		(17)
Total		$	(1)	$	(16)

The effective portion of pretax gains (losses) recorded in currency translation adjustment (CTA) within other comprehensive income (loss) related toto net investment hedges was ~~$22~~$(29) million and ~~$(17)~~$22 million for the three months ended December 31, ~~2018~~2019 and ~~2017,~~2018, respectively. For the three months ended December 31, 2019 and 2018, ~~and 2017,~~ respectively, no0 gains or losses were reclassified from CTA into income for Adient's outstanding net investment hedges, and there was ~~no ineffectiveness~~0 ineffectiveness on cash flow hedges.

9.10. Fair Value Measurements

ASC 820, "Fair Value Measurement," defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a three-level fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.

ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

Recurring Fair Value Measurements

The following tables present Adient's fair value hierarchy for those assets and liabilities measured at fair value:

Adient plc | Form 10-Q | 18


	Fair Value Measurements Using:									Fair Value Measurements Using:
(in millions)	Total as of December 31, 2018		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		(in millions)	Total as of December 31, 2019		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other current assets									Other current assets
Foreign currency exchange derivatives	$	7	$	—	$	7	$	—	Foreign currency exchange derivatives	$	17	$	—	$	17	$	—
Cross-currency interest rate swaps									Cross-currency interest rate swaps	10		—		10		—
Other noncurrent assets									Other noncurrent assets
Foreign currency exchange derivatives	1		—		1		—		Foreign currency exchange derivatives	1		—		1		—
Cross-currency interest rate swaps	17		—		17		—		Cross-currency interest rate swaps	2		—		2		—

Total assets	$	25	$	—	$	25	$	—	Total assets	$	30	$	—	$	30	$	—
Other current liabilities									Other current liabilities
Foreign currency exchange derivatives	$	14	$	—	$	14	$	—	Foreign currency exchange derivatives	$	5	$	—	$	5	$	—
Other noncurrent liabilities
Foreign currency exchange derivatives	2		—		2		—
Equity swaps	4		—		4		—

Total liabilities	$	20	$	—	$	20	$	—	Total liabilities	$	5	$	—	$	5	$	—


	Fair Value Measurements Using:
(in millions)	Total as of September 30, 2019		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other current assets
Foreign currency exchange derivatives	$	8	$	—	$	8	$	—
Cross-currency interest rate swaps	12		—		12
Other noncurrent assets
Foreign currency exchange derivatives	1		—		1		—
Cross-currency interest rate swaps	1		—		1		—
Interest rate cap	1		—		1		—
Total assets	$	23	$	—	$	23	$	—
Other current liabilities
Foreign currency exchange derivatives	$	12	$	—	$	12	$	—
Other noncurrent liabilities
Foreign currency exchange derivatives	3		—		3		—
Total liabilities	$	15	$	—	$	15	$	—

Fair Value Measurements Using:
(in millions)
Total as of
September 30,
2018

Quoted Prices
in Active
Markets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Other current assets
Foreign currency exchange derivatives $ 8
$ —
$ 8
$ —
Other noncurrent assets
Foreign currency exchange derivatives 2
—
2
—
Cross-currency interest rate swaps 13
—
13
—
Total assets $ 23
$ —
$ 23
$ —
Other current liabilities
Foreign currency exchange derivatives $ 11
$ —
$ 11
$ —
Other noncurrent liabilities
Foreign currency exchange derivatives 2
—
2
—
Equity swaps 2
—
2
—
Total liabilities $ 15
$ —
$ 15
$ —

Valuation Methods

Foreign currency exchange derivatives Adient selectively hedges anticipated transactions and net investments that are subject to foreign exchange rate risk primarily using foreign currency exchange hedge contracts. The foreign currency exchange derivatives are valued under a market approach using publicized spot and forward prices. Changes in fair value on foreign exchange derivatives accounted for as hedging instruments under ASC 815 are initially recorded as a component of AOCI and are subsequently reclassified into earnings when the hedged transactions occur and affect earnings. These contracts were highly effective in hedging Adient's net investments and the variability in future cash flows attributable to changes in currency exchange rates at December 31, ~~2018~~2019 and September 30, ~~2018,~~2019, respectively. The changes in fair value of foreign currency exchange derivatives not designated as hedging instruments under ASC 815 are recorded in the consolidated statements of income.

~~Equity swaps~~ Adient selectively uses equity swaps to reduce market risk associated with certain of its stock-based compensation plans, such as its deferred compensation plans. The equity swaps are recorded at fair value. Changes in fair value of the equity swaps are reflected in the consolidated statements of income within selling, general and administrative expenses.

Cross-currency interest rate swaps Adient selectively uses cross-currency interest rate swaps to hedge portions of its net investment in Europe. During fiscal 2018, Adient entered into 2 floating to floating cross-currency interest rate swaps

Adient plc | Form 10-Q | 19

totaling approximately €160 million designated as net investment hedges in Adient's net investment in Europe. During fiscal 2019, Adient entered into 1 floating to floating cross-currency interest rate swap totaling ¥11 billion designated as a net investment hedge in Adient's net investment in Japan. As of December 31, 2019, Adient had 1 €80 million cross-currency interest rate swap and 1 ¥11 billion cross-currency interest rate swap outstanding.

The fair value of cash and cash equivalents, accounts receivable, short-term debt and accounts payable approximate their carrying values. The fair value of long-term debt, which was ~~$3.0~~ $3.7 billion ~~and $3.3~~and $3.4 billion at December 31, ~~2018~~2019 and September 30, ~~2018,~~2019, respectively, was determined primarily using market quotes classified as Level 1 inputs within the ASC 820 fair value hierarchy.

~~10.~~11. Equity and Noncontrolling Interests


(in millions)	Ordinary Shares		Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Shareholders' Equity Attributable to Adient		Shareholders' Equity Attributable to Noncontrolling Interests		Total Equity
Balance at September 30, 2019	$	—	$	3,962	$	(1,545)	$	(569)	$	1,848	$	341	$	2,189
Net income (loss)	—		—		(167)		—		(167)		18		(149)
Foreign currency translation adjustments	—		—		—		50		50		6		56
Realized and unrealized gains (losses) on derivatives	—		—		—		15		15		—		15

Dividends attributable to noncontrolling interests	—		—		—		—		—		(6)		(6)
Change in noncontrolling interest share	—		—		—		—		—		(18)		(18)
Share based compensation	—		3		—		—		3		—		3
Adjustments from adoption of a new standard	—		—		(4)		—		(4)		—		(4)
Other	—		(2)				—		(2)		—		(2)
Balance at December 31, 2019	$	—	$	3,963	$	(1,716)	$	(504)	$	1,743	$	341	$	2,084

The deconsolidation of Adient Aerospace in the quarter ended December 31, 2019 resulted in a $18 million change in noncontrolling interest.


(in millions)	Ordinary Shares		Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Shareholders' Equity Attributable to Adient		Shareholders' Equity Attributable to Noncontrolling Interests		Total Equity
Balance at September 30, 2018	$	—	$	3,951	$	(1,028)	$	(531)	$	2,392	$	325	$	2,717
Net income (loss)	—		—		(17)		—		(17)		18		1
Foreign currency translation adjustments	—		—		—		16		16		1		17
Realized and unrealized gains (losses) on derivatives	—		—		—		(3)		(3)		—		(3)

Dividends declared ($0.275 per share)	—		—		(26)		—		(26)		—		(26)
Dividends attributable to noncontrolling interests	—		—		—		—		—		(14)		(14)


Formation of consolidated joint venture	—		—		—		—		—		28		28
Share based compensation	—		3		1		—		4		—		4
Balance at December 31, 2018	$	—	$	3,954	$	(1,070)	$	(518)	$	2,366	$	358	$	2,724

During October 2018, Adient declared a dividend of $0.275 per ordinary share, which was paid in November 2018.

Adient plc | Form 10-Q | 20

(in millions) Ordinary Shares Additional Paid-in Capital
Retained Earnings
(Accumulated Deficit)
Accumulated Other Comprehensive Income (Loss)
Shareholders' Equity Attributable
to Adient
Shareholders' Equity Attributable to Noncontrolling Interests Total Equity
Balance at September 30, 2018 $ —
$ 3,951
$ (1,028 ) $ (531 ) $ 2,392
$ 325
$ 2,717
Net income (loss) —
—
(17 ) —
(17 ) 18
1
Foreign currency translation adjustments —
—
—
16
16
1
17
Realized and unrealized gains (losses) on derivatives —
—
—
(3 ) (3 ) —
(3 )
Dividends declared ($0.275 per share) —
—
(26 ) —
(26 ) —
(26 )
Dividends attributable to noncontrolling interests —
—
—
—
—
(14 ) (14 )
Formation of consolidated joint venture —
—
—
—
—
28
28
Share based compensation —
3
1
—
4
—
4
Balance at December 31, 2018 $ —
$ 3,954
$ (1,070 ) $ (518 ) $ 2,366
$ 358
$ 2,724

(in millions) Ordinary Shares Additional Paid-in Capital
Retained Earnings
(Accumulated Deficit)
Accumulated Other Comprehensive Income (Loss)
Shareholders' Equity Attributable
to Adient
Shareholders' Equity Attributable to Noncontrolling Interests Total Equity
Balance at September 30, 2017 $ —
$ 3,942
$ 734
$ (397 ) $ 4,279
$ 313
$ 4,592
Net income (loss) —
—
(216 ) —
(216 ) 13
(203 )
Foreign currency translation adjustments —
—
—
71
71
4
75
Realized and unrealized gains (losses) on derivatives —
—
—
(10 ) (10 ) —
(10 )
Dividends declared ($0.275 per share) —
—
(26 ) —
(26 ) —
(26 )
Dividends attributable to noncontrolling interests —
—
—
—
—
(9 ) (9 )
Share based compensation —
6
—
—
6
—
6
Other —
4
—
—
4
—
4
Balance at December 31, 2017 $ —
$ 3,952
$ 492
$ (336 ) $ 4,108
$ 321
$ 4,429

The following table presents changes in AOCI attributable to Adient:

Three Months Ended
December 31,
(in millions) 2018 2017
Foreign currency translation adjustments
Balance at beginning of period $ (523 ) $ (398 )
Aggregate adjustment for the period, net of tax 16
71
Balance at end of period (507 ) (327 )
Realized and unrealized gains (losses) on derivatives
Balance at beginning of period (7 ) 3
Current period changes in fair value, net of tax (3 ) (9 )
Reclassification to income, net of tax —
(1 )
Balance at end of period (10 ) (7 )
Pension and postretirement plans
Balance at beginning of period (1 ) (2 )
Balance at end of period (1 ) (2 )
Accumulated other comprehensive income (loss), end of period $ (518 ) $ (336 )


	Three Months Ended December 31,
(in millions)	2019		2018
Foreign currency translation adjustments
Balance at beginning of period	$	(558)	$	(523)
Aggregate adjustment for the period, net of tax	50		16
Balance at end of period	(508)		(507)
Realized and unrealized gains (losses) on derivatives
Balance at beginning of period	(8)		(7)
Current period changes in fair value, net of tax	17		(3)
Reclassification to income, net of tax	(2)		—
Balance at end of period	7		(10)
Pension and postretirement plans
Balance at beginning of period	(3)		(1)

Balance at end of period	(3)		(1)
Accumulated other comprehensive income (loss), end of period	$	(504)	$	(518)

Adient consolidates certain subsidiaries in which the noncontrolling interest party has within their control the right to require Adient to redeem all or a portion of its interest in the subsidiary. These redeemable noncontrolling interests are reported at their estimated redemption value. Any adjustment to the redemption value impacts retained earnings but does not impact net income. Redeemable noncontrolling interests which are redeemable only upon future events, the occurrence of which is not currently probable, are recorded at carrying value. The following table presents changes in the redeemable noncontrolling interests:


	Three Months Ended December 31,
(in millions)	2019		2018
Beginning balance	$	51	$	47
Net income	7		9
Foreign currency translation adjustments	3		(1)
Dividends	(23)		(28)

Ending balance	$	38	$	27

Three Months Ended
December 31,
(in millions) 2018 2017
Beginning balance $ 47
$ 28
Net income 9
7
Foreign currency translation adjustments (1 ) 1
Dividends (28 ) (8 )
Change in noncontrolling interest share —
1
Ending balance $ 27
$ 29

~~During October 2018, Adient declared a dividend of $0.275 per ordinary share, which was paid in November 2018.~~

~~11.~~12. Retirement Plans

Adient maintains non-contributory defined benefit pension plans covering primarily non-U.S. employees and a limited number of U.S. employees. The following table contains the components of net periodic benefit cost:



	Three Months Ended December 31,
(in millions)	2019		2018
Service cost	$	2	$	2
Interest cost	3		3
Expected return on plan assets	(5)		(5)
Net periodic benefit cost	$	—	$	—

Three Months Ended December 31,
(in millions) 2018 2017
Service cost $ 2
$ 2
Interest cost 3
4
Expected return on plan assets (5 ) (5 )
Net periodic benefit cost $ —
$ 1

The interest cost and expected return on plan assets components of net periodic benefit cost are included in other pension expense (income) in the consolidated statements of income (loss).

Adient plc | Form 10-Q | 21

~~12.~~13. Restructuring and Impairment Costs

To better align its resources with its overall strategies and reduce the cost structure of its global operations to address the softness in certain underlying markets, Adient commits to restructuring plans as necessary.

During the first quarter of ~~fiscal 2019,~~2020, Adient committed to a restructuring plan ("~~2019~~2020 Plan") of ~~$25 million.~~$7 million that was offset by $5 million of prior year underspend. Of the restructuring costs recorded, ~~$12~~$3 million relates to the ~~SS&M~~Americas segment, ~~and $13~~$2 million relates to the ~~Seating~~EMEA segment and $2 million relates to the Asia segment. The restructuring actions relate to cost reduction initiatives and consist primarily of workforce reductions. The restructuring actions are expected to be substantially completed by fiscal ~~2019.~~2021.

The following table summarizes the changes in Adient's 2020 Plan reserve:


(in millions)	Employee Severance and Termination Benefits		Other		Currency Translation		Total
Original Reserve	$	6	$	1	$	—	$	7
Utilized—cash	(1)		—		—		(1)
Utilized—noncash	—		—		(1)		(1)
Balance at December 31, 2019	$	5	$	1	$	(1)	$	5

The following table summarizes the changes in Adient's 2019 Plan reserve:


(in millions)	Employee Severance and Termination Benefits			(in millions)	Employee Severance and Termination Benefits		Other		Currency Translation		Total
Original Reserve	$	25
Balance at September 30, 2019				Balance at September 30, 2019	$	69	$	3	$	(2)	$	70
Utilized—cash	(2		)	Utilized—cash	(9)		—		—		(9)
Balance at December 31, 2018	$	23
Utilized—noncash				Utilized—noncash	—		—		—		—
Noncash adjustment—underspend				Noncash adjustment—underspend	(2)		—		1		(1)
Balance at December 31, 2019				Balance at December 31, 2019	$	58	$	3	$	(1)	$	60

In fiscal 2018, Adient committed to a restructuring plan ("2018 Plan") of $71 million that was offset by $20 million of underspend in the 2016 Plan and $7 million of underspend related to other plan years. Of the restructuring costs recorded, $23 million relates to the SS&M segment and $48 million relates to the Seating segment. This is the total amount expected to be incurred for this restructuring plan. The restructuring actions relate to cost reduction initiatives and consist primarily of workforce reductions. The restructuring actions are expected to be substantially completed by fiscal 2019.

The following table summarizes the changes in Adient's 2018 Plan reserve:


(in millions)	Employee Severance and Termination Benefits			Other			Currency Translation			Total			(in millions)	Employee Severance and Termination Benefits		Currency Translation		Total
Balance at September 30, 2018	$	49		$	1		$	(2	)	$	48
Balance at September 30, 2019													Balance at September 30, 2019	$	24	$	(4)	$	20
Utilized—cash	(9		)	—			—			(9		)	Utilized—cash	(5)		—		(5)
Utilized—noncash	—			(1		)	—			(1		)	Utilized—noncash	—		—		—
Balance at December 31, 2018	$	40		$	—		$	(2	)	$	38
Noncash adjustment—underspend													Noncash adjustment—underspend	(3)		1		(2)
Balance at December 31, 2019													Balance at December 31, 2019	$	16	$	(3)	$	13

InThere were no material changes during the first quarter of fiscal 2017, Adient committed to a restructuring plan ("2017 Plan") within the Seating segment and recorded $46 million of restructuring and impairment costs in the consolidated statements of income. This is the total amount expected to be incurred for this restructuring plan. The restructuring actions relate to cost reduction initiatives and consist primarily of workforce reductions and plant closures. The restructuring actions are expected to be substantially complete in fiscal 2019.

~~The following table summarizes the changes in Adient's 2017 Plan reserve:~~

(in millions) Employee Severance and Termination Benefits
Balance at September 30, 2018 $ 12
Utilized—cash (1 )
Balance at December 31, 2018 $ 11

In fiscal 2016, Adient committed to a restructuring plan ("2016 Plan") and recorded $332 million of restructuring and impairment costs in the consolidated statements of income. This is the total amount expected to be incurred for this restructuring plan. The restructuring actions relate to cost reduction initiatives and consist primarily of workforce reductions, plant closures and asset impairments. Of the restructuring and impairment costs recorded, $217 million relates2020 to the ~~Seating segment, $98~~2017 Plan's $5 million ~~relates to the SS&M segment and $17 million relates to the Interiors segment. The asset impairment charge recorded during fiscal 2016~~reserve balance.

related primarily to information technology assets within the Seating segment that will not be used going forward by Adient. The restructuring actions are expected to be substantially complete in fiscal 2021.

~~Since the announcement of the 2016 Plan in fiscal 2016,~~

Adient has experienced lower employee severance and termination benefit cash payouts than previously calculated of approximately $20 million, due to changes in cost reduction actions. The planned workforce reductions disclosed for the 2016 Plan have been updated for Adient's revised actions.plc | Form 10-Q | 22

The following table summarizes the changes in Adient's 2016 Plan reserve:


(in millions)	Employee Severance and Termination Benefits		Currency Translation		Total
Balance at September 30, 2019	$	25	$	2	$	27

Utilized—cash	(2)		—		(2)
Utilized—noncash	—		—		—
Noncash adjustment—underspend	—		—		—
Balance at December 31, 2019	$	23	$	2	$	25

(in millions) Employee Severance and Termination Benefits Currency
Translation Total
Balance at September 30, 2018 $ 71
$ 4
$ 75
Utilized—cash (2 ) —
(2 )
Balance at December 31, 2018 $ 69
$ 4
$ 73

Adient's fiscal 2020, 2019, 2018, 2017 and 2016 restructuring plans included workforce reductions of approximately ~~6,800.~~8,900. Restructuring charges associated with employee severance and termination benefits are paid over the severance period granted to each employee or on a lump sum basis in accordance with individual severance agreements. As of December 31, ~~2018,~~2019, approximately ~~4,300~~6,200 of the employees have been separated from Adient pursuant to the restructuring plans. In addition, the restructuring plans included ~~fourteen~~18 plant closures. As of December 31, ~~2018, nine~~2019, 15 of the ~~fourteen~~18 plants have been closed.

Adient's management closely monitors its overall cost structure and continually analyzes each of its businesses for opportunities to consolidate current operations, improve operating efficiencies and locate facilities in low cost countries in close proximity to customers. This ongoing analysis includes a review of its manufacturing, engineering, purchasing and administrative functions, as well as the overall global footprint for all its businesses. Because of the importance of new vehicle sales by major automotive manufacturers to operations, Adient is affected by the general business conditions in the automotive industry. Future adverse developments in the automotive industry could impact Adient's liquidity position, lead to impairment charges and/or require additional restructuring of its operations.

~~13.~~14. Income Taxes

In calculating the provision for income taxes, Adient uses an estimate of the annual effective tax rate based upon the facts and circumstances known at each interim period. On a quarterly basis, the actual effective tax rate is adjusted, as appropriate, based on changes in facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and each interim period thereafter. For the three months ended December 31, 2019, Adient’s income tax expense was $54 million. The income tax expense was higher than the statutory rate impact of 12.5% primarily due to the impact of recognizing no tax benefit for losses in jurisdictions with valuation allowances, partially offset with a tax benefit related to the impairment of Adient’s YFAI investment. For the three months ended December 31, 2018, Adient’s income tax expense was $10 million equating to an effective tax rate ~~was~~of 48%. The ~~effective rate~~income tax expense was higher than the statutory rate of 12.5% primarily due to the impact of recognizing no tax benefit for losses in jurisdictions with valuation allowances, partially offset by a tax rate change in China. For the three months ended December 31, 2017, Adient’s effective tax rate was 384%. The effective rate was higher than the statutory rate of 12.5% primarily due to the charge to recognize the impact of the U.S. tax reform legislation and unfavorable foreign exchange.

Valuation Allowances

As a result of the Company's first quarter fiscal ~~2019~~2020 analysis of the realizability of its worldwide deferred tax assets, and after considering tax planning initiatives and other positive and negative evidence, Adient determined that no ~~material~~ changes to valuation allowances were required.

Adient reviews the realizability of its deferred tax assets on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or combined group recording the net deferred tax asset are considered, along with any other positive or negative evidence. All of the factors that Adient considers in evaluating whether and when to establish or release all or a portion of the deferred tax asset valuation allowance involve significant judgment.

Since future financial results may differ from previous estimates, periodic adjustments to Adient's valuation allowances may be necessary. If Adient's operating performance continues to be negatively impacted and actual results differ significantly from current or prior estimates, Adient may conclude that it is more likely than not that a material portion of our deferred tax assets will not be

realized. As such, it is possible that a change to valuation allowances in certain jurisdictions may result in a material increase to income tax expense during the next twelve months. In addition, the effective tax rate in subsequent periods would also increase.

Uncertain Tax Positions

At December 31, ~~2018,~~2019, Adient had gross tax effected unrecognized tax benefits of ~~$283~~$425 million. If recognized, ~~$132~~$125 million of Adient's unrecognized tax benefits would impact the effective tax rate. Total net accrued interest at December 31, ~~2018~~2019 was approximately $6$11 million (net of tax benefit). The interest and penalties accrued ~~during~~for the three months ended December 31, ~~2018~~

Adient plc | Form 10-Q | 23

2019 was ~~not material.~~$1 million. Adient recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.

Impacts of Tax Legislation and Change in Statutory Tax Rates

During the first quarter of fiscal 2019, Adient completed its accounting for the Tax Cuts and Jobs Act Base Erosion and Anti-avoidance Tax valuation allowance resulting in no change to the $100 million income tax impact estimated in fiscal 2018.

During the first quarter of fiscal 2019, Guangzhou Adient Automotive Seating Co., Ltd. ~~("GAAS”)~~ was approved for High and New Tech Enterprise status for the three-year period of 2018 to 2020, thereby reducing their tax rate from 25% to 15%. As a result, a $7 million income tax benefit was recorded on the reduction of deferred tax liabilities and a reduction of 2018 calendar year income taxes.

Other tax legislation was adopted during the quarter in various jurisdictions, which did not have a material impact on Adient’s consolidated financial statements.

Other Tax Matters

During the first quarter of fiscal 2020, Adient recognized a pre-tax non-cash impairment of $216 million in equity income related to Adient's YFAI investment. Refer to Note 3, “Acquisitions and Divestitures,” of the notes to the consolidated financial statements for additional information. The tax benefit associated with the impairment charge was $4 million.

~~14.~~15. Segment Information

Adient manages its business on a geographic basis and operates in the following 3 reportable segments for financial reporting purposes: 1) Americas, which is inclusive of North America and South America; 2) Europe, Middle East, and Africa ("EMEA") and 3) Asia Pacific/China ("Asia").

Adient evaluates the performance of its reportable segments using an adjusted EBITDA metric defined as income before income taxes and noncontrolling interests, excluding net financing charges, ~~qualified~~ restructuring and impairment costs, restructuring related-costs, ~~incremental "Becoming Adient" costs, separation costs,~~ net mark-to-market adjustments on pension and postretirement plans, transaction gains/losses, purchase accounting amortization, depreciation, stock-based compensation and other non-recurring items ("Adjusted EBITDA"). Also, certain corporate-related costs are not allocated to the segments. The reportable segments are consistent with how management views the markets served by Adient and reflect the financial information that is reviewed by its chief operating decision maker. ~~Adient has three reportable segments for financial reporting purposes:~~


	Three Months Ended December 31,
(in millions)	2019		2018
Net Sales
Americas	$	1,859	$	1,935
EMEA	1,564		1,640
Asia	572		650
Eliminations	(59)		(67)
Total net sales	$	3,936	$	4,158

Adient plc | Form 10-Q | 24



•	~~Seating: This segment produces complete seat systems for automotive and other mobility applications, as well as certain components of complete seat systems, such as foam, trim and fabric.~~

•	~~Seat Structures & Mechanisms (SS&M): This segment produces seat structures and mechanisms for inclusion in complete seat systems that are produced by Adient or others.~~

•	Interiors: This segment, derived from Adient's global automotive interiors joint ventures, produces instrument panels, floor consoles, door panels, overhead consoles, cockpit systems, decorative trim and other products.


	Three Months Ended December 31,
(in millions)	2019		2018
Adjusted EBITDA
Americas	$	94	$	43
EMEA	49		2
Asia	177		154
Corporate-related costs ⁽¹⁾	(23)		(23)
Restructuring and impairment costs ⁽²⁾	(2)		(31)
Purchase accounting amortization ⁽³⁾	(10)		(10)
Restructuring related charges⁽⁴⁾	(5)		(9)
Loss on business divestitures - net ⁽⁵⁾	(25)		—
Impairment of nonconsolidated partially-owned affiliate ⁽⁶⁾	(216)		—
Depreciation	(75)		(65)
Stock based compensation	(4)		(6)
Other items ⁽⁷⁾	(2)		(1)
Earnings (loss) before interest and income taxes	(42)		54
Net financing charges	(48)		(35)
Other pension income (expense)	2		2
Income (loss) before income taxes	$	(88)	$	21

~~Financial information relating to Adient's reportable segments is as follows:~~

Three Months Ended
December 31,
(in millions) 2018 2017
Net Sales
Seating $ 3,739
$ 3,796
SS&M 727

718
Eliminations (308 )
(310 )
Total net sales $ 4,158
$ 4,204

Three Months Ended
December 31,
(in millions) 2018
2017 ⁽¹⁾
Adjusted EBITDA
Seating $ 261
$ 354
SS&M (72 ) (82 )
Interiors 11
25
Corporate-related costs ⁽²⁾
(24 )
(31 )
Becoming Adient costs ⁽³⁾
—
(19 )
Restructuring and impairment costs ⁽⁴⁾
(31 ) —
Purchase accounting amortization ⁽⁵⁾
(10 ) (17 )
Restructuring related charges⁽⁶⁾
(9 ) (11 )
Stock based compensation ⁽⁷⁾
(6 ) (10 )
Depreciation ⁽⁸⁾
(65 ) (94 )
Other items ⁽⁹⁾
(1 ) (14 )
Earnings (loss) before interest and income taxes 54
101
Net financing charges (35 ) (33 )
Other pension income 2
1
Income (loss) before income taxes $ 21
$ 69

~~Notes~~

Notes:

(1) The presentation of certain amounts has been revised from what was previously reported to retrospectively adopt Accounting Standard Update ("ASU") 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Cost" as of October 1, 2018. See Note 1, "Basis of Presentation and Summary of Significant Accounting Policies," for more information.

~~(2)~~ Corporate-related costs not allocated to the segments include executive office, ~~aviation,~~ communications, corporate development, legal ~~finance~~ and ~~marketing.~~ finance.

~~(3) Reflects incremental expenses associated with becoming an independent company. Includes non-cash costs of $6 million in the three months ended December 31, 2017.~~

~~(4)~~(2) Reflects qualified restructuring charges for costs that are directly attributable to restructuring activities and meet the definition of restructuring under ASC 420 and non-recurring impairment charges. Restructuring charges during the three months ended December 31, 2019 primarily consist of workforce reductions.

~~(5)~~(3) Reflects amortization of intangible assets including those related to partially owned affiliates recorded within equity income. ~~As a result of the fiscal year 2018 YFAI impairment, the intangible assets related to YFAI were deemed to be fully impaired and thus no longer amortized.~~

~~(6)~~(4) Reflects restructuring related charges for costs that are directly attributable to restructuring activities, but do not meet the definition of restructuring under ASC 420.

(5) Reflects losses on business divestitures, of which $4 million is related to the deconsolidation of Adient Aerospace, and $21 million is the result of the sale of the RECARO automotive high performance seating systems.

(6) Reflects the $216 million pre-tax non-cash impairment of Adient's YFAI investment as described in Note 3, "Acquisitions and Divestitures," of the notes to consolidated financial statements.

(7) ~~For the~~The three months ended December 31, ~~2017, stock based compensation excludes $6~~2019 includes $1 million ~~which is included in Becoming Adient~~of transaction costs, ~~discussed above.~~

~~(8) For the three months ended December 31, 2017, depreciation excludes $2~~and $1 million ~~which is included in restructuring related charges, discussed above.~~

~~(9)~~of tax adjustments at YFAI. The three months ended December 31, 2018 ~~reflects~~includes $1 million of ~~Futuris integration costs. The three months ended December 31, 2017 reflects $6 million of Futuris~~ integration costs ~~and $8 million related to~~associated with the ~~impact~~acquisition of ~~the U.S. tax reform legislation at YFAI.~~

Futuris.

Adient plc | Form 10-Q | 25

Geographic Information

Revenue by geographic area is as follows:


Net Sales
	Three Months Ended December 31,
(in millions)	2019		2018
Americas
United States	$	1,567	$	1,615
Mexico	613		670
Other Americas	123		124
Regional elimination	(444)		(474)
	1,859		1,935
EMEA
Germany	321		341
Czech Republic	336		352
Other EMEA	1,337		1,394
Regional elimination	(430)		(447)
	1,564		1,640
Asia
Thailand	133		162
China	160		155
Japan	122		141
Other Asia	159		193
Regional elimination	(2)		(1)
	572		650

Inter-segment elimination	(59)		(67)

Total	$	3,936	$	4,158

Adient plc | Form 10-Q | 26

~~15.~~16. Nonconsolidated Partially-Owned Affiliates

Investments in the net assets of nonconsolidated partially-owned affiliates are reported in the "Investments in partially-owned affiliates" line in the consolidated statements of financial position as of December 31, ~~2018~~2019 and September ~~31, 2018.~~30, 2019. Equity in the net income of nonconsolidated partially-owned affiliates are reported in the "Equity ~~income"~~income (loss)" line in the consolidated statements of income (loss) for the three months ended December 31, ~~2018~~2019 and ~~2017.~~2018.

Adient maintains total investments in partially-owned affiliates of ~~$1.5~~$1.3 billion and $1.4 billion at December 31, ~~2018~~2019 and September 30, ~~2018,~~2019, respectively. Operating information for nonconsolidated partially-owned affiliates is as follows:


	Three Months Ended December 31,
(in millions)	2019		2018
Income statement data:
Net sales	$	4,243	$	4,268
Gross profit	$	512	$	456

Net income	$	243	$	195
Net income attributable to the entity	$	239	$	190

Refer to Note 3, "Acquisitions and Divestitures," of the notes to consolidated financial statements for recent developments regarding certain of Adient's investments in partially-owned affiliates.

Three Months Ended
December 31,
(in millions) 2018 2017
Income statement data:
Net sales $ 4,268
$ 4,663
Gross profit $ 456
$ 566
Net income $ 195
$ 221
Net income attributable to the entity $ 190
$ 216

~~16.~~17. Commitments and Contingencies

Adient is involved in various lawsuits, claims and proceedings incident to the operation of its businesses, including those pertaining to product liability, casualty environmental, safety and health, intellectual property, employment, commercial and contractual matters, and various other matters. Although the outcome of any such lawsuit, claim or proceeding cannot be predicted with certainty and some may be disposed of unfavorably to Adient, it is management's opinion that none of these will have a material adverse effect on Adient's financial position, results of operations or cash flows. Costs related to such matters were not material to the periods presented.

Adient accrues for potential environmental liabilities when it is probable a liability has been incurred and the amount of the liability is reasonably estimable. Reserves for environmental liabilities totaled $8$11 million and $8$12 million at December 31, ~~2018~~2019 and September 30, ~~2018,~~2019, respectively. Adient reviews the status of its environmental sites on a quarterly basis and adjusts its reserves accordingly. Such potential liabilities accrued by Adient do not take into consideration possible recoveries of future insurance proceeds. They do, however, take into account the likely share other parties will bear at remediation sites. It is difficult to estimate Adient's ultimate level of liability at many remediation sites due to the large number of other parties that may be involved, the complexity of determining the relative liability among those parties, the uncertainty as to the nature and scope of the investigations and remediation to be conducted, the uncertainty in the application of law and risk assessment, the various choices and costs associated with diverse technologies that may be used in corrective actions at the sites, and the often quite lengthy periods over which eventual remediation may occur. Nevertheless, Adient does not currently believe that any claims, penalties or costs in connection with known environmental matters will have a material adverse effect on Adient's financial position, results of operations or cash flows.

~~17.~~18. Related Party Transactions

In the ordinary course of business, Adient enters into transactions with related parties, such as equity affiliates. Such transactions consist of the sale or purchase of goods and other arrangements. ~~Subsequent to the separation, transactions with the former Parent and its businesses represent third-party transactions.~~

The following table sets forth the net sales to and purchases from related parties included in the consolidated statements of income:


		Three Months Ended December 31,
(in millions)		2019		2018
Net sales to related parties	Net sales	$	99	$	92
Purchases from related parties	Cost of sales	177		173

Three Months Ended
December 31,
(in millions) 2018 2017
Net sales to related parties Net sales $ 92
$ 99
Purchases from related parties Cost of sales 173
137

The following table sets forth the amount of accounts receivable due from and payable to related parties in the consolidated statements of financial position:


(in millions)		December 31, 2019		September 30, 2019
Accounts receivable due from related parties	Accounts receivable	$	60	$	73
Accounts payable due to related parties	Accounts payable	103		137

(in millions) December 31, 2018 September 30, 2018
Accounts receivable due from related parties Accounts receivable $ 108
$ 91
Accounts payable due to related parties Accounts payable 107
102

Average receivable and payable balances with related parties remained consistent with the period end balances shown above.

Adient plc | Form 10-Q | 28

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This section and other parts of this Quarterly Report on Form 10-Q ~~contain~~contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as "future," "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "will," "would," "could," "can," "may," or similar terms. Forward-looking statements are not guarantees of future performance and Adient's actual results may differ significantly from the results discussed in the forward-looking statements. Adient cautions that these statements are subject to numerous important risks, uncertainties, assumptions and ~~others,~~other factors, some of which are beyond Adient’s control, that could cause Adient’s actual results to differ materially from those expressed or implied by such forward-looking statements, including, among others, risks related to: the ability of Adient to close the transactions subject to the Yanfeng agreement, the ability of Adient to effectively launch new business at forecasted and profitable levels, the ~~impact~~ability of ~~tax reform legislation through the Tax Cuts and Jobs Act,~~Adient to execute its turnaround plan, uncertainties in U.S. administrative policy regarding trade agreements, tariffs and other international trade relations, the ~~ability~~impact of ~~Adient to execute turnaround actions,~~tax reform legislation through the ~~ability of Adient to identify, recruit~~Tax Cuts and ~~retain key leadership,~~Jobs Act, the ability of Adient to meet debt service requirements, ~~the ability and~~ terms of financing, general economic and business conditions, the strength of the U.S. or other economies, automotive vehicle production levels, mix and schedules, energy and commodity prices, the availability of raw materials and component products, currency exchange rates, the ~~ability of Adient to fully integrate the Futuris business,~~ cancellation of or changes to commercial arrangements, and the ability of Adient ~~Aerospace~~ to ~~successfully implement its strategic initiatives or realize the expected benefits of the joint venture.~~identify, recruit and retain key leadership. Additional information regarding these and other risks related to Adient’s business that could cause actual results to differ materially from what is contained in the forward-looking statements is included in the section entitled "Risk Factors," contained in Item Part I, Item 1A of the which are incorporated herein by reference. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in Part II, Item 8 of the Form 10-K. All information presented herein is based on the Adient's fiscal calendar. Unless otherwise stated, references to particular years, quarters, months or periods refer to Adient's fiscal years ended in September and the associated quarters, months and periods of those fiscal years. Adient assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Overview

Adient is a global leader in the automotive seating supply industry with leading market positions in the Americas, Europe and China and maintains longstanding relationships with the largest global ~~auto manufacturers.~~automotive original equipment manufacturers (OEMs). Adient's proprietary technologies extend into virtually every area of automotive seating solutions, including complete seating systems, frames, mechanisms, foam, head restraints, armrests, trim covers and fabrics. Adient is ~~an independent~~a global seat supplier with ~~global scale and~~ the capability to design, develop, engineer, manufacture, and deliver complete seat systems and components in every major automotive producing region in the world. Adient also participates in the automotive interiors market, which includes production of instrument panels, floor consoles, door panels, overhead consoles, cockpit systems, decorative trim and other automotive interior products, primarily through its ~~30% equity interest in its global automotive interiors~~ joint venture in China, Yanfeng Global Automotive Interior Systems Co., Ltd. (YFAI) (refer to Note 3, "Acquisitions and Divestitures," of the notes to consolidated financial statements for recent developments regarding Adient's investment in YFAI).

Adient designs, manufactures and markets a full range of seating systems and components for passenger cars, commercial vehicles and light trucks, including vans, pick-up trucks and sport/crossover utility vehicles. Adient ~~also supplies high performance seating systems to the international motorsports industry through its award winning RECARO brand of products. Adient~~ operates in ~~234~~220 wholly- and majority-owned manufacturing or assembly facilities, with operations in 3433 countries. Additionally, Adient has partially-owned affiliates in China, Asia, Europe and North America. Through its global footprint, vertical integration and partnerships in China, Adient leverages its capabilities to drive growth in the automotive seating industry.

Adient manages its business on a geographic basis and operates in the following three reportable segments for financial reporting purposes: 1) Americas, which is inclusive of North America and South America; 2) Europe, Middle East, and Africa ("EMEA") and 3) Asia Pacific/China ("Asia").

~~Seating~~

~~The Seating segment produces complete seat systems for automotive and other mobility applications, as well as certain components of complete seat systems, such as foam, trim and fabric.~~

~~Seat Structures and Mechanisms~~

~~The SS&M segment produces seat structures and mechanisms for inclusion in complete seat systems that are produced by Adient or others.~~

~~Interiors~~

The Interiors segment, derived from Adient's global automotive interiors joint ventures, produces instrument panels, floor consoles, door panels, overhead consoles, cockpit systems, decorative trim and other products.

Global Automotive Industry

Adient conducts its business globally in the automotive industry, which is highly competitive and sensitive to economic, political and social factors in the various regions. ~~During~~In the first quarter of fiscal ~~2019,~~2020, automotive light vehicle production in North

Adient plc | Form 10-Q | 29

America, Europe and ~~China experienced~~Asia decreased, production in South America ~~production~~ was flat and production in ~~North America and Asia experienced an increase.~~China increased slightly compared to the first quarter of fiscal 2019.

Light vehicle production levels by geographic region are provided below:


	Light Vehicle Production				Light Vehicle Production
	Three Months Ended December 31,				Three Months Ended December 31,
(units in millions)	2018	Change	2017	(units in millions)	2019	Change	2018
Global	24.1	-2.8%	24.8	Global	22.3	-5.1%	23.5
North America	4.2	2.4%	4.1	North America	3.8	-9.5%	4.2
South America	0.9	—%	0.9	South America	0.8	—%	0.8
Europe	5.7	-3.4%	5.9	Europe	5.3	-7.0%	5.7
China	7.5	-10.7%	8.4	China	7.2	1.4%	7.1
Asia, excluding China, and Other	5.8	5.5%	5.5	Asia, excluding China, and Other	5.2	-8.8%	5.7

Source: IHS Automotive, January 2019
Source: IHS Automotive, January 2020				Source: IHS Automotive, January 2020

Financial Results Summary

Significant aspects of Adient's financial results for the first quarter of fiscal ~~2019~~2020 include the following:

•Adient recorded net sales of ~~$4,158~~$3,936 million for the first quarter of fiscal ~~2019,~~2020, representing a decrease of ~~$46~~$222 million, or 5% when compared to the first quarter of fiscal ~~2018.~~2019. The decrease in net sales ~~is primarily due to~~was the ~~unfavorable foreign currency impact and~~result of lower volumes in ~~Europe~~all regions and ~~China,~~the unfavorable impact of foreign currency, partially offset by ~~higher volumes~~favorable commercial settlements and net pricing adjustments in ~~North America~~the Americas and ~~Asia.~~Europe regions.

•Gross profit was $263 million, or 6.7% of net sales for the first quarter of fiscal 2020 compared to $180 million, or 4.3% of net sales for the first quarter of fiscal ~~2019 compared to $201 million, or 4.8% of net sales for the first quarter of fiscal 2018.~~2019. Profitability, including gross profit as a percentage of net sales, was ~~lower primarily~~higher due to ~~ongoing business performance issues in Seating.~~the effects of commercial settlements and net pricing adjustments, lower levels of launch inefficiencies, and lower operational waste and freight costs. The positive benefits were partially offset by lower sales volumes across all regions as compared to fiscal 2019.

•Equity loss was $113 million for the first quarter of fiscal 2020, which compares to equity income ~~was~~of $83 million for the first quarter of fiscal ~~2019,~~2019. The change is primarily attributable to a $216 million non-cash impairment of Adient's YFAI investment, partially offset by a $20 million increase in equity earnings primarily from certain partially owned affiliates in China which ~~compares~~includes $10 million of benefits from tax credits at various affiliates that are not expected to ~~equity income of $96~~recur.

•Net loss attributable to Adient was $167 million for the first quarter of fiscal ~~2018. The decrease was primarily attributable to overall lower profitability within certain Seating affiliates and ongoing operating performance issues at YFAI.~~

~~Net loss attributable to Adient was $17 million for the first quarter of fiscal 2019,~~2020, compared to ~~$216~~$17 million of net loss attributable to Adient for the first quarter of fiscal ~~2018.~~ 2019. The year over year ~~decrease~~increase in net loss ~~attributable to Adient~~ is primarily attributable to a ~~prior year tax~~$216 million non-cash impairment charge ~~related to~~on Adient's YFAI investment, a $21 million loss on the ~~impact~~sale of the ~~2018 U.S. tax reform legislation~~RECARO business, a $4 million loss on the deconsolidation of Adient Aerospace, and $13 million of higher net financing costs, partially offset by ~~lower profitability within Seating.~~

an $83 million increase in gross profit, a $13 million reduction of administrative costs, a $33 million reduction in restructuring related charges, and a $20 million increase in equity earnings at certain China affiliates.

Adient plc | Form 10-Q | 30

Consolidated Results of Operations


	Three Months Ended December 31,
(in millions)	2019		Change	2018
Net sales	$	3,936	-5%	$	4,158
Cost of sales	3,673		-8%	3,978
Gross profit	263		46%	180
Selling, general and administrative expenses	165		-7%	178
Loss on business divestitures - net	25		n/a	—
Restructuring and impairment costs	2		-94%	31
Equity income (loss)	(113)		> -100%	83
Earnings (loss) before interest and income taxes	(42)		> -100%	54
Net financing charges	48		37%	35
Other pension expense (income)	(2)		—%	(2)
Income (loss) before income taxes	(88)		> -100%	21
Income tax provision (benefit)	54		> 100%	10
Net income (loss)	(142)		> -100%	11
Income (loss) attributable to noncontrolling interests	25		-11%	28
Net income (loss) attributable to Adient	$	(167)	> -100%	$	(17)

Three Months Ended
December 31,
(in millions) 2018 Change 2017
Net sales $ 4,158
-1% $ 4,204
Cost of sales 3,978
-1% 4,003
Gross profit 180
-10% 201
Selling, general and administrative expenses 178
-9% 196
Restructuring and impairment costs 31
* —
Equity income (loss) 83
-14% 96
Earnings (loss) before interest and income taxes 54
-47% 101
Net financing charges 35
6% 33
Other pension expense (income) (2 ) * (1 )
Income (loss) before income taxes 21
-70% 69
Income tax provision (benefit) 10
-96% 265
Net income (loss) 11
* (196 )
Income (loss) attributable to noncontrolling interests 28
40% 20
Net income (loss) attributable to Adient $ (17 ) -92% $ (216 )

* Measure not meaningful

Net Sales


	Three Months Ended December 31,						Three Months Ended December 31,
(in millions)	2018		Change	2017		(in millions)	2019		Change	2018
Net sales	$	4,158	-1%	$	4,204	Net sales	$	3,936	-5%	$	4,158

Net sales decreased by ~~$46~~$222 million, or 1%5%, in the first quarter of fiscal ~~2019~~2020 as compared to the first quarter of fiscal ~~2018~~2019 primarily due to ~~the unfavorable foreign currency impact of $94 million and~~ lower volumes in Americas, Europe and ~~China,~~Asia and the unfavorable impact of foreign currency ($43 million), partially offset by ~~higher volumes in North America~~favorable commercial settlements and ~~Asia.~~net pricing adjustments, including material economic recoveries. Refer to the segment analysis below for a discussion of segment net sales.

Cost of Sales / Gross Profit


	Three Months Ended December 31,								Three Months Ended December 31,
(in millions)	2018			Change	2017			(in millions)	2019			Change	2018
Cost of sales	$	3,978		-1%	$	4,003		Cost of sales	$	3,673		-8%	$	3,978
Gross profit	$	180		-10%	$	201		Gross profit	$	263		46%	$	180
% of sales	4.3		%		4.8		%	% of sales	6.7		%		4.3		%

Cost of sales decreased by ~~$25~~$305 million , or 1%8%, and gross profit ~~decreased~~increased by ~~$21~~$83 million, or ~~10%~~46%, in the first quarter of fiscal ~~2019~~2020 as ~~compared~~compared to the first quarter of fiscal ~~2018. Cost~~2019. The year over year decrease in cost of sales was primarily due to the decrease in volumes, overall operational improvements and the favorable impact of foreign currency ($43 million). Gross profit was favorably impacted ~~favorably~~by commercial settlements and net pricing adjustments, lower launch inefficiencies, and a reduction in operational waste and freight, partially offset by the impact of foreign currency ($84 million), a reduction in depreciation expense ($25 million) and prior year Becoming Adient charges, partially offset by volume decreases and continued business performance issues related to launch inefficiencies within Seating, including higher freight and higher operational waste. These ongoing performance issues also resulted in a year-over-year decline of gross profit as a percentage of net sales.lower sales volume. Refer to the segment analysis below for a discussion of segment profitability.

Adient plc | Form 10-Q | 31

Selling, General and Administrative Expenses


	Three Months Ended December 31,								Three Months Ended December 31,
(in millions)	2018			Change	2017			(in millions)	2019			Change	2018
Selling, general and administrative expenses	$	178		-9%	$	196		Selling, general and administrative expenses	$	165		-7%	$	178
% of sales	4.3		%		4.7		%	% of sales	4.2		%		4.3		%

Selling, general and administrative expenses (SG&A) decreased by ~~$18~~$13 million in the first quarter of fiscal ~~2019~~2020 as compared to the first quarter of fiscal ~~2018.~~2019. The year over year decrease in SG&A ~~was favorably impacted by~~is attributable to lower overall administrative and engineering spending of $12 million and prior year Adient Aerospace costs ~~($21 million), lower depreciation expense ($6 million) and a favorable impact~~ of ~~foreign currency ($4 million),~~$5 million, partially offset by ~~reestablishing certain discretionary spending, primarily incentive compensation, in~~higher depreciation of $4 million.

Loss on Business Divestitures - net


	Three Months Ended December 31,
(in millions)	2019		Change	2018
Loss on business divestitures - net	$	25	n/a	$	—

The loss on business divestitures is comprised of a $21 million loss on the ~~current year.~~sale of RECARO automotive high performance seating and a $4 million loss on the deconsolidation of Adient Aerospace. Refer to Note 3, "Acquisitions and Divestitures," of the ~~segment analysis below~~notes to the consolidated financial statements for ~~a discussion of segment profitability.~~information related to these divestitures.

Restructuring and Impairment Costs

Three Months Ended
December 31,
(in millions) 2018 Change 2017
Restructuring and impairment costs $ 31
* $ —


	Three Months Ended December 31,
(in millions)	2019		Change	2018
Restructuring and impairment costs	$	2	-94%	$	31

* Measure not meaningful

Restructuring and impairment costs were lower by $29 million during the first quarter of fiscal ~~2019 primarily consists~~2020 due to the lower levels of restructuring ~~charges related to committed~~ actions ~~to reduce Adient's workforce.~~taken. Refer to Note ~~12,~~13, "Restructuring and Impairment Costs," of the notes to the consolidated financial statements for information related to Adient's restructuring plans.

~~Equity Income~~

Three Months Ended
December 31,
(in millions) 2018 Change 2017
Equity income (loss) $ 83
-14% $ 96

Equity ~~income~~Income (Loss)


	Three Months Ended December 31,
(in millions)	2019		Change	2018
Equity income (loss)	$	(113)	> -100%	$	83

Equity loss was ~~$83~~$113 million for the first quarter of fiscal ~~2019, which is $13~~2020, compared to $83 million ~~lower compared to~~of income in the first quarter of fiscal ~~2018.~~2019. The ~~decrease was~~change is primarily attributable to ~~overall lower profitability within~~a $216 million non-cash impairment charge related to Adient's YFAI investment resulting from the announced transaction that includes the divestiture of the YFAI investment, partially offset by a $20 million increase in equity earnings primarily from certain ~~Seating~~partially owned affiliates in China, ~~along with ongoing operating performance issues~~which includes $10 million of benefits from tax credits at ~~YFAI and the unfavorable impact of foreign currency translation of $5 million.~~various affiliates that are not expected to recur.

Adient plc | Form 10-Q | 32

Net Financing Charges


	Three Months Ended December 31,						Three Months Ended December 31,
(in millions)	2018		Change	2017		(in millions)	2019		Change	2018
Net financing charges	$	35	6%	$	33	Net financing charges	$	48	37%	$	35

Net financing charges increased in the first quarter of fiscal ~~2019~~2020 as compared to the first quarter of fiscal ~~2018~~2019 due to higher levels of outstanding debt and to higher average interest rates in the current ~~quarter on similar levels of outstanding debt.~~quarter.

Other Pension Expense (Income)

Three Months Ended
December 31,
(in millions) 2018 Change 2017
Other pension expense (income) $ (2 ) * $ (1 )


	Three Months Ended December 31,
(in millions)	2019		Change	2018
Other pension expense (income)	$	(2)	—%	$	(2)

* Measure not meaningful

Other pension ~~expense (income) consists of non-service components of Adient's net periodic pension costs.~~income remained consistent year over year. Refer to Note ~~11,~~12, "Retirement Plans," of the notes to the consolidated financial statements for information related to the non-service components of Adient's net periodic pension costs.

Income Tax Provision


	Three Months Ended December 31,						Three Months Ended December 31,
(in millions)	2018		Change	2017		(in millions)	2019		Change	2018
Income tax provision (benefit)	$	10	-96%	$	265	Income tax provision (benefit)	$	54	> 100%	$	10

The first quarter of fiscal ~~2019~~2020 income tax expense of $54 million was higher than the statutory rate of 12.5% primarily due to the impact of recognizing no tax benefit for losses in jurisdictions with valuation allowances, partially offset with a $4 million tax benefit associated with the impairment of Adient’s YFAI investment. For the first quarter of fiscal 2019, Adient’s income tax expense was $10 million and was higher than the statutory rate of 12.5% primarily due to the impact of recognizing no tax benefit for losses in jurisdictions with valuation allowances, partially offset by a $7 million benefit from a tax rate change at a consolidated affiliate in China. The year over year decrease in income tax expense is primarily attributable to the prior year tax charge of $258 million related to the impact of the 2018 U.S. tax reform legislation.China affiliate.

Income Attributable to Noncontrolling Interests


	Three Months Ended December 31,
(in millions)	2019		Change	2018
Income (loss) attributable to noncontrolling interests	$	25	-11%	$	28

Three Months Ended
December 31,
(in millions) 2018 Change 2017
Income (loss) attributable to noncontrolling interests $ 28
40% $ 20

The ~~increase~~decrease in income attributable to noncontrolling interests for the first quarter of fiscal ~~2019~~2020 when compared to the same period in the prior year was primarily attributable to ~~higher~~lower income resulting from ~~higher~~lower volumes at certain Seating affiliates in varying jurisdictions.

Net Income (Loss) Attributable to Adient


	Three Months Ended December 31,								Three Months Ended December 31,
(in millions)	2018			Change	2017			(in millions)	2019		Change	2018
Net income (loss) attributable to Adient	$	(17	)	-92%	$	(216	)	Net income (loss) attributable to Adient	$	(167)	> -100%	$	(17)

Net loss attributable to Adient was ~~$(17)~~$167 million for the first quarter of fiscal ~~2019~~2020 compared to ~~$(216) million of~~a net loss ~~attributable to Adient~~of $17 million for the first quarter of fiscal ~~2018.~~2019. The year over year ~~decrease~~increase in net loss ~~attributable to Adient~~ is primarily attributable to a ~~prior year tax~~$216 million non-cash impairment charge ~~($258 million) related to~~on Adient's YFAI investment, a $21 million loss on the ~~impact~~sale of the ~~2018 U.S. tax reform legislation,~~RECARO business, a $4 million loss on

Adient plc | Form 10-Q | 33

the deconsolidation of Adient Aerospace, and $13 million of higher net financing charges, partially offset by ~~lower profitability within Seating~~an $83 million increase in gross profit, a $13 million reduction of administrative costs, a $33 million reduction in restructuring related charges, and ~~lower levels of~~a $20 million increase in equity ~~income.~~earnings at certain China affiliates.

Comprehensive Income (Loss) Attributable to Adient

Three Months Ended
December 31,
(in millions) 2018 Change 2017
Comprehensive income (loss) attributable to Adient $ (4 ) * $ (155 )

* Measure not meaningful


	Three Months Ended December 31,
(in millions)	2019		Change	2018
Comprehensive income (loss) attributable to Adient	$	(102)	> -100%	$	(4)

Comprehensive loss attributable to Adient was $102 million for the first quarter of fiscal 2020 compared to a loss of $4 million for the first quarter of fiscal ~~2019 compared to comprehensive loss attributable to Adient for the first quarter of fiscal 2018 of $155 million.~~2019. The ~~decrease~~increase in comprehensive loss attributable to Adient for the first quarter of fiscal ~~2019~~2020 was primarily due to ~~reduced~~an unfavorable change in net ~~losses attributable to Adient~~income/loss ($~~199~~153 million), partially offset by ~~unfavorable~~the favorable year-over-year impact of foreign currency ($5550 million). primarily due to the strengthening of the US dollar against the Euro. The year-over-year ~~unfavorable foreign currency impact was~~change in net income/loss is primarily ~~driven by the weakening of the Chinese yuan against the U.S. dollar.~~attributable to a $216 million pre-tax non-cash impairment charge on Adient's YFAI investment and losses on business divestitures ($25 million).

Segment Analysis

Adient evaluates the performance of its reportable segments using an adjusted EBITDA metric defined as income before income taxes and noncontrolling interests, excluding net financing charges, qualified restructuring and impairment costs, restructuring related-costs, ~~incremental "Becoming Adient" costs, separation costs,~~ net mark-to-market adjustments on pension and postretirement plans, transaction gains/losses, purchase accounting amortization, depreciation, stock-based compensation and other non-recurring items ("Adjusted EBITDA"). Also, certain corporate-related costs are not allocated to the segments. The reportable segments are consistent with how management views the markets served by Adient and reflect the financial information that is reviewed by its chief operating decision maker. ~~Adient has three reportable segments for financial reporting purposes:~~



•	~~Seating: This segment produces complete seat systems for automotive and other mobility applications, as well as certain components of complete seat systems, such as foam, trim and fabric.~~

•	~~Seat Structures & Mechanisms (SS&M): This segment produces seat structures and mechanisms for inclusion in complete seat systems that are produced by Adient or others.~~

•	Interiors: This segment, derived from Adient's global automotive interiors joint ventures, produces instrument panels, floor consoles, door panels, overhead consoles, cockpit systems, decorative trim and other products.

Financial information relating to Adient's reportable segments is as follows:


	Three Months Ended December 31,
(in millions)	2019		2018
Net Sales
Americas	$	1,859	$	1,935
EMEA	1,564		1,640
Asia	572		650
Eliminations	(59)		(67)
Total net sales	$	3,936	$	4,158

Adient plc | Form 10-Q | 34

Three Months Ended
December 31,
(in millions) 2018 2017
Net Sales
Seating $ 3,739
$ 3,796
SS&M 727
718
Eliminations (308 ) (310 )
Total net sales $ 4,158
$ 4,204


	Three Months Ended December 31,
(in millions)	2019		2018
Adjusted EBITDA
Americas	$	94	$	43
EMEA	49		2
Asia	177		154
Corporate-related costs ⁽¹⁾	(23)		(23)
Restructuring and impairment costs ⁽²⁾	(2)		(31)
Purchase accounting amortization ⁽³⁾	(10)		(10)
Restructuring related charges ⁽⁴⁾	(5)		(9)
Loss on business divestitures - net ⁽⁵⁾	(25)		—
Impairment of nonconsolidated partially-owned affiliate ⁽⁶⁾	(216)		—
Depreciation	(75)		(65)
Stock based compensation	(4)		(6)
Other items ⁽⁷⁾	(2)		(1)
Earnings (loss) before interest and income taxes	(42)		54
Net financing charges	(48)		(35)
Other pension income (expense)	2		2
Income (loss) before income taxes	$	(88)	$	21

Notes:

Three Months Ended
December 31,
(in millions) 2018
2017 ⁽¹⁾
Adjusted EBITDA
Seating $ 261
$ 354
SS&M (72 ) (82 )
Interiors 11
25
Corporate-related costs ⁽²⁾
(24 ) (31 )
Becoming Adient costs ⁽³⁾
—
(19 )
Restructuring and impairment costs ⁽⁴⁾
(31 ) —
Purchase accounting amortization ⁽⁵⁾
(10 ) (17 )
Restructuring related charges⁽⁶⁾
(9 ) (11 )
Stock based compensation ⁽⁷⁾
(6 ) (10 )
Depreciation ⁽⁸⁾
(65 ) (94 )
Other items ⁽⁹⁾
(1 ) (14 )
Earnings (loss) before interest and income taxes 54
101
Net financing charges (35 ) (33 )
Other pension income 2
1
Income (loss) before income taxes $ 21
$ 69

~~Notes~~

~~(2)~~ Corporate-related costs not allocated to the segments include executive office, ~~aviation,~~ communications, corporate development, legal, finance and marketing.

~~(3)~~(2) Reflects ~~incremental expenses associated with becoming an independent company. Includes non-cash costs of $6 million in the three months ended December 31, 2017.~~

~~(4) Reflects qualified~~ restructuring charges for costs that are directly attributable to restructuring activities and meet the definition of restructuring under ASC 420 and non-recurring impairment charges. Refer to Note 13, "Restructuring and Impairment Costs," of the notes to the consolidated financial statements for more information.

~~(6)~~(4) Reflects restructuring related charges for costs that are directly attributable to restructuring activities, but do not meet the definition of restructuring under ASC ~~420.~~420 along with restructuring costs at partially owned affiliates recorded within equity income.

~~(7) For~~(6) Reflects the ~~three months ended December 31, 2017, stock based compensation excludes $6~~$216 million ~~which is included~~pre-tax non-cash impairment of Adient's YFAI investment as described in ~~Becoming Adient costs, discussed above.~~Note 3, "Acquisitions and Divestitures," of the notes to consolidated financial statements.

~~(8) For the three months ended December 31, 2017, depreciation excludes $2 million which is included in restructuring related charges, discussed above.~~

~~(9)~~(7) The three months ended December 31, ~~2018 reflects~~2019 includes $1 million of transaction costs and $1 million for the U.S. tax reform impact at YFAI. The three months ended December 31, 2019 includes $1 million of Futuris integration costs. ~~The three months ended December 31, 2017 reflects $6~~

Americas


	Three Months Ended December 31,
(in millions)	2019		Change	2018
Net sales	$	1,859	-4%	$	1,935
Adjusted EBITDA	$	94	> 100%	$	43

Adient plc | Form 10-Q | 35

Net sales decreased during the first quarter of fiscal 2020 by $76 million due to lower production volumes ($79 million, including $55 million attributable to the GM labor strike), and the unfavorable impact of ~~Futuris integration costs~~foreign currency ($7 million), partially offset by favorable commercial settlements and $8net pricing adjustments ($10 million ~~related~~).

Adjusted EBITDA increased during the first quarter of fiscal 2020 by $51 million due to the impact of favorable commercial settlements and net pricing adjustments ($20 million), lower administrative and engineering expense ($16 million), operational performance improvements ($20 million), favorable material economics, net of recoveries ($4 million) and the ~~U.S. tax reform legislation at YFAI.~~favorable impact of foreign currency ($1 million), partially offset by lower volumes and unfavorable product mix ($9 million) and lower equity income ($1 million).

EMEA

~~Seating~~


	Three Months Ended December 31,						Three Months Ended December 31,
(in millions)	2018		Change	2017		(in millions)	2019		Change	2018
Net sales	$	3,739	-2%	$	3,796	Net sales	$	1,564	-5%	$	1,640
Adjusted EBITDA	$	261	-26%	$	354	Adjusted EBITDA	$	49	> 100%	$	2

Net sales decreased during the first quarter of fiscal ~~2019~~2020 by ~~$57~~$76 million due to the unfavorable impact of foreign currency ($7648 million) and ~~net pricing reductions~~lower production volumes ($1445 million), partially offset by ~~overall higher volumes ($33 million). The volume increase related to higher sales in North America~~favorable commercial settlements and ~~Asia, partially offset by lower sales in Europe and China.~~

Adjusted EBITDA decreased during the first quarter of fiscal 2019 by $93 million due to an increase in operating costs related to launch inefficiencies, including increased freight and operational waste ($72 million), impact of net pricing ~~reductions~~adjustments ($14 million), higher administration and engineering costs ($10 million), the unfavorable impact of foreign currency ($8 million) and lower equity income ($6 million), partially offset by lower net material costs ($14 million) and higher volumes in certain regions ($317 million).

~~SS&M~~

Three Months Ended
December 31,
(in millions) 2018 Change 2017
Net sales $ 727
1% $ 718
Adjusted EBITDA $ (72 ) -12% $ (82 )

~~Net sales~~Adjusted EBITDA increased during the first quarter of fiscal ~~2019~~2020 by $9$47 million due to ~~higher volumes~~operational performance improvements ($~~25 million) and certain material economic recoveries($10~~23 million), ~~partially offset by~~ the ~~unfavorable~~favorable impact of ~~foreign currency ($18 million)~~commercial settlements and net pricing ~~reductions~~adjustments ($821 million)~~. The volume increase was attributable to North America, partially offset by decreases in Europe.~~

~~Adjusted EBITDA losses declined during the first quarter of fiscal 2019 by $10 million due to the impact of improved business performance, including~~, lower ~~launch related costs~~administrative and ~~reduced freight~~engineering expenses ($2712 million) and ~~lower administrative expenses~~higher equity income ($1 million), partially offset by ~~net pricing reductions ($8 million), impact of~~lower volumes and product mix ($6 ~~million)~~million), ~~lower equity income~~unfavorable material economics, net of recoveries ($2 million) and the unfavorable impact of foreign currency ($2 million).

~~Interiors~~

Three Months Ended
December 31,
(in millions) 2018 Change 2017
Adjusted EBITDA $ 11
-56% $ 25

~~Adjusted EBITDA~~Asia


	Three Months Ended December 31,
(in millions)	2019		Change	2018
Net sales	$	572	-12%	$	650
Adjusted EBITDA	$	177	15%	$	154

Net sales decreased during the first quarter of fiscal ~~2019~~2020 by ~~$14~~$78 million ~~primarily attributable~~due to lower production volumes in($90 million), partially offset by the favorable impact of foreign currency ($11 million) and favorable commercial settlements and net pricing adjustments ($1 million).

Adjusted EBITDA increased during the first quarter of fiscal 2020 by $23 million due to higher equity income at certain China affiliates ($26 million) including $10 million of benefits from tax credits at various affiliates that are not expected to recur, the favorable impact of commercial settlements and ~~North America and ongoing operational issues at YFAI~~net pricing adjustments ($1314 million) and the ~~unfavorable~~favorable impact of foreign currency ($1 million), partially offset by lower volumes and product mix ($6 million), higher administration and engineering costs ($5 million) and unfavorable material economics, net of recoveries ($2 million). As a result of the planned divestiture of our YFAI investment, no further equity income will be recorded related to YFAI. Refer to "Note 3, "Acquisitions and Divestitures," of the notes to consolidated financial statements for more information on the planned divestiture of YFAI.

Liquidity and Capital Resources

Adient's primary liquidity needs are to fund general business requirements, including working capital, capital expenditures, restructuring costs and debt service requirements. Adient's principal sources of liquidity are cash flows from operating

Adient plc | Form 10-Q | 36

activities, the revolving credit facility and other debt issuances, and existing cash balances. ~~Funding also previously came from the former Parent through October 31, 2016 and as part of the separation agreement.~~ Adient actively manages its working capital and associated cash requirements and continually seeks more effective uses of cash. Working capital is highly influenced by the timing of cash flows associated with sales and purchases, and therefore can be difficult to manage at times. Adient had cash and cash equivalents of $406 million and $687 million as of December 31, 2018 and September 30, 2018, respectively. Adient's revolving credit facility provides for $1.5 billion of commitments and was undrawn at December 31, 2018 and September 30, 2018. See below and refer to Note 7,8, "Debt and Financing

Arrangements," of the notes to consolidated financial statements for discussion of financing arrangements. Following the first quarter of fiscal 2019 dividend payout, Adient has suspended future dividends.

Indebtedness

~~The Original Credit Facilities include commitments for~~Adient US LLC ("Adient US"), a ~~$1.5 billion~~wholly owned subsidiary of Adient, together with certain of Adient's other subsidiaries, maintains an asset-based revolving credit facility ~~(undrawn~~(the “ABL Credit Facility”), which provides for a revolving line of credit up to $1,250 million, including a North American subfacility of up to $950 million and a European subfacility of up to $300 million, subject to borrowing base capacity. The ABL Credit Facility will mature on May 6, 2024, subject to a springing maturity date 91 days earlier if certain amounts remain outstanding at that time under the Term Loan B Agreement (defined below). Interest is payable on the ABL Credit Facility at a fluctuating rate of interest determined by reference to the Eurodollar rate plus an applicable margin of 1.50% to 2.00%. Adient will pay a commitment fee of 0.25% to 0.375% on the unused portion of the commitments under the asset-based revolving credit facility based on average global availability. Letters of credit are limited to the lesser of (x) $150 million and (y) the aggregate unused amount of commitments under the ABL Credit Facility then in effect. Subject to certain conditions, the ABL Credit Facility may be expanded by up to $250 million in additional commitments. Loans under the ABL Credit Facility may be denominated, at the option of Adient, in U.S. dollars, Euros, Pounds Sterling or Swedish Kroner. The ABL Credit Agreement is secured on a first-priority lien on all accounts receivable, inventory and bank accounts (and funds on deposit therein) and a second-priority lien on all of the tangible and intangible assets of certain Adient subsidiaries. As of December 31, ~~2018~~2019, Adient's availability under this facility was $1,059 million.

In addition, Adient US and ~~September 30, 2018) and~~Adient Global Holdings S.à r.l., a ~~$1.5 billion Term~~wholly-owned subsidiary of Adient, maintain a term loan credit agreement (the “Term Loan AB Agreement”) providing for a 5-year $800 million senior secured term loan facility ~~(which~~that was fully drawn ~~during the fourth quarter of fiscal 2016).~~at closing. The ~~Original Credit Facilities mature in July 2021. Until the~~ Term Loan ~~A maturity date, amortization~~B Agreement amortizes in equal quarterly installments at a rate of ~~the funded Term Loan A is required in an amount~~1.00% per ~~quarter equal to 1.25%~~annum of the original principal amount ~~prior to July 27, 2019 and 2.5% in each quarter thereafter prior to~~thereof, with the remaining balance due at final ~~maturity. The~~maturity on May 6, 2024. Interest on the Term Loan ~~A facility also requires mandatory prepayments in connection with certain non-ordinary course asset sales and insurance recovery and condemnation events, among other things, and subject in each case~~B Agreement accrues at the Eurodollar rate plus an applicable margin equal to ~~certain significant exceptions.~~

~~During the first quarter~~4.25% (with one 0.25% step down based on achievement of fiscal 2019, Adient entered into an amendment to the Original Credit Facilities (“First Amended Credit Facilities") whereby the financial maintenance covenant was amended to require Adient to maintain a ~~total~~specific secured net leverage ~~ratio equal to or less than 4.5x adjusted EBITDA,~~level starting with ~~step down provisions starting in~~ the fiscal quarter ending December 31, ~~2020.~~2019). The ~~amendment~~Term Loan B Agreement also expanded the upper range of interest rate margins such that the drawn portion of the First Amended Credit Facilities will bear interest based on LIBOR plus a margin between 1.25% - 2.50% (previously 1.25% - 2.25%), based on Adient’s total net leverage ratio. No other terms were impacted by the amendment. During the second quarter of fiscal 2019, Adient entered into an amendment to the First Amended Credit Facilities (“Second Amended Credit Facilities") whereby the financial maintenance covenant contained in the First Amended Credit Facilities was amended to requirepermits Adient to ~~maintain~~incur incremental term loans in an aggregate amount not to exceed the greater of $750 million and an unlimited amount subject to a pro forma first lien secured net leverage ratio ~~equal~~of not greater than 1.75 to ~~or less than 2.5x adjusted EBITDA as~~1.00 and certain other conditions.

Adient US also maintains an indenture relating to the issuance of $800 million aggregate principal amount of Senior First Lien Notes (the “Notes”). The Notes mature on May 15, 2026 and bear interest at a rate of 7.00% per annum. Interest on the ~~last day~~Notes is payable semi-annually in arrears on November 15 and May 15 of each ~~quarter, with step down provisions starting~~year, commencing on ~~September 30, 2020.~~ November 15, 2019.

The ~~amendment also added a new tier to~~ABL Credit Facility, Term Loan B Agreement and the ~~pricing schedule~~Notes contain covenants that ~~will be applicable when~~are usual and customary for facilities and transactions of this type and that, among other things, restrict the ~~total net leverage ratio exceeds 4.0x adjusted EBITDA~~ability of Adient and ~~amended~~its restricted subsidiaries to: create certain liens and enter into sale and lease-back transactions; create, assume, incur or guarantee certain indebtedness; pay dividends or make other distributions on, or repurchase or redeem, Adient’s capital stock or certain other ~~definitions, negative~~debt; make other restricted payments; and consolidate or merge with, or convey, transfer or lease all or substantially all of Adient’s and its restricted subsidiaries’ assets, to another person. These covenants are subject to a number of other limitations and ~~other terms within~~exceptions set forth in the ~~credit facility.~~agreements. The agreements also provide for customary events of default, including, but not limited to, failure to pay principal and interest, failure to comply with covenants, agreements or conditions, and certain events of bankruptcy or insolvency involving Adient ~~expects to be in compliance with~~and its ~~financial covenants for the foreseeable future.~~significant subsidiaries.

Adient ~~is currently exploring financing options that would provide further flexibility for its business including~~Global Holdings Ltd., a wholly-owned subsidiary of Adient, maintains $0.9 billion aggregate principal amount of 4.875% USD-denominated unsecured notes due 2026 and €1.0 billion aggregate principal amount of 3.50% unsecured notes due 2024. Adient Germany Ltd. & Co. KG, a wholly owned subsidiary of Adient, maintains €165 million in an unsecured term loan from the ~~refinancing of its credit facilities.~~European Investment Bank due in 2022. The loan bears interest at the 6-month EURIBOR rate plus 158 basis points.

Adient plc | Form 10-Q | 37

Sources of Cash Flows


	Three Months Ended December 31,
(in millions)	2019		2018
Cash provided (used) by operating activities	$	239	$	(128)
Cash provided (used) by investing activities	(128)		(118)
Cash provided (used) by financing activities	(74)		(38)
Capital expenditures	(91)		(144)

Three Months Ended
December 31,
(in millions) 2018 2017
Cash provided (used) by operating activities $ (128 ) $ (127 )
Cash provided (used) by investing activities (118 ) (146 )
Cash provided (used) by financing activities (38 ) (49 )
Capital expenditures (144 ) (143 )

Operating Cash Flows: Cash flows from operating activities ~~remained consistent~~increased year over year ~~with~~primarily as a result of higher ~~net income~~profitability and favorable overall ~~favorable~~ changes to working capital, ~~offset by~~including favorable changes ~~in deferred income taxes.~~to accounts receivable, inventory and accounts payable.

Investing Cash Flows: The ~~decrease~~increase in cash used by investing activities is primarily attributable to a $37 million cash outflow related to the deconsolidation of Adient Aerospace, partially offset by a year over year decrease in capital expenditures ($53 million), and prior year proceeds from the sale of ~~both~~ the Detroit, Michigan properties and ~~remaining~~ airplane ~~for approximately $35 million, partially offset by loans to affiliates for $11 million.~~($35 million).

Financing Cash Flows: The ~~decrease~~increase in cash used by financing activities is primarily attributable to ~~Adient's JV partner’s contribution~~cash dividends paid to noncontrolling interests ($18 million), funding of ~~$28 million as part of~~short-term debt ($19 million), and prior year cash received related to the formation of athe Adient Aerospace consolidated joint venture ($28 million), partially offset by ~~higher amounts of~~non-recurring cash dividends paid ~~to non-controlling interests.~~in the prior year ($26 million).

Capital expenditures: Capital expenditures ~~remained consistent~~decreased year over year based on ~~similar levels~~timing of program spend on product ~~launches.~~launches and tightening controls around overall spending.

Working capital


(in millions)	December 31, 2019		September 30, 2019
Current assets	$	3,799	$	4,116
Current liabilities	3,683		3,835
Working capital	$	116	$	281

(in millions)
December 31,
2018
September 30, 2018
Current assets $ 3,668
$ 4,309
Current liabilities 3,675
4,192
Working capital $ (7 ) $ 117

The decrease in working capital of ~~$124~~$165 million is primarily attributable to lower levels of ~~cash and~~ accounts receivable as of December 31, ~~2018~~2019 offset by lower levels of accounts payable. Also contributing to the lower levels of working capital is the recognition of lease liabilities (current lease liability of $112 million at December 31, 2019 impacting working capital), upon adoption of the new lease accounting standard in the first quarter of fiscal 2020.

Adient plc | Form 10-Q | 38

Restructuring and Impairment Costs

During the first quarter of 2020, Adient committed to a restructuring plan ~~in fiscal 2019 to drive cost efficiencies and to balance our global production against demand and recorded $25~~("2020 Plan") of $7 million that was offset by $5 million of prior year underspend. Of the restructuring costs inrecorded, $3 million relates to the ~~consolidated statement of income.~~Americas segment, $2 million relates to the EMEA segment and $2 million relates to the Asia segment. The restructuring actions ~~related~~relate to cost reduction initiatives ~~in the Seating~~ and ~~SS&M segments. The costs~~ consist primarily of workforce ~~reductions and plant closures.~~reductions. The restructuring actions are expected to be substantially ~~complete in~~completed by fiscal ~~2019. The restructuring plan reserve balance of $23 million at December 31, 2018 is expected to be paid in cash.~~2021.

In fiscal 2019, Adient committed to a restructuring plan ~~in fiscal 2018 to drive cost efficiencies and to balance our global production against demand and recorded $43~~("2019 Plan") of $109 million ~~of restructuring costs in the consolidated statement of income~~ that was offset by $16 million of prior year underspend, ina $9 million increase to a prior ~~years by $27 million. The~~year reserve and $6 million of customer recoveries related to previous restructuring charges. Of the restructuring costs recorded, $81 million relates to the EMEA segment, $16 million relates to the Americas segment and $8 million relates to the Asia segment. This is the total amount expected to be incurred for this restructuring plan.The restructuring actions ~~related~~relate to cost reduction initiatives ~~in the Seating~~ and ~~SS&M segments. The costs~~ consist primarily of workforce ~~reductions~~reductions. Adient currently estimates that upon completion of the restructuring actions, the fiscal 2019 restructuring plan will reduce annual operating costs by approximately $109 million, which is primarily the result of lower costs of sales and ~~plant closures.~~selling, general and administrative expenses due to reduced employee-related costs, of which approximately 35-40% will result in net savings. The restructuring actions are expected to be substantially completed by fiscal 2021.

In fiscal 2018, Adient committed to a restructuring plan ("2018 Plan") of $71 million that was offset by $25 million of prior year underspend. Of the restructuring costs recorded, $52 million relates to the EMEA segment, $10 million relates to the Asia segment and $9 million relates to the Americas segment. In fiscal 2019 there was adjustment to this plan which resulted in additional $9 million of charges. This is the total amount expected to be incurred for this restructuring plan. The restructuring actions relate to cost reduction initiatives and consist primarily of workforce reductions. Adient currently estimates that upon completion of the restructuring actions, the fiscal 2018 restructuring plan will reduce annual operating costs by approximately $65 million, which is primarily the result of lower costs of sales and selling, general and administrative expenses due to reduced employee-related costs, of which approximately ~~55%~~60% will result in net savings. ~~The restructuring actions are expected to be substantially complete~~Adient partially achieved these savings in fiscal year 2019. The restructuring plan reserve balance of ~~$38~~$13 million at December 31, ~~2018~~2019 is expected to be paid in cash.

In fiscal 2017, Adient committed to a restructuring plan ~~in fiscal~~ ("2017 ~~to drive cost efficiencies and to balance our global production against demand~~Plan") and recorded $46 million of restructuring and impairment costs in the consolidated ~~statement~~statements of income. Of the restructuring costs recorded, $34 million relates to the EMEA segment, $7 million relates to the Americas segment and $5 million relates to the Asia segment. This is the total amount expected to be incurred for this restructuring plan. The restructuring actions ~~related~~relate to cost reduction initiatives ~~in the Seating segment. The costs~~and consist primarily of workforce reductions and plant closures. Adient currently estimates that upon completion of the restructuring actions, the fiscal 2017 restructuring plan will reduce annual operating costs by approximately $40 million, which is primarily the result of lower cost of sales and selling, general and administrative expenses due to reduced employee-related costs, of which approximately 55%-60% will result in net savings. Adient partially achieved these savings in fiscal years 2017, 2018 and ~~2018.~~2019. The restructuring actions are expected to be substantially complete in fiscal ~~2019. The restructuring plan~~2021. There were no material changes during the first quarter of fiscal 2020 to the 2017 Plan's $5 million reserve ~~balance of $11 million at December 31, 2018 is expected to be paid in cash.~~balance.

In fiscal 2016, Adient committed to a restructuring plan ~~in fiscal~~ ("2016 ~~(the "2016~~ Plan") ~~to drive cost efficiencies and to balance our global production against demand~~ and recorded $332 million of restructuring and impairment costs in the consolidated ~~statement~~statements of income. This is the total amount expected to be incurred for this restructuring plan. The restructuring actions ~~related~~relate to cost reduction initiatives ~~primarily in the Seating~~ and ~~SS&M segments. The costs~~ consist primarily of workforce reductions, plant closures and asset impairments. Adient currently estimates that upon completion of the restructuring actions, the fiscal 2016 restructuring plan will reduce annual operating costs by approximately ~~$150~~$145 million, which is primarily the result of lower cost of sales and selling, general and administrative expenses due to reduced employee-related costs and depreciation expense, of which approximately ~~70%-75%~~75%-80% will result in net savings. Adient partially achieved these savings in fiscal years 2016 through ~~2018, with the full benefit expected in fiscal~~ 2019. ~~The restructuring actions are expected to be substantially complete in fiscal 2021. The restructuring plan reserve balance of $73 million at December 31, 2018 is expected to be paid in cash.~~

Since the announcement of the 2016 Plan in fiscal 2016, Adient has experienced lower employee severance and termination benefit cash payouts than previously calculated of approximately $20 million, due to changes in cost reduction actions. The planned workforce reductions disclosed for the 2016 Plan have been updated for Adient's revised actions.

Off-Balance Sheet Arrangements and Contractual Obligations

There have been no material changes to the off-balance sheet arrangements and contractual obligations disclosed in Adient's Annual Report on Form 10-K for the year ended September 30, ~~2018.~~2019.

Effects of Inflation and Changing Prices

The effects of inflation have not been significant to Adient's results of operations in recent years. Generally, Adient has been able to implement operating efficiencies to sufficiently offset cost increases, which have been moderate.

Adient plc | Form 10-Q | 39

Critical Accounting Estimates and Policies

See "Critical Accounting Estimates and Policies" under the heading "Item 7" of Adient's Annual Report on Form 10-K for the year ended September 30, ~~2018,~~2019, for a discussion of critical accounting estimates and policies. There have been no material changes to Adient's critical accounting estimates and policies during the three months ended December 31, ~~2018.~~2019.

New Accounting Pronouncements

See Note 1, "~~Basis~~"Basis of Presentation and Summary of Significant Accounting Policies,," of the notes to consolidated financial statements for a discussion of new accounting pronouncements.


Other Information

~~Other Information~~

Not applicable.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

As of December 31, ~~2018,~~2019, Adient had not experienced any adverse changes in market risk exposures that materially affected the quantitative and qualitative disclosures presented in Adient's Annual Report on Form 10-K for the year ended September 30, ~~2018.~~2019.



Item 4.			Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, Adient's principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act")), which are designed to provide reasonable assurance that we are able to record, process, summarize and report the information required to be disclosed in our reports under the Exchange Act within the time periods specified in SEC rules and forms. Based on their evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to management, and made known to our principal executive officer and principal financial officer, on a timely basis to ensure that it is recorded, processed, summarized and reported within the time period specified in the SEC's rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in internal control over financial reporting during the three months ended December 31, ~~2018~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Adient plc | Form 10-Q | 40



PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

Adient is involved in various lawsuits, claims and proceedings incident to the operation of its businesses, including those pertaining to product liability, product safety, environmental, safety and health, intellectual property, employment, commercial and contractual matters and various other matters. Although the outcome of any such lawsuit, claim or proceeding cannot be predicted with certainty and some may be disposed of unfavorably to Adient, it is management's opinion that none of these will have a material adverse effect on Adient's financial position, results of operations or cash flows. Adient accrues for potential liabilities in a manner consistent with accounting principles generally accepted in the United States, that is, when it is probable a liability has been incurred and the amount of the liability is reasonably estimable.

Information with respect to this item may be found in Note 1617, "Commitments and ~~Contingencies"~~Contingencies," of the notes to ~~the~~ consolidated financial statements in this Quarterly Report on Form 10-Q, which information is incorporated herein by reference.

Additional information on Adient's commitments and contingencies can be found in Adient's Annual Report on Form 10-K for its fiscal year ended September 30, ~~2018.~~2019.

Item 1A.

Risk Factors

There are no material changes from the risk factors as previously disclosed in Adient's Annual Report on Form 10-K for the fiscal year ended September 30, ~~2018.~~2019, except that Adient has updated the below risk factors to reflect recent developments. The following risk factor updates supersede the corresponding risk factors previously reported in Adient's Annual Report on Form 10-K for the fiscal year ended September 30, 2019.

General economic, credit, capital market and political conditions could adversely affect Adient's financial performance, Adient's ability to grow or sustain its businesses and Adient's ability to access the capital markets.

Adient competes around the world in various geographic regions and product markets. Global economic conditions affect Adient's business. As discussed in greater detail below, any future financial distress in the industries and/or markets where Adient competes could negatively affect Adient's revenues and financial performance in future periods, result in future restructuring charges, and adversely impact Adient's ability to grow or sustain its businesses.

The capital and credit markets provide Adient with liquidity to operate and grow its business beyond the liquidity that operating cash flows provide. A worldwide economic downturn and/or disruption of the credit markets likely would reduce Adient's access to capital necessary for its operations and executing its strategic plan. If Adient's access to capital were to become constrained significantly, or if costs of capital increased significantly, due to lowered credit ratings, prevailing industry conditions, the volatility of the capital markets or other factors, Adient's financial condition, results of operations and cash flows likely would be adversely affected.

On June 23, 2016, the U.K. voted in a national referendum to withdraw from the European Union and in March 2017 the U.K. invoked Article 50 of the Treaty on European Union, which began the U.K.’s withdrawal from the European Union. The U.K. formally left the European Union on January 31, 2020 and entered into a transition period which is due to end on December 31, 2020, during which the U.K. and the European Union will seek to agree on the terms of their future relationship. Uncertainties in connection with the future of the U.K. and its relationship with the European Union have caused and may continue to cause disruptions to capital and currency markets worldwide. The consequences of a withdrawal by the U.K. from the European Union and the impact on markets, as well as the impact on Adient’s operations, remain highly uncertain, in particular, in respect of the U.K.’s future access to the European Single Market, its future regulatory environment and the free movement of capital and labor. This market volatility may lead to an increase in Adient’s cost of borrowing or the availability of credit, which may adversely impact Adient’s financial performance. The U.K.’s withdrawal from the European Union may also have a detrimental effect on Adient’s customers and suppliers, which would, in turn, adversely affect Adient’s revenues and financial condition. In

Adient plc | Form 10-Q | 41

addition, the U.K.’s withdrawal from the European Union may also result in legal uncertainty and potentially divergent national laws and regulations as new legal relationships between the U.K. and the European Union are established.

Risks associated with joint venture partnerships may adversely affect Adient's business and financial results.

Adient has entered into several joint ventures worldwide and may enter into additional joint ventures in the future. Adient's joint venture partners may at any time have economic, business or legal interests or goals that are inconsistent with Adient's goals or with the goals of the joint venture. Adient may compete against its joint venture partners in certain of its markets and certain negotiations with its customers may negatively impact its joint venture business with those same customers. Disagreements with Adient's business partners may impede Adient's ability to maximize the benefits of its partnerships and/or may consume management time and other resources to negotiate. Adient's joint venture arrangements may require Adient, among other matters, to pay certain costs or to make certain capital investments or to seek its joint venture partner's consent to take certain actions. Adient does not control the ability to collect cash dividends from its non-consolidated joint ventures. Delays in the collection of dividends, even by a few days, could adversely affect Adient's financial position and cash flows. Adient's joint venture partners may be unable or unwilling to meet their economic or other obligations under the operative documents, and Adient may be required to either fulfill those obligations alone to ensure the ongoing success of a joint venture or to dissolve and liquidate a joint venture. Further, joint venture partnerships are subject to renewal or expiration at various times, specifically including the need to renew the YFAS joint venture by the end of 2022. Adient has recently entered into an agreement to extend the term of the YFAS joint venture until December 31, 2038, which transaction is subject to regulatory and other customary conditions of closing and is cross-conditioned on other transactions that Adient has entered into with Yanfeng related to the YFAI and AYM joint ventures. The failure to renew or extend the terms of Adient’s joint venture partnerships could impact other areas of Adient’s business, including its business relationships. The above risks, if realized, could result in an adverse effect on Adient's business and financial results.

Risks associated with Adient's non-U.S. operations could adversely affect Adient's business, financial condition and results of operations.

Adient has significant operations in a number of countries outside the U.S. , some of which are located in emerging markets. Long-term economic uncertainty in some of the regions of the world in which Adient operates, such as Asia, South America and Europe and other emerging markets, could result in the disruption of markets and negatively affect cash flows from Adient's operations to cover its capital needs and debt service requirements.

In addition, as a result of Adient's global presence, a significant portion of its revenues and expenses is denominated in currencies other than the U.S. dollar. Adient is therefore subject to foreign currency risks and foreign exchange exposure. While Adient employs financial instruments to hedge some of its transactional foreign exchange exposure, these activities do not insulate Adient completely from those exposures. Exchange rates can be volatile and could adversely impact Adient's financial results and the comparability of results from period to period.

There are other risks that are inherent in Adient's non-U.S. operations, including the potential for changes in socioeconomic conditions, laws and regulations, including import, export, direct and indirect taxes, value-added taxes, labor and environmental laws, and monetary and fiscal policies; protectionist measures that may prohibit acquisitions or joint ventures, or impact trade volumes; unsettled political conditions; government-imposed plant or other operational shutdowns; backlash from foreign labor organizations related to Adient's restructuring actions; corruption; natural and man-made disasters, global health epidemics, hazards and losses; violence, civil and labor unrest; and possible terrorist attacks. Specifically, Adient is assessing and responding where possible to the potential impact of the coronavirus outbreak in China. Adient’s assessment includes an evaluation of the impact on its facilities, employees, customers, suppliers and logistics providers. The significance of the virus’ impact on Adient’s business remains uncertain.

These and other factors may have an adverse effect on Adient's non-U.S. operations and therefore on Adient's business and results of operations.

Adient plc | Form 10-Q | 42

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds



(a) Unregistered Sale of Equity Securities

None.

(b) Use of Proceeds

Not applicable.

(c) Repurchase of Equity Securities

There has been no share repurchase activity during the three months ended December 31, ~~2018.~~2019.

Item 3.

Defaults Upon Senior Securities



None.

Item 4.

Mine Safety Disclosures



Not applicable.

Item 5.

Other Information


None.

Adient plc | Form 10-Q | 43

~~None.~~

Item 6.

Exhibit Index

EXHIBIT INDEX



Exhibit No.						Exhibit Title
31.1						Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						XBRL Instance Document

101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						XBRL Taxonomy Extension Label Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

Adient plc | Form 10-Q | 44

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



			Adient plc
			By:			/s/ Douglas G. Del Grosso
						Douglas G. Del Grosso
						President and Chief Executive Officer and a Director
			Date:			February ~~11, 2019~~7, 2020

			By:			/s/ Jeffrey M. Stafeil
						Jeffrey M. Stafeil
						Executive Vice President and Chief Financial Officer
			Date:			February ~~11, 2019~~7, 2020

Adient plc | Form 10-Q | 4245



(in millions)	Three Months Ended December 31, 2018
	Seating			SS&M			Total
United States	$	1,183		$	242		$	1,425
Germany	212			111			323
Mexico	480			110			590
Other European countries	1,025			264			1,289
Other foreign	839			—			839
	3,739			727			4,466
Elimination	(1		)	(307		)	(308		)
Total	$	3,738		$	420		$	4,158



(in millions)	Three Months Ended December 31, 2017
	Seating			SS&M			Total
United States	$	1,067		$	226		$	1,293
Germany	285			139			424
Mexico	441			106			547
Other European countries	1,175			247			1,422
Other foreign	828			—			828
	3,796			718			4,514
Elimination	(1		)	(309		)	(310		)
Total	$	3,795		$	409		$	4,204



	Fair Value Measurements Using:
(in millions)	Total as of September 30, 2018		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other current assets
Foreign currency exchange derivatives	$	8	$	—	$	8	$	—
Other noncurrent assets
Foreign currency exchange derivatives	2		—		2		—
Cross-currency interest rate swaps	13		—		13		—
Total assets	$	23	$	—	$	23	$	—
Other current liabilities
Foreign currency exchange derivatives	$	11	$	—	$	11	$	—
Other noncurrent liabilities
Foreign currency exchange derivatives	2		—		2		—
Equity swaps	2		—		2		—
Total liabilities	$	15	$	—	$	15	$	—



(in millions)	December 31, 2018			September 30, 2018
Current assets	$	3,668		$	4,309
Current liabilities	3,675			4,192
Working capital	$	(7	)	$	117

~~Standard Pending Adoption~~

~~Description~~

~~Anticipated Impact~~

~~Effective Date~~

~~ASU 2016-02, 2018-01, 2018-10 and 2018-11~~

The standard requires that a lessee recognize on its balance sheet right-of-use assets and corresponding liabilities resulting from leasing transactions, as well as additional financial statement disclosures. Currently, U.S. GAAP only requires balance sheet recognition for leases classified as capital leases. The provisions of this update apply to substantially all leased assets.

Adient is currently evaluating the impact this standard will have on its consolidated financial position, results of operations and cash flows and expects the impact to the consolidated balance sheet to be significant.

~~October 1, 2019~~