UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020March 31, 2021
or
or
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
adnt-20210331_g1.jpg
Adient plc
(exact name of Registrant as specified in its charter)

Ireland98-1328821
(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)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of exchange on which registered
Ordinary Shares, par value $0.001ADNTNew York Stock Exchange

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“large accelerated filer,” “accelerated filer”” “accelerated filer” and “smaller“smaller reporting company”company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filerAccelerated filer
Non-accelerated filerSmaller 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   ☑

At June 30, 2020, 93,884,381March 31, 2021, 94,208,305 ordinary shares were outstanding.



Adient plc
Form 10-Q
For the Three Months Ended June 30, 2020 March 31, 2021

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
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions, except per share data)(in millions, except per share data)2020201920202019(in millions, except per share data)2021202020212020
Net salesNet sales$1,626  $4,219  $9,073  $12,605  Net sales$3,819 $3,511 $7,667 $7,447 
Cost of salesCost of sales1,779  4,008  8,726  12,017  Cost of sales3,521 3,274 7,028 6,947 
Gross profitGross profit(153) 211  347  588  Gross profit298 237 639 500 
Selling, general and administrative expensesSelling, general and administrative expenses115  165  407  511  Selling, general and administrative expenses148 127 297 292 
Loss on business divestitures - netLoss on business divestitures - net—  —  25  —  Loss on business divestitures - net25 
Restructuring and impairment costsRestructuring and impairment costs49  15  103  159  Restructuring and impairment costs52 12 54 
Equity income (loss)Equity income (loss)48  64  (57) 209  Equity income (loss)85 182 (105)
Earnings (loss) before interest and income taxesEarnings (loss) before interest and income taxes(269) 95  (245) 127  Earnings (loss) before interest and income taxes230 66 512 24 
Net financing chargesNet financing charges58  60  156  135  Net financing charges110 50 169 98 
Other pension expense (income)Other pension expense (income)(1)  (5)  Other pension expense (income)(2)(2)(4)(4)
Income (loss) before income taxesIncome (loss) before income taxes(326) 30  (396) (11) Income (loss) before income taxes122 18 347 (70)
Income tax provision (benefit)Income tax provision (benefit) 338  75  412  Income tax provision (benefit)28 16 80 70 
Net income (loss)Net income (loss)(331) (308) (471) (423) Net income (loss)94 267 (140)
Income (loss) attributable to noncontrolling interestsIncome (loss) attributable to noncontrolling interests(6) 13  40  64  Income (loss) attributable to noncontrolling interests25 21 48 46 
Net income (loss) attributable to AdientNet income (loss) attributable to Adient$(325) $(321) $(511) $(487) Net income (loss) attributable to Adient$69 $(19)$219 $(186)
Earnings (loss) per share:Earnings (loss) per share:Earnings (loss) per share:
BasicBasic$(3.46) $(3.43) $(5.45) $(5.21) Basic$0.73 $(0.20)$2.33 $(1.98)
DilutedDiluted$(3.46) $(3.43) $(5.45) $(5.21) Diluted$0.72 $(0.20)$2.30 $(1.98)
Shares used in computing earnings per share:Shares used in computing earnings per share:Shares used in computing earnings per share:
BasicBasic93.9  93.6  93.8  93.5  Basic94.2 93.8 94.1 93.8 
DilutedDiluted93.9  93.6  93.8  93.5  Diluted96.0 93.8 95.4 93.8 

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
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)(in millions)2020201920202019(in millions)2021202020212020
Net income (loss)Net income (loss)$(331) $(308) $(471) $(423) Net income (loss)$94 $$267 $(140)
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:
Foreign currency translation adjustmentsForeign currency translation adjustments17  (24) (65) 32  Foreign currency translation adjustments(35)(141)37 (82)
Realized and unrealized gains (losses) on derivativesRealized and unrealized gains (losses) on derivatives24   (23)  Realized and unrealized gains (losses) on derivatives(11)(62)17 (47)
Other comprehensive income (loss)Other comprehensive income (loss)41  (19) (88) 38  Other comprehensive income (loss)(46)(203)54 (129)
Total comprehensive income (loss)Total comprehensive income (loss)(290) (327) (559) (385) Total comprehensive income (loss)48 (201)321 (269)
Comprehensive income (loss) attributable to noncontrolling interestsComprehensive income (loss) attributable to noncontrolling interests 14  41  70  Comprehensive income (loss) attributable to noncontrolling interests16 56 38 
Comprehensive income (loss) attributable to Adient Comprehensive income (loss) attributable to Adient $(293) $(341) $(600) $(455) Comprehensive income (loss) attributable to Adient$32 $(205)$265 $(307)

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)(in millions, except share and per share data)June 30,
2020
September 30,
2019
(in millions, except share and per share data)March 31,
2021
September 30, 2020
AssetsAssetsAssets
Cash and cash equivalentsCash and cash equivalents$1,032  $924  Cash and cash equivalents$984 $1,692 
Accounts receivable - net
Accounts receivable - net
1,161  1,905  Accounts receivable - net1,757 1,641 
InventoriesInventories737  793  Inventories756 685 
Assets held for saleAssets held for sale31  —  Assets held for sale56 43 
Other current assetsOther current assets498  494  Other current assets537 421 
Current assetsCurrent assets3,459  4,116  Current assets4,090 4,482 
Property, plant and equipment - netProperty, plant and equipment - net1,592  1,671  Property, plant and equipment - net1,551 1,581 
GoodwillGoodwill2,039  2,150  Goodwill2,059 2,057 
Other intangible assets - netOther intangible assets - net350  405  Other intangible assets - net432 443 
Investments in partially-owned affiliatesInvestments in partially-owned affiliates1,090  1,399  Investments in partially-owned affiliates848 707 
Assets held for saleAssets held for sale165  —  Assets held for sale26 27 
Other noncurrent assetsOther noncurrent assets924  601  Other noncurrent assets969 964 
Total assetsTotal assets$9,619  $10,342  Total assets$9,975 $10,261 
Liabilities and Shareholders' EquityLiabilities and Shareholders' EquityLiabilities and Shareholders' Equity
Short-term debtShort-term debt$372  $22  Short-term debt$14 $202 
Current portion of long-term debtCurrent portion of long-term debt  Current portion of long-term debt
Accounts payableAccounts payable1,465  2,709  Accounts payable2,378 2,179 
Accrued compensation and benefitsAccrued compensation and benefits333  364  Accrued compensation and benefits376 374 
Liabilities held for saleLiabilities held for sale26  —  Liabilities held for sale60 46 
Restructuring reserveRestructuring reserve141  123  Restructuring reserve150 237 
Other current liabilitiesOther current liabilities738  609  Other current liabilities675 773 
Current liabilitiesCurrent liabilities3,083  3,835  Current liabilities3,661 3,819 
Long-term debtLong-term debt4,147  3,708  Long-term debt3,646 4,097 
Liabilities held for sale10  —  
Pension and postretirement benefitsPension and postretirement benefits130  151  Pension and postretirement benefits135 145 
Other noncurrent liabilitiesOther noncurrent liabilities635  408  Other noncurrent liabilities647 622 
Long-term liabilitiesLong-term liabilities4,922  4,267  Long-term liabilities4,428 4,864 
Commitments and Contingencies (Note 17)
Commitments and Contingencies (Note 17)
Commitments and Contingencies (Note 17)00
Redeemable noncontrolling interestsRedeemable noncontrolling interests42  51  Redeemable noncontrolling interests44 43 
Preferred shares issued, par value $0.001; 100,000,000 shares authorized,
NaN shares issued and outstanding at June 30, 2020
—  —  
Ordinary shares issued, par value $0.001; 500,000,000 shares authorized,
93,884,381 shares issued and outstanding at June 30, 2020
—  —  
Preferred shares issued, par value $0.001; 100,000,000 shares authorized,
NaN shares issued and outstanding at March 31, 2021
Preferred shares issued, par value $0.001; 100,000,000 shares authorized,
NaN shares issued and outstanding at March 31, 2021
Ordinary shares issued, par value $0.001; 500,000,000 shares authorized,
94,208,305 shares issued and outstanding at March 31, 2021
Ordinary shares issued, par value $0.001; 500,000,000 shares authorized,
94,208,305 shares issued and outstanding at March 31, 2021
Additional paid-in capitalAdditional paid-in capital3,968  3,962  Additional paid-in capital3,985 3,974 
Accumulated deficitAccumulated deficit(2,060) (1,545) Accumulated deficit(1,877)(2,096)
Accumulated other comprehensive income (loss)Accumulated other comprehensive income (loss)(658) (569) Accumulated other comprehensive income (loss)(619)(665)
Shareholders' equity attributable to AdientShareholders' equity attributable to Adient1,250  1,848  Shareholders' equity attributable to Adient1,489 1,213 
Noncontrolling interestsNoncontrolling interests322  341  Noncontrolling interests353 322 
Total shareholders' equityTotal shareholders' equity1,572  2,189  Total shareholders' equity1,842 1,535 
Total liabilities and shareholders' equityTotal liabilities and shareholders' equity$9,619  $10,342  Total liabilities and shareholders' equity$9,975 $10,261 

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)

Nine Months Ended
June 30,
Six Months Ended
March 31,
(in millions)(in millions)20202019(in millions)20212020
Operating ActivitiesOperating ActivitiesOperating Activities
Net income (loss) attributable to AdientNet income (loss) attributable to Adient$(511) $(487) Net income (loss) attributable to Adient$219 $(186)
Income attributable to noncontrolling interestsIncome attributable to noncontrolling interests40  64  Income attributable to noncontrolling interests48 46 
Net income (loss)Net income (loss)(471) (423) Net income (loss)267 (140)
Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:
DepreciationDepreciation214  205  Depreciation139 147 
Amortization of intangiblesAmortization of intangibles27  31  Amortization of intangibles19 19 
Pension and postretirement expense (benefit)  
Pension and postretirement contributions, netPension and postretirement contributions, net(21) (17) Pension and postretirement contributions, net(12)(18)
Equity in earnings of partially-owned affiliates, net of dividends received (includes purchase accounting amortization of $1 and $0, respectively)
85  (11) 
Impairment of nonconsolidated partially-owned affiliate222  —  
Equity in earnings of partially-owned affiliates, net of dividends received (includes purchase accounting amortization of $2 and $2, respectively)Equity in earnings of partially-owned affiliates, net of dividends received (includes purchase accounting amortization of $2 and $2, respectively)(139)(103)
(Gain) on sale/impairment of nonconsolidated partially-owned affiliates(Gain) on sale/impairment of nonconsolidated partially-owned affiliates(33)216 
Premium and transaction costs paid on repurchase of debtPremium and transaction costs paid on repurchase of debt46 
Deferred income taxesDeferred income taxes(13) 304  Deferred income taxes(3)
Non-cash impairment chargesNon-cash impairment charges27  66  Non-cash impairment charges10 
Loss (gain) on divestitures - net25  —  
Loss on divestitures - netLoss on divestitures - net25 
Equity-based compensationEquity-based compensation 16  Equity-based compensation26 
OtherOther10  18  Other
Changes in assets and liabilities:Changes in assets and liabilities:Changes in assets and liabilities:
ReceivablesReceivables706  219  Receivables(120)508 
InventoriesInventories16  39  Inventories(71)(30)
Other assetsOther assets77  105  Other assets(85)38 
Restructuring reservesRestructuring reserves(60) (90) Restructuring reserves(95)(33)
Accounts payable and accrued liabilitiesAccounts payable and accrued liabilities(1,135) (185) Accounts payable and accrued liabilities135 (466)
Accrued income taxesAccrued income taxes 20  Accrued income taxes50 
Cash provided (used) by operating activitiesCash provided (used) by operating activities(272) 306  Cash provided (used) by operating activities140 183 
Investing ActivitiesInvesting ActivitiesInvesting Activities
Capital expendituresCapital expenditures(258) (350) Capital expenditures(126)(185)
Sale of property, plant and equipmentSale of property, plant and equipment 65  Sale of property, plant and equipment12 
Settlement of cross-currency interest rate swapSettlement of cross-currency interest rate swap10  —  Settlement of cross-currency interest rate swap10 
Receipt of deferred considerationReceipt of deferred consideration19 
Changes in long-term investmentsChanges in long-term investments(37)  Changes in long-term investments(37)
Other—   
Cash provided (used) by investing activitiesCash provided (used) by investing activities(280) (278) Cash provided (used) by investing activities(95)(208)
Financing ActivitiesFinancing ActivitiesFinancing Activities
Increase (decrease) in short-term debtIncrease (decrease) in short-term debt818 
Increase (decrease) in short-term debt164   
Increase (decrease) in long-term debt600  1,600  
Repayment of long-term debtRepayment of long-term debt(6) (1,202) Repayment of long-term debt(705)(4)
Debt financing costsDebt financing costs(10) (45) Debt financing costs(1)(1)
Dividends paid to noncontrolling interestsDividends paid to noncontrolling interests(59)(59)
Cash dividends—  (26) 
Dividends paid to noncontrolling interests(67) (53) 
Formation of consolidated joint venture—  28  
OtherOther(2) (3) Other(3)(2)
Cash provided (used) by financing activitiesCash provided (used) by financing activities679  300  Cash provided (used) by financing activities(762)752 
Effect of exchange rate changes on cash and cash equivalentsEffect of exchange rate changes on cash and cash equivalents(19) 10  Effect of exchange rate changes on cash and cash equivalents12 (11)
Increase (decrease) in cash and cash equivalents, including cash classified within current assets held for saleIncrease (decrease) in cash and cash equivalents, including cash classified within current assets held for sale(705)716 
Change in cash classified within current assets held for saleChange in cash classified within current assets held for sale(3)
Increase (decrease) in cash and cash equivalentsIncrease (decrease) in cash and cash equivalents108  338  Increase (decrease) in cash and cash equivalents(708)716 
Cash and cash equivalents at beginning of periodCash and cash equivalents at beginning of period924  687  Cash and cash equivalents at beginning of period1,692 924 
Cash and cash equivalents at end of periodCash and cash equivalents at end of period$1,032  $1,025  Cash and cash equivalents at end of period$984 $1,640 

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 and trim covers and fabrics.covers. 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.

For recent developments regarding the planned divestitures of Adient's YFAI investment and the fabrics business, refer to Note 3, "Acquisitions and Divestitures," of the notes to consolidated financial statements.
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 withgenerally accepted accounting principles generally accepted in the United States of America ("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, particularly in. During fiscal 2020, given theAdient faced an unprecedented situation Adient is facing with the COVID-19coronavirus pandemic identified in late 2019 ("COVID-19") and the related significant interruption it is havinghad on Adient's operations. Adient's China facilities (including both consolidated and non-consolidated joint ventures) were effectively shut down during the lunar New Year festival (at the end of January)January 2020) and did not returnreturned to operations untilby the end of March 2020. All of Adient's plants in China are currently operating and all of its customer plants in China have re-opened. Beginning in late March 2020, Adient experienced the shutdown of effectively all of its facilities in the Americas and European regions coinciding with the shutdown of its customer facilities in those regions. Adient also experienced the shutdown of approximately 50% of its plants in Asia (outside China) during late March and early April.April 2020. During May and June 2020, production started to resume in allthe Americas, European and Asia (outside China) regions concurrent with Adient's customers resuming operations. Asoperations and production continued to ramp up throughout Adient’s fiscal fourth quarter of June 30,fiscal 2020 the majorityin all regions in line with customer production. Virtually all of Adient's plants havehad resumed production although production rates are well below pre-pandemic levels.by the end of first quarter of fiscal 2021.

Principles of Consolidation
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 2 variable interest entities (VIEs) for the reporting periods ended June 30, 2020,March 31, 2021, and September 30, 2019,2020, 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 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.
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:

(in millions)March 31,
2021
September 30, 2020
Current assets$260 $217 
Noncurrent assets84 74 
Total assets$344 $291 
Current liabilities$211 $204 
Noncurrent liabilities10 
Total liabilities$220 $214 

Adient plc | Form 10-Q | 7


(in millions)June 30,
2020
September 30,
2019
Current assets$201  $236  
Noncurrent assets80  40  
Total assets$281  $276  
Current liabilities$148  $235  
Noncurrent liabilities14  —  
Total liabilities$162  $235  

Earnings Per Share
The following table shows the computation of basic and diluted earnings (loss) per share:
Three Months Ended
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions, except per share data)(in millions, except per share data)2020201920202019(in millions, except per share data)2021202020212020
Numerator:Numerator:Numerator:
Net income (loss) attributable to AdientNet income (loss) attributable to Adient$(325) $(321) $(511) $(487) Net income (loss) attributable to Adient$69 $(19)$219 $(186)
Denominator:Denominator:Denominator:
Shares outstandingShares outstanding93.9  93.6  93.8  93.5  Shares outstanding94.2 93.8 94.1 93.8 
Effect of dilutive securitiesEffect of dilutive securities—  —  —  —  Effect of dilutive securities1.8 1.3 
Diluted sharesDiluted shares93.9  93.6  93.8  93.5  Diluted shares96.0 93.8 95.4 93.8 
Earnings (loss) per share:Earnings (loss) per share:Earnings (loss) per share:
BasicBasic$(3.46) $(3.43) $(5.45) $(5.21) Basic$0.73 $(0.20)$2.33 $(1.98)
DilutedDiluted$(3.46) $(3.43) $(5.45) $(5.21) Diluted$0.72 $(0.20)$2.30 $(1.98)

Potentially dilutive securities whose effect would have been antidilutive are excluded from the computation of diluted earnings
per share for the three and six months ended March 31, 2020, which is a result of all periods presented being in a loss position.

New Accounting Pronouncements

Standards Adopted During Fiscal 20202021

On October 1, 2019,2020, Adient adopted Accounting Standards Codification Topic 842,2016-13, "Leases"Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments ("ASC 842"). The guidance requires lessees to recognize a lease liability and a right-of-use (ROU) assetASU 2016-13 changes the impairment model for all leases withfinancial assets measured at amortized cost, requiring presentation at the exception of short-term leases whose terms are twelve months or less. By applying the optional modified retrospective method, Adient recorded an adjustment as of the adoption date without any retrospective adjustments to comparative financial information. Additionally, Adient elected the package of practical expedients permitted under ASC 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 apply the "hindsight" practical expedient upon adoption. Adient did elect to apply the practical expedient to not separate nonlease components from associated lease components. Refer to Note 7, "Leases," of the notes to consolidated financial statements for additional information.

ASU 2018-07, Compensation-Stock Compensation: Improvements to 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 acquires goods and servicesnet amount expected 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 conjunctioncollected. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts. Available-for-sale debt securities with selling goods or services to customers as part of a contract accountedunrealized losses will now be recorded through an allowance for under
Adient plc | Form 10-Q | 8


ASC 606.credit losses. The adoption of this guidance on October 1, 20192020 did not significantly impact Adient's consolidated financial statements for the ninesix months ended June 30, 2020.March 31, 2021.

Standards Effective After FiscalASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, eliminates, adds, and modifies certain disclosure requirements for fair value measurements. 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. The adoption of this guidance on October 1, 2020 did not significantly impact Adient's consolidated financial statements for the six months ended March 31, 2021.

ASU 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities, 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. The adoption of this guidance on October 1, 2020 did not significantly impact Adient's consolidated financial statements for the six months ended March 31, 2021.

Adient plc | Form 10-Q | 8


Standards Effective After Fiscal 2021

Adient has considered the ASUs summarized below, effective after fiscal 2020,2021, none of which is expected to significantly impact the consolidated financial statements:
Standard AdoptedDescriptionDate Effective
ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial InstrumentsASU 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 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value MeasurementASU 2018-13 eliminates, adds, and modifies certain disclosure requirements for fair value measurements. 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, 2020
ASU 2018-14 Compensation-Retirement Benefits-Defined Benefit Plans-General: Disclosure FrameworkCompensation - Changes to the Disclosure Requirements forRetirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)The amendments in ASU 2018-14 eliminate, add,20218-14 eliminates, adds, and modifymodifies 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.basis.October 1, 2020
ASU 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest EntitiesASU 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, 20202021
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income TaxesASU 2019-12 modifies ASC 740, Income Taxes, by simplifying accounting for income taxes. As part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements, the FASB’sFASB’s amendments may impact both interim and annual reporting periods.October 1, 2021
ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity by reducing the number of accounting models for convertible debt and convertible preferred stock.October 1, 2022


2. Revenue Recognition

Adient generates revenue through the sale of automotive seating solutions, including complete seating systems and the components of complete seating systems. 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), net of the impact, if any, of consideration paid to the customer.

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
Adient plc | Form 10-Q | 9


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 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 at September 30, 20192020 or at June 30, 2020.March 31, 2021. 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. Refer to Note 15, "Segment Information," of the notes to
Adient plc | Form 10-Q | 9


consolidated financial statements for disaggregated revenue by geographical market.


3. Acquisitions and Divestitures

Divestitures2021 Yanfeng Transaction

Adient Aerospace, LLC ("Adient Aerospace") became operational on October 11, 2018 with Adient's initial ownership position in Adient Aerospace being 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 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 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 sold the RECARO automotive high performance seating systems business to a group of investors for de minimis proceeds. As a result of the sale, Adient recorded a loss of $21 million during the quarter ending December 31, 2019. For fiscal 2019, the RECARO business recorded $148 million of net sales and insignificant pre-tax income.
On January 31, 2020 (as amended on June 24, 2020),March 12, 2021, Adient, Yanfeng Automotive Trim Systems Company Ltd. (“Yanfeng”(“Yanfeng”), Yanfeng Adient Seating Co., Ltd. (“YFAS”), a joint venture owned, directly or indirectly, by Yanfeng (50.01%) and Adient (49.99%), and KEIPER Seating Mechanisms Co., Ltd. (f/k/a Adient Yanfeng Seating Mechanisms Co., Ltd. (“AYM”(“AYM” or "KEIPER"), a joint venture owned, directly or indirectly, by Yanfeng (50%) and Adient (50%), entered into a Master Agreement (the “2021 Agreement”), pursuant to which the parties have agreed to, among other things, the following transactions (collectively, the “2021 Yanfeng Transaction”) in each case, on the terms and subject to the conditions set forth in the 2021 Agreement and the relevant agreements to be entered into in connection therewith:

a.Adient will transfer all of the issued and outstanding equity interest in YFAS held by Adient, which represents 49.99% of YFAS’s total issued and outstanding equity interest, to Yanfeng pursuant to the Equity Transfer Agreement, dated as of March 12, 2021, by and between Yanfeng and Adient, for CNY ¥8,064 million ($1,228 million), of which ¥3,446 million ($525 million) is payable by Yanfeng to Adient upon the YFAS Sale Closing (as defined in the 2021 Agreement) and ¥4,618 million ($703 million) is payable by Yanfeng to Adient on or before the later of December 21, 2021 and the YFAS Sale Closing (the “YFAS Sale”);

b.If Adient is successful in the public bidding process (which is required to be conducted under People’s Republic of China (“P.R.C.”) law with respect to the sale of state-owned assets) for the issued and outstanding equity interests in Chongqing Yanfeng Adient Automotive Components Co., Ltd. (“CQYFAS”) and Yanfeng Adient (Langfang) Seating Co., Ltd. ("YFASLF") held directly or indirectly by YFAS, then YFAS will transfer all of such equity interests to Adient, for a price to be determined by the outcome of the public bidding process and in accordance with the 2021 Agreement, but which will not be less than ¥1,754 million ($267 million) (the “YFAS JVs Acquisition”);

c.YFAS will transfer all of the issued and outstanding equity interest in Yanfeng Adient Founder Motor Co., Ltd. (“YFM”) held, directly or indirectly, by YFAS, which represents 70% of YFM’s total issued and outstanding equity interest, to KEIPER for ¥71 million ($11 million) (the “YFM Sale”);

d.YFAS will transfer all of the issued and outstanding equity interest in Nantong Yanfeng Adient Seating Trim Co., Ltd. (“YFAT”) held, directly or indirectly, by YFAS, which represents 75% of YFAT’s total issued and outstanding equity interest, to KEIPER for ¥113 million ($17 million) (the “YFAT Sale”);

e.Adient will grant to Yanfeng a license of intellectual property for use on a non-exclusive and perpetual basis for a payment of ¥385 million ($59 million)), and Yanfeng/YFAS will grant to Adient a royalty-free, non-exclusive and perpetual intellectual property license of the Yanfeng/YFAS intellectual property; and

f.YFAS shall declare and distribute dividends in the amounts and at the times as set forth in the 2021 Agreement to its shareholders (proportionately to their ownership interest, namely 50.01% to Yanfeng and 49.99% to Adient, except with respect to any amount beyond the minimum amount paid for the acquisition of the YFAS JVs, any which excess amount will be paid solely to Adient) of approximately ¥4,168 million ($635 million) in the aggregate.

The completion of certain of the transactions comprising the 2021 Yanfeng Transaction are cross-conditioned on each other and on the completion of the Additional Equity Sales (as discussed further below) and the completion of certain of the transactions comprising the 2021 Yanfeng Transaction are subject to various regulatory approvals and other customary closing conditions. Adient expects the 2021 Yanfeng Transaction to be completed in the second half of calendar year 2021.

In addition, on March 12, 2021, Adient, YFAS, Yanfeng and KEIPER, entered into an Ancillary Master Agreement (the “Ancillary Master Agreement”), pursuant to which the parties have agreed to, among other things, the following transactions (collectively, the “Ancillary Transactions”):

a.Adient and Yanfeng will amend the KEIPER Equity Joint Venture Contract, dated as of January 31, 2020, as amended, and the Articles of Association of KEIPER, dated as of September 9, 2013, as amended, to, among other things, (i) provide that KEIPER will declare and pay certain annual dividends to KEIPER’s shareholders with respect to each of its 2021 to 2023 fiscal years and (ii) upon closing of the earlier of the YFAT Sales (as defined below) or YFM Sale,
Adient plc | Form 10-Q | 10


because of KEIPER’s ownership of YFAT and YFM, certain amendments relating thereto, including modifying the scope of KEIPER’s business to include the manufacture and sale of automotive seat trim products and micro-motors; and

b.KEIPER and Yanfeng and KEIPER and Adient will each enter into a long-term supply agreement.

The Ancillary Transactions are not cross-conditioned on each other but the completion of the Ancillary Transaction in paragraph a.(i) above is subject to the completion of YFAS Sale and the Ancillary Transactions in paragraph b. above are effective upon signing of the Ancillary Master Agreement. The completion of certain of the Ancillary Transactions is subject to customary closing conditions.

In conjunction with the 2021 Yanfeng Transaction, Adient has entered into an agreement (the “Boxun Agreement”) with Chongqing Boxun Industrial Co., Ltd. (“Boxun”). Pursuant to such agreement, upon consummation of the YFAS JVs Acquisition, Adient has provided Boxun with the right to sell and, if exercised, Adient has agreed to purchase, all of the issued and outstanding equity interest in CQYFAS held by Boxun, which represents 25% of CQYFAS’s total issued and outstanding equity interest (the “Boxun Equity Purchase”) for approximately ¥825 million ($126 million), subject to adjustment as set forth in the Boxun Agreement. If Adient buys Boxun’s 25% interest of CQYFAS and acquires YFAS’s 50% interest of CQYFAS, then, Adient will own 100% of CQYFAS.

In addition, in conjunction with the 2021 Yanfeng Transaction, Adient has entered into agreements, whereby, Adient will: (i) transfer all of the issued and outstanding equity interest in YFAT held, directly or indirectly, by Adient, which represents 25% of YFAT’s total issued and outstanding equity interest, to KEIPER for ¥38 million ($6 million) (the “Adient YFAT Sale” and together with the YFAT Sale, the “YFAT Sales”); (ii) transfer all of the issued and outstanding equity interest in Guangzhou Dongfeng Adient Seating Co., Ltd. (“(“GZDFAS”) held by Adient, which represents 25% of GZDFAS’s total issued and outstanding equity interest, to YFAS for ¥371 million ($56 million) (the “GZDFAS Sale”) and (iii) transfer all of the issued and outstanding equity interest in Hefei Adient Yunhe Automotive Seating Co., Ltd. (“YHAS”) held by Adient, which represents 10% of YHAS’s total issued and outstanding equity interest, to YFAS for ¥13 million ($2 million) (the “YHAS Sale,” together with the Adient YFAT Sale and GZDFAS Sale, each an “Additional Equity Sale” and collectively, the “Additional Equity Sales”). The completion of each of the Additional Equity Sales is subject to regulatory approvals and other customary closing conditions. Adient expects the Additional Equity Sales to be completed in the second half of calendar year 2021.

As a result of the 2021 Agreement, Adient expects the remaining balance of proceeds from the sale of its interest in Yanfeng Global Automotive Interior Systems Co. ("YFAI"), a joint venture owned, directly or indirectly, by Yanfeng (50.1%) and Adient (49.9%) and YFAI, a joint venturepreviously owned, directly or indirectly, by Yanfeng (70%) and Adient (30%), which was part of the 2020 Yanfeng Transaction (as defined and described below), to be settled in the second half of calendar year 2021. Additionally, the $92 million intangible asset established at the time of the YFAS contract extension will be written off upon closing of the 2021 Yanfeng Transaction.

SJA
On March 31, 2021, Adient sold its 50% equity interest in Shenyang Jinbei Adient Automotive Components Co., Ltd. ("SJA") to the joint venture partner for $58 million, which resulted in a $33 million one-time pre-tax gain recognition during the second quarter of fiscal 2021. The receivable was recorded as part of other current assets on March 31, 2021, and the net proceeds of $53 million were received on April 1, 2021.

Fabrics
On September 30, 2020, Adient closed on the sale of its automotive fabrics manufacturing business including the lamination business to Sage Automotive Interiors for net proceeds of approximately $170 million, net of $4 million of cash divested within the business. Proceeds from the transaction are expected to be used by Adient for general corporate purposes or to potentially pay down a portion of Adient's debt subject to the ongoing impact of the COVID-19 pandemic. A minimal gain was recorded as a result of the transaction after allocating $80 million of goodwill to the disposed business. The sale transaction included 11 facilities globally with the majority located in EMEA and approximately 1,300 employees. For fiscal years 2020 and 2019, the fabrics manufacturing business recorded $99 million and $130 million of third party sales and a nominal amount and $8 million of pre-tax income, respectively.

2020 Yanfeng Transaction
On January 31, 2020 (as amended on June 24, 2020), Adient, Yanfeng, KEIPER, YFAS and YFAI entered into a Master Agreement (the “Agreement”“2020 Agreement”, collectively referred to as “2020 Yanfeng Transaction”), pursuant to which the parties have agreed, among other things, that:

Adient plc | Form 10-Q | 11


Adient willwould transfer all of the issued and outstanding equity interest in YFAI held, directly or indirectly, by Adient, which represents 30% of YFAI’sYFAI’s total issued and outstanding equity interest, to Yanfeng for $369 million, of which US $309 million will bewas paid at the closing of the agreed transactions and the remaining US $60 million willwould be paid on a deferred basis post-closing. With respect to each YFAI fiscal year ending after the closing, starting with the year ending December 31, 2020, Adient willwould be paid an earnout in an amount equal to 30% percent of YFAI’sYFAI’s distributable earnings for such year until such time as the US $60 million deferred purchase price is fully paid. During the second quarter of fiscal 2021, a payment of $19 million was received by Adient based on YFAI's fiscal 2020 performance. As described further above, as a result of the 2021 Agreement, Adient expects the remaining balance of proceeds from the sale of its interest in YFAI to be settled in the second half of calendar year 2021;

Adient and Yanfeng willwould amend the YFAS Joint Venture Contract, dated as 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;2038. As described further above, in connection with 2021 Yanfeng Transaction, Adient and Yanfeng subsequently agreed to end the YFAS partnership. Upon consummation of the 2021 Yanfeng Transaction, Adient will sell all of the issued and outstanding equity interest in YFAS held by Adient to Yanfeng;

Adient willwould 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’sAdient’s mechanism business as of the date of such transfer (the “Transferred IP”“Transferred IP”) to AYM for $20 million, and in connection with such transfer, (i) AYM willwould grant back to Adient a sole license with respect to the Transferred IP on a worldwide and royalty-free basis, (ii) Adient willwould grant AYM a worldwide and royalty-free license with respect to certain intellectual
Adient plc | Form 10-Q | 10


property rights owned by Adient (or certain of its subsidiaries) and used on a non-exclusive basis in the conduct of Adient’sAdient’s mechanism business, and (iii) Adient and AYM willwould 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 willwould 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 maywould control and consolidate the results of AYM for financial reporting and accounting purposes, and (ii) expand AYM’sAYM’s business and customer scope such that it may carry out its seating mechanism business anywhere in and outside of the People’sPeople’s Republic of China, in each case, on the terms and subject to the conditions set forth in the 2020 Agreement and the relevant definitive agreements to be entered into in connection therewith. Subsequent to this, Adient and Yanfeng further agreed to revise and amend the AYM Equity Joint Venture Contract and Articles of Association of AYM, as further described above.

The transactions agreed on January 31, 2020, as amended on June 24, 2020, arewere cross-conditioned on each other and closing is subject to regulatory approvals, includingclosed in accordance with 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 Adient's fiscalterms above on August 21, 2020. Proceeds from the transactions are expected to beof $329 million were received at closing, the majority of which was used by Adient for general corporate purposes or to potentially pay down a portion of Adient’s debt subject to the ongoing impacts of the COVID-19 pandemic.Adient’s debt. The terms of the Master2020 Agreement as described above are consistent with non-binding terms reached in December 2019.

As a result of the January 31, 2020 agreement, as amended on June 24, 2020, described above, Adient concluded that indicators of other-than-temporary impairment were present related to the investment in YFAI as of December 31, 2019, and June 30, 2020.2020 and upon closing. Upon entering into a formal agreement to sell the YFAI investment, Adient determined that other-than-temporary impairment did exist and recorded a $216 million non-cash impairment of Adient's YFAI investment during the quarter ended December 31, 2019. As a result of the June 24, 2020 modifications to the agreement described above, Adient recorded $6 million of additional non-cash impairment of Adient's YFAI investment during the quarter ended June 30, 2020. Upon closing of the transaction, an additional $9 million of impairment was recorded due to receipt of proceeds in U.S. dollars. The impairments were determined based on combining the fair value of consideration received for all transactions contemplated within the Master2020 Agreement, including an estimated fair value of the 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 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement" and primarily consisted of expected future operating margins and cash flows of YFAI, estimated production volumes, estimated dividend payments from YFAS over the extension period, estimated terminal values of YFAS, market comparables, weighted-average costs of capital (YFAI - 15.0%, YFAS - 10.5%), and noncontrolling interest discounts. As a result of the pending divestiture of the YFAI investment and the corresponding impairment, Adient ceased recognizing equity income from YFAI subsequent to December 31, 2019 (YFAI equity income was $40 million in fiscal year 2019). In addition, upon the closing of the transaction, an intangible asset of $92 million will bewas recorded associated with the YFAS joint venture extension to be amortized over the 18-year term of the extension. As noted above, as a result of the 2021 Yanfeng Transaction, upon
Adient plc | Form 10-Q | 12


consummation, Adient expects to write off the $92 million intangible asset established at the time of the YFAS contract extension.

RECARO
On March 5, 2020,December 31, 2019, Adient entered into an agreement to sell itssold the RECARO automotive fabrics manufacturing business including the laminationhigh performance seating systems business to Sage Automotive Interiorsa group of investors for $175 million. Proceeds from the transaction are expected to be used by Adient for general corporate purposes or to potentially pay downde minimis proceeds. As a portion of Adient's debt subject to the ongoing impactsresult of the COVID-19 pandemic. The transaction is subject to regulatory approvals and other customary closing conditions and is expected to be completed bysale, Adient recorded a loss of $21 million during the end of Adient's fiscal 2020. The sale transaction includes 11 facilities globally with the majority located in EMEA, with approximately 1,300 employees. The assets and liabilities belonging to the business, including $83 million of allocated goodwill, have been classified as assets and liabilities held for sale, respectively, as of June 30, 2020.quarter ending December 31, 2019. For fiscal 2019, the fabrics manufacturingRECARO business recorded $227$148 million of net sales and $8 million ofinsignificant pre-tax income.

Adient Aerospace
Adient Aerospace, LLC ("Adient Aerospace") became operational on October 11, 2018 with Adient’s initial ownership position in Adient Aerospace being 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 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 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.

All of the acquisitions and divestiture transactions described above align with Adient's strategy of focusing on its core, high-volume seating business.

Adient plc | Form 10-Q | 11Assets held for sale


During the first quarter of fiscal 2021, Adient committed to a plan to sell certain assets in France. As a result, these assets were classified as assets held for sale and were required to be adjusted to the lower of fair value less cost to sell or carrying value. Adient recorded an impairment charge of $8 million ($2 million within the second quarter of fiscal 2021) within restructuring and impairment costs on the consolidated statement of income (loss) during the six months ended March 31, 2021. The impairment was measured using third party sales pricing to determine fair values of the assets. The inputs utilized in the analyses are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement."

During fiscal 2020, Adient committed to a plan to sell certain entities in China and certain properties in the U.S. As a result, these assets were classified as assets held for sale and were required to be adjusted to the lower of fair value less cost to sell or carrying value. This resulted in an impairment charge of $21 million which was recorded within restructuring and impairment costs on the consolidated statement of income (loss) during fiscal 2020, of which $12 million related to America’s assets and $9 million related to China’s assets. The impairment was measured using third party sales pricing to determine fair values of the assets. The inputs utilized in the analyses are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement."


4. Inventories

Inventories consisted of the following:
(in millions)June 30,
2020
September 30,
2019
Raw materials and supplies$569  $609  
Work-in-process24  32  
Finished goods144  152  
Inventories$737  $793  
(in millions)March 31,
2021
September 30, 2020
Raw materials and supplies$583 $530 
Work-in-process25 22 
Finished goods148 133 
Inventories$756 $685 

Adient plc | Form 10-Q | 13



5. Goodwill and Other Intangible Assets

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

(in millions)AmericasEMEAAsiaTotal
Balance at September 30, 2019$638  $429  $1,083  $2,150  
Business divestitures(21) (83) —  (104) 
Currency translation and other(10)  (1) (7) 
Balance at June 30, 2020$607  $350  $1,082  $2,039  
(in millions)AmericasEMEAAsiaTotal
Balance at September 30, 2020$606 $368 $1,083 $2,057 
Currency translation and other(1)
Balance at March 31, 2021$605 $369 $1,085 $2,059 

Due to the COVID-19 pandemic and the significant interruption it has caused to Adient’s operations, Adient tested goodwill and intangible assets for impairment for each of its reporting units for the quarter ended March 31, 2020 using a fair value method based on management's judgments and assumptions regarding future cash flows. The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. Adient estimated the fair value of each of its reporting units using an income approach, which utilized Level 3 unobservable inputs. These calculations contain uncertainties as they require management to make assumptions about market comparables, future cash flows, and the appropriate discount rates (based on weighted average cost of capital ranging from 15.0% to 17.5% as of March 31, 2020) to reflect the risk inherent in the future cash flows and to derive a reasonable enterprise value and related premium. The estimated future cash flows reflect management's latest assumptions of the financial projections as of March 31, 2020 based on current and anticipated competitive landscape, including estimates of revenue based on production volumes over the foreseeable future and long-term growth rates, and operating margins based on historical trends and future cost containment activities. The financial projections also considered the impact that COVID-19 is having on Adient’s current and future operations as well as the impact to new vehicle sales in future years. As a result of the test, there was no goodwill impairment recorded during the quarter ended March 31, 2020. A change in any of these estimates and assumptions, especially as it relates to the extent of the COVID-19 pandemic’s impacts on vehicle production volumes within the automotive industry as well as the demand for new vehicle sales once the current operational interruptions are over, could produce significantly lower fair values of Adient's reporting units, which could have a material impact on its results of operations. Based on the resumption of production during the third quarter of fiscal 2020 as well as future year forecasts approximating previous expectations, no goodwill impairment triggering events were identified as of June 30, 2020.
Adient plc | Form 10-Q | 12



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

 June 30, 2020September 30, 2019
(in millions)Gross
Carrying
Amount
Accumulated
Amortization
NetGross
Carrying
Amount
Accumulated
Amortization
Net
Intangible assets
Patented technology$28  $(19) $ $27  $(17) $10  
Customer relationships490  (170) 320  494  (129) 365  
Trademarks43  (29) 14  51  (32) 19  
Miscellaneous18  (11)  21  (10) 11  
Total intangible assets$579  $(229) $350  $593  $(188) $405  

During the three months ended June 30, 2020, a pre-tax non-cash impairment of $27 million was recorded in the Asia segment related to customer relationship intangible assets of $24 million and $3 million of other long-lived assets within the Futuris China business due to an overall decline in forecasted operations within that business. The impairment was calculated based on a fair value method using discounted cash flows that involves the use of management's judgments and estimates related to forecasted revenue, operating costs and discount rates.

Amortization of other intangible assets for the nine months ended June 30, 2020 and 2019 was $27 million and $31 million, respectively.

Refer to Note 15, "Segment 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:

 March 31, 2021September 30, 2020
(in millions)Gross
Carrying
Amount
Accumulated
Amortization
NetGross
Carrying
Amount
Accumulated
Amortization
Net
Intangible assets
Patented technology$26 $(18)$$27 $(19)$
Customer relationships469 (153)316 424 (103)321 
Trademarks41 (29)12 41 (27)14 
Miscellaneous109 (13)96 110 (10)100 
Total intangible assets$645 $(213)$432 $602 $(159)$443 

Amortization of other intangible assets for the three months ended March 31, 2021 and 2020 was $19 million and $19 million, respectively.

Refer to Note 15, "Segment Information," of the notes to consolidated financial statements for more information on Adient's reportable segments.


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:
Nine Months Ended
June 30,
(in millions)20202019
Balance at beginning of period$22  $11  
Accruals for warranties issued during the period  
Changes in accruals related to pre-existing warranties (including changes in estimates)(1)  
Settlements made (in cash or in kind) during the period(5) (4) 
Balance at end of period$25  $22  

In the second quarter of fiscal 2019, Adient recorded $7 million of warranty expense to correct a prior period error related to incurred but not yet reported warranty expense. Adient has concluded that this adjustment was not material to previously reported financial statements.




Six Months Ended
March 31,
(in millions)20212020
Balance at beginning of period$24 $22 
Accruals for warranties issued during the period
Changes in accruals related to pre-existing warranties (including changes in estimates)(1)(1)
Settlements made (in cash or in kind) during the period(4)(3)
Balance at end of period$23 $23 
Adient plc | Form 10-Q | 1314




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 did not have any significant impact on the consolidated statement of income or cash flows.

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 included in the consolidated statement of income (loss) for the three months and ninesix months ended June 30,March 31, 2021 and 2020 were as follows:

(in millions)Three Months Ended June 30, 2020Nine Months Ended June 30, 2020
Operating lease cost$30  $94  
Short-term lease cost 18  
Total lease cost$36  $112  
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)2021202020212020
Operating lease cost32 31 62 64 
Short-term lease cost12 12 
Total lease cost$38 $38 $74 $76 

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

(in millions)June 30, 2020
Operating lease right-of-use assetsOther noncurrent assets$324  
Operating lease liabilities - currentOther current liabilities$88  
Operating lease liabilities - noncurrentOther noncurrent liabilities238  
$326  
(in millions)March 31,
2021
September 30, 2020
Operating leases:
Operating lease right-of-use assetsOther noncurrent assets$341 $334 
Operating lease liabilities - currentOther current liabilities$89 $95 
Operating lease liabilities - noncurrentOther noncurrent liabilities257 244 
$346 $339 
Weighted average remaining lease term:
Operating leases7 years5 years
Weighted average discount rate:
Operating leases5.6 %5.9 %

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 June 30, 2020March 31, 2021 were as follows:

Operating leases
Fiscal years (in millions)March 31, 2021
2021 (excluding the six months ended March 31, 2021)$57 
202292 
202372 
202452 
202540 
Thereafter107 
Total lease payments420 
Less: imputed interest(74)
Present value of lease liabilities$346 

Adient plc | Form 10-Q | 1415


Operating leases
Fiscal years (in millions)June 30, 2020
2020 (excluding the nine months ended June 30, 2020)$28  
202198  
202271  
202356  
202441  
Thereafter91  
Total lease payments385  
Less: imputed interest(59) 
Present value of lease liabilities$326  

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

Operating leases
Fiscal years (in millions)September 30, 2019
2020$119  
202191  
202264  
202351  
202440  
After 202494  
Total minimum lease payments$459  

Supplemental cash flow information related to leases was as follows:

(in millions)Nine Months Ended June 30, 2020
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (non-cash activity)$34  
Operating cash flows:
Cash paid for amounts included in the measurement of lease liabilities$95  
Six Months Ended
March 31,
(in millions)20212020
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (non-cash activity)$69 $19 
Operating cash flows:
Cash paid for amounts included in the measurement of lease liabilities$65 $65 

The weighted average remaining lease term for Adient's operating leases as of June 30, 2020 was 5 years. The weighted average discount rate for Adient's operating leases as of June 30, 2020 was 5.7%.
Adient plc | Form 10-Q | 15



8. Debt and Financing Arrangements

Debt consisted of the following:
(in millions)(in millions)June 30,
2020
September 30,
2019
(in millions)March 31,
2021
September 30, 2020
Long-term debt:Long-term debt:Long-term debt:
Term Loan B - LIBOR plus 4.00% due in 2024
$792  $798  
Term Loan B - LIBOR plus 4.25% due in 2024Term Loan B - LIBOR plus 4.25% due in 2024$786 $790 
4.875% Notes due in 2026
4.875% Notes due in 2026
900  900  4.875% Notes due in 2026797 797 
3.50% Notes due in 2024
3.50% Notes due in 2024
1,122  1,094  3.50% Notes due in 20241,173 1,173 
7.00% Notes due in 2026
7.00% Notes due in 2026
800  800  7.00% Notes due in 2026160 800 
9.00% Notes due in 2025
9.00% Notes due in 2025
600  —  9.00% Notes due in 2025600 600 
European Investment Bank Loan - EURIBOR plus 1.58% due in 2022
European Investment Bank Loan - EURIBOR plus 1.58% due in 2022
—  180  European Investment Bank Loan - EURIBOR plus 1.58% due in 2022178 
Less: debt issuance costsLess: debt issuance costs(59) (56) Less: debt issuance costs(40)(55)
Gross long-term debtGross long-term debt4,155  3,716  Gross long-term debt3,654 4,105 
Less: current portionLess: current portion  Less: current portion
Net long-term debtNet long-term debt$4,147  $3,708  Net long-term debt$3,646 $4,097 
Short-term debt:Short-term debt:Short-term debt:
ABL Credit Facility$179  $—  
European Investment Bank Loan - EURIBOR plus 1.58% due in 2022
European Investment Bank Loan - EURIBOR plus 1.58% due in 2022
185  —  European Investment Bank Loan - EURIBOR plus 1.58% due in 2022$$194 
Other bank borrowingsOther bank borrowings 22  Other bank borrowings14 
Total short-term debtTotal short-term debt$372  $22  Total short-term debt$14 $202 

Adient US LLC ("Adient US"), a wholly owned subsidiary of Adient, together with certain of Adient's other subsidiaries, maintains an asset-based revolving credit facility (the “ABL“ABL Credit Facility”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 June 30, 2020,March 31, 2021, Adient had not drawn down $179 million on the ABL Credit Facility and had availability under this facility of $155$945 million (net of $107$69 million of letters of credit). During July 2020,
Adient voluntarily repaid the outstanding balance of the ABL revolving credit balance.plc | Form 10-Q | 16


In addition, Adient US and Adient Global Holdings S.àà r.l., a wholly-owned subsidiary of Adient, maintain a term loan credit agreement (the “Term“Term Loan B Agreement”Agreement”) providing for a 5-year $800 million senior secured term loan facility that was fully drawn aton 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. In April 2021, Adient amended the Term Loan B Agreement ("Amended Agreement") which, among other changes (i) extended the maturity date for loans outstanding to April 8, 2028, (ii) reduced the interest rate margin applicable thereunder by 0.75% to 3.50%, in the case of Eurodollar Rate loans, and 2.50% (in the case of Base Rate loans) (in each case, with one 0.25% step down based on achievement of a specified first lien secured net leverage level starting with the fiscal quarter ending December 31, 2021) and (iii) made certain other negative covenant and mandatory prepayment changes in connection therewith. The amendment also established incremental term loans in an aggregate principal amount of $214 million resulting in total loans outstanding under the Amended Agreement of $1.0 billion. Adient paid $6 million related to the Amended Agreement and expects to write off $9 million of previously deferred financing costs as a result of the debt extinguishment, which will be reflected in the third quarter of fiscal 2021.

Adient plc | Form 10-Q | 16


Adient US is also maintainsa party to an indenture relating to the issuance of $800 million aggregate principal amount of Senior First Lien Notes. TheseThe notes mature on May 15, 2026 and bear interest at a rate of 7.00% per annum. Interest on these notes is payable semi-annually in arrears on November 15 and May 15 of each year, commencing on November 15, 2019. During the second quarter of fiscal 2021, Adient repurchased $640 million of the outstanding balance of the Senior First Lien Notes at a price of 107% of the principal plus $17 million of accrued and unpaid interest. As a result, $9 million of previously deferred financing costs was written off to net financing charges. Adient redeemed an additional $80 million of the remaining balance of the Senior First Lien Notes in April 2021 at a price of 103% of the principal plus $2 million of accrued and unpaid interest, and intends to redeem the remaining $80 million in May 2021.

The ABL Credit Facility, Term Loan B Agreement and the Senior First Lien Notes due 2026 contain covenants that are usual and customary for facilities and transactionsdebt instruments 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’sAdient’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’sAdient’s and its restricted subsidiaries’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, cross-default clauses with other debt arrangements, failure to 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. ("AGH"), a wholly-owned subsidiary of Adient, maintains $0.9 billion$900 million aggregate principal amount of 4.875% USD-denominated unsecured notes due 2026 and €1.02026. During the fourth quarter of fiscal 2020, Adient redeemed $103 million of face value of these notes, resulting in a remaining balance of $797 million as of September 30, 2020. AGH also maintains €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€152 million in an unsecured term loan from the European Investment Bank ("EIB") due in 2022. The loan bears interest at the 6-month EURIBOR rate plus 158 basis points. Adient amended the EIB loan agreement as of June 30, 2020 to increaseis compliant with the net leverage ratio of 4.5x at March 31, 2021 and expects to 6.75x from 5.25x at June 30, 2020. Future net leverage ratio requirements (5.25x at September 30, 2020 with step downs starting inbe compliant for the foreseeable future. During the first quarter of fiscal 2021) were not adjusted.2021, Adient is forecasting that it will not be in compliance with this net leverage ratio during the next 12 months and will be required to either obtain another amendment or waiver or will pay downrepaid $16 million of the EIB loan. Accordingly, Adient has classified thisloan, triggered in part by the redemption of debt as short term debt at June 30, 2020. in the prior year.

On April 20, 2020, Adient US offeredissued $600 million (net proceeds of $591 million) aggregate principal amount of 9.00% Senior First Lien Notes due 2025. These notes will mature on April 15, 2025, provided that if Adient Global Holdings Ltd (“AGH”) has not refinanced (or otherwise redeemed) in whole its outstanding 3.50% unsecured notes due 2024 or any refinancing indebtedness thereof that matures earlier than 91 days prior to the maturity date of the Senior First Lien Notes due 2025 on or prior to May 15, 2024, these notes will mature on May 15, 2024. Interest on these notes will be paidis due on April 15 and October 15 each year, beginning on October 15, 2020. These notes contain covenants that are usual and customary, similar to the covenants on the Senior First Lien Notes due 2026 as described above. Adient incurred $10 million of debt issuance cost associated with this new debt in fiscal 2020.

Adient plc | Form 10-Q | 17


Net Financing Charges

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

Three Months Ended
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)(in millions)2020201920202019(in millions)2021202020212020
Interest expense, net of capitalized interest costsInterest expense, net of capitalized interest costs$56  $46  $152  $119  Interest expense, net of capitalized interest costs$57 $48 $116 $96 
Banking fees and debt issuance cost amortizationBanking fees and debt issuance cost amortization 18  13  25  Banking fees and debt issuance cost amortization10 13 
Interest incomeInterest income(2) (4) (9) (8) Interest income(2)(3)(4)(7)
Premium paid on repurchase of debtPremium paid on repurchase of debt45 45 
Net foreign exchangeNet foreign exchange(1) —  —  (1) Net foreign exchange(1)
Net financing chargesNet financing charges$58  $60  $156  $135  Net financing charges$110 $50 $169 $98 


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 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 plc | Form 10-Q | 17


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 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. As a result of the COVID-19 impacts and the resulting interruptions to Adient's operations, a loss of $2 million related to ineffective hedges was reclassified to the consolidated statement of income for the three months ended March 31, 2020. All contracts were highly effective in hedging the variability in future cash flows attributable to changes in currency exchange rates at June 30, 2020March 31, 2021 and September 30, 2019,2020, respectively.
As of June 30, 2020,March 31, 2021, the €1.0€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. During the three months ended March 31, 2020, Adient settled the 1 remaining cross-currency interest rate swap for $10 million in proceeds, resulting in 0 outstanding Euro denominated cross-currency interest rate swaps as of June 30, 2020.

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 June 30, 2020,March 31, 2021, Adient had 1 cross-currency interest rate swap outstanding totaling approximately ¥11¥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 Adient's Term Loan B Agreement. The interest rate caps are designated as cash flow hedges under ASC 815. As of June 30, 2020,March 31, 2021, Adient had 2 outstanding interest rate caps with total notional amount of approximately $200 million. In April 2021, in conjunction with the Term Loan B Amendment as discussed in Note 8, "Debt and Financing Arrangements," Adient de-designated these 2 contracts, the impact of which was not material.

Adient entered into a ¥950¥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’sAdient’s net investment in China. The forward contract matured in June 2020.

Adient plc | Form 10-Q | 18


In conjunction with the 2021 Yanfeng Transaction as described in Note 3, "Acquisitions and Divestitures," Adient entered into 2 forward foreign currency exchange contracts in April 2021 with total notional amount of approximately ¥7,482 million in order to economically hedge the expected proceeds. One contract is expected to mature at the end of the fourth quarter of fiscal 2021, and the other contract will mature at the end of the first quarter of fiscal 2022. These contracts are treated as freestanding financial instruments and their subsequent fair value changes will be recorded in earnings.

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
(in millions)June 30,
2020
September 30,
2019
June 30,
2020
September 30,
2019
Other current assets
Foreign currency exchange derivatives$ $ $ $ 
Cross-currency interest rate swaps—  12  —  —  
Other noncurrent assets
Foreign currency exchange derivatives —  —   
Interest rate cap—   —  —  
Cross-currency interest rate swaps  —  —  
Total assets$ $19  $ $ 
Other current liabilities
Foreign currency exchange derivatives$40  $12  $—  $—  
Other noncurrent liabilities
Foreign currency exchange derivatives  —  —  
Long-term debt
Foreign currency denominated debt1,122  1,094  —  —  
Total liabilities$1,168  $1,109  $—  $—  
 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)March 31,
2021
September 30, 2020March 31,
2021
September 30, 2020
Other current assets
Foreign currency exchange derivatives$10 $$$
Cross-currency interest rate swaps
Other noncurrent assets
Foreign currency exchange derivatives
Interest rate cap
Total assets$14 $$$
Other current liabilities
Foreign currency exchange derivatives$18 $34 $$
Cross-currency interest rate swaps00
Other noncurrent liabilities
Foreign currency exchange derivatives
Long-term debt
Foreign currency denominated debt1,173 1,173 
Total liabilities$1,195 $1,213 $$

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 June 30, 2020March 31, 2021 and September 30, 2019,2020, 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:

AssetsLiabilities
(in millions)March 31,
2021
September 30, 2020March 31,
2021
September 30, 2020
Gross amount recognized$19 $$1,195 $1,213 
Gross amount eligible for offsetting(10)(5)(10)(5)
Net amount$$$1,185 $1,208 


AssetsLiabilities
(in millions)June 30,
2020
September 30,
2019
June 30,
2020
September 30,
2019
Gross amount recognized$ $23  $1,168  $1,109  
Gross amount eligible for offsetting(3) (9) (3) (9) 
Net amount$ $14  $1,165  $1,100  

Adient plc | Form 10-Q | 19


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
June 30,
Nine Months Ended
June 30,
2020201920202019
Foreign currency exchange derivatives$18  $ $(39) $ 

Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)2021202020212020
Foreign currency exchange derivatives$(11)$(79)$19 $(57)
Adient plc | Form 10-Q | 19



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)(in millions)Three Months Ended
June 30,
Nine Months Ended
June 30,
(in millions)Three Months Ended
March 31,
Six Months Ended
March 31,
2020201920202019(in millions)202020212020
Foreign currency exchange derivativesForeign currency exchange derivativesCost of sales$(15) $(1) $(9) $(3) Foreign currency exchange derivativesCost of sales$$(3)$

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)(in millions)Three Months Ended
June 30,
Nine Months Ended
June 30,
(in millions)Three Months Ended
March 31,
Six Months Ended
March 31,
2020201920202019(in millions)202020212020
Foreign currency exchange derivativesForeign currency exchange derivativesCost of sales$—  $(1) $(1) $(2) Foreign currency exchange derivativesCost of sales(2)$$(2)$(1)
Foreign currency exchange derivativesForeign currency exchange derivativesNet financing charges (1)  —  Foreign currency exchange derivativesNet financing charges
Equity swapSelling, general and administrative—  —  —  (13) 
TotalTotal$ $(2) $ $(15) Total$(2)$$$

The effective portion of pretax gains (losses) recorded in currency translation adjustment (CTA) within other comprehensive income (loss) related toto net investment hedges was $(25)$64 million and $(20)$23 million for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively. For the three months ended June 30, 2020 and 2019, respectively,March 31, 2021, 0 gains or losses were reclassified from CTA into income for Adient's outstanding net investment hedges. There For the three months ended March 31, 2020, a loss of $2 million was norecognized in the consolidated statements of income (loss) resulting from ineffectiveness on cash flow hedges during the three months ended June 30, 2020 and 2019,hedges.


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.


Adient plc | Form 10-Q | 20


Recurring Fair Value Measurements
The following tables present Adient's fair value hierarchy for those assets and liabilities measured at fair value:
 Fair Value Measurements Using:
(in millions)Total as of
June 30,
2020
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$ $—  $ $—  
Other noncurrent assets
Foreign currency exchange derivatives —   —  
Cross-currency interest rate swaps —   —  
Total assets$ $—  $ $—  
Other current liabilities
Foreign currency exchange derivatives$40  $—  $40  $—  
Other noncurrent liabilities
Foreign currency exchange derivatives —   —  
Total liabilities$46  $—  $46  $—  
 Fair Value Measurements Using:
(in millions)
Total as of
March 31, 2021
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$13 $$13 $
Cross-currency interest rate swaps
Other noncurrent assets
Foreign currency exchange derivatives
Interest rate cap
Total assets$19 $$19 $
Other current liabilities
Foreign currency exchange derivatives$18 $$18 $
Cross-currency interest rate swaps
Other noncurrent liabilities
Foreign currency exchange derivatives
Total liabilities$22 $$22 $

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$ $—  $ $—  
Cross-currency interest rate swaps12  —  12  —  
Other noncurrent assets
Foreign currency exchange derivatives —   —  
Cross-currency interest rate swaps —   —  
Interest rate cap —   —  
Total assets$23  $—  $23  $—  
Other current liabilities
Foreign currency exchange derivatives$12  $—  $12  $—  
Other noncurrent liabilities
Foreign currency exchange derivatives —   —  
Total liabilities$15  $—  $15  $—  
Fair Value Measurements Using:
(in millions)Total as of
September 30,
2020
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$$$$
Other noncurrent assets
Interest rate cap
Total assets$$$$
Other current liabilities
Foreign currency exchange derivatives$34 $$34 $
Cross-currency interest rate swaps11
Other noncurrent liabilities
Foreign currency exchange derivatives
Total liabilities$40 $$40 $

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 the variability in future cash flows attributable to changes in currency exchange rates at March 31, 2021
Adient plc | Form 10-Q | 21


and September 30, 2020, 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.
Adient plc | Form 10-Q | 21


Cross-currency interest rate swaps Adient determines the fair value of a cross-currency interest rate swap contract using a market approach which is based on quoted market price for similar instruments in markets. All significant inputs are corroborated by observable market data for the term of such a contract. 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 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. During fiscal 2019 and the first nine months of fiscal 2020, Adient settled both Euro denominated cross-currency interest rate swaps.investments. As of June 30, 2020,March 31, 2021, Adient had 1 ¥11¥11 billion cross-currency interest rate swap outstanding.

Interest rate caps Adient determines the fair value of an interest rate cap contract using a market approach which is based on quoted market price for identical or similar instruments in markets. All significant inputs are corroborated by observable market data for the term of such a contract. Adient selectively uses interest rate caps to limit the impact of floating rate interest payment increases on its Term Loan B Agreement. The interest rate caps are designated as cash flow hedges under ASC 815. As of June 30, 2020,March 31, 2021, Adient had 2 interest rate caps outstanding totaling approximately $200 million.
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 $3.8 billion $3.9 billion and $3.4$4.1 billion at June 30, 2020March 31, 2021 and September 30, 2019,2020, respectively, was determined primarily using market quotes classified as Level 1 inputs within the ASC 820 fair value hierarchy.


11. Equity and Noncontrolling Interests

For the ninesix months ended June 30, 2020:March 31, 2021:

(in millions)Ordinary SharesAdditional Paid-in CapitalRetained Earnings
(Accumulated Deficit)
Accumulated Other Comprehensive Income (Loss)Shareholders' Equity Attributable
 to Adient
Shareholders' Equity Attributable to Noncontrolling InterestsTotal Equity
Balance at September 30, 2020$0 $3,974 $(2,096)$(665)$1,213 $322 $1,535 
Net income (loss)— — 219 — 219 35 254 
Foreign currency translation adjustments— — — 29 29 35 
Realized and unrealized gains (losses) on derivatives— — — 17 17 — 17 
Dividends attributable to noncontrolling interests— — — —  (11)(11)
Share based compensation and other— 11 — — 11 12 
Balance at March 31, 2021$0 $3,985 $(1,877)$(619)$1,489 $353 $1,842 


(in millions)Ordinary SharesAdditional Paid-in CapitalRetained Earnings
(Accumulated Deficit)
Accumulated Other Comprehensive Income (Loss)Shareholders' Equity Attributable
to Adient
Shareholders' Equity Attributable to Noncontrolling InterestsTotal Equity
Balance at September 30, 2019$—  $3,962  $(1,545) $(569) $1,848  $341  $2,189  
Net income (loss)—  —  (511) —  (511) 26  (485) 
Foreign currency translation adjustments—  —  —  (66) (66)  (65) 
Realized and unrealized gains (losses) on derivatives—  —  —  (23) (23) —  (23) 
Dividends attributable to noncontrolling interests—  —  —  —  —  (28) (28) 
Change in noncontrolling interest share—  —  —  —  —  (18) (18) 
Share based compensation—   —  —   —   
Adjustments from adoption of a new standard—  —  (4) —  (4) —  (4) 
Other—  —  —  —  —  —  —  
Balance at June 30, 2020
$—  $3,968  $(2,060) $(658) $1,250  $322  $1,572  
For the three months ended March 31, 2021:

(in millions)Ordinary SharesAdditional Paid-in CapitalRetained Earnings
(Accumulated Deficit)
Accumulated Other Comprehensive Income (Loss)Shareholders' Equity Attributable
 to Adient
Shareholders' Equity Attributable to Noncontrolling InterestsTotal Equity
Balance at December 31, 2020$0 $3,980 $(1,946)$(582)$1,452 $345 $1,797 
Net income (loss)— — 69 — 69 18 87 
Foreign currency translation adjustments— — — (26)(26)(4)(30)
Realized and unrealized gains (losses) on derivatives— — — (11)(11)— (11)
Dividends attributable to noncontrolling interests— — — —  (7)(7)
Share based compensation and other— — — 5 6 
Balance at March 31, 2021$0 $3,985 $(1,877)$(619)$1,489 $353 $1,842 

Adient plc | Form 10-Q | 22


For the six months ended March 31, 2020:

(in millions)Ordinary SharesAdditional Paid-in CapitalRetained Earnings
(Accumulated Deficit)
Accumulated Other Comprehensive Income (Loss)Shareholders' Equity Attributable
 to Adient
Shareholders' Equity Attributable to Noncontrolling InterestsTotal Equity
Balance at September 30, 2019$0 $3,962 $(1,545)$(569)$1,848 $341 $2,189 
Net income (loss)— — (186)— (186)32 (154)
Foreign currency translation adjustments— — — (74)(74)(1)(75)
Realized and unrealized gains (losses) on derivatives— — — (47)(47)— (47)
Dividends attributable to noncontrolling interests— — — —  (12)(12)
Change in noncontrolling interest share— — — —  (18)(18)
Share based compensation and other— — — 4 — 4 
Adjustments from adoption of a new standard— — (4)— (4)— (4)
Balance at March 31, 2020$0 $3,966 $(1,735)$(690)$1,541 $342 $1,883 

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

Adient plc | Form 10-Q | 22


For the three months ended June 30,March 31, 2020:
(in millions)Ordinary SharesAdditional Paid-in CapitalRetained Earnings
(Accumulated Deficit)
Accumulated Other Comprehensive Income (Loss)Shareholders' Equity Attributable
to Adient
Shareholders' Equity Attributable to Noncontrolling InterestsTotal Equity
Balance at March 31, 2020$—  $3,966  $(1,735) $(690) $1,541  $342  $1,883  
Net income (loss)—  —  (325) —  (325) (6) (331) 
Foreign currency translation adjustments—  —  —     10  
Realized and unrealized gains (losses) on derivatives—  —  —  24  24  —  24  
Dividends attributable to noncontrolling interests—  —  —  —  —  (16) (16) 
Share based compensation—   —  —   —   
Other—   —  —   —   
Balance at June 30, 2020$—  $3,968  $(2,060) $(658) $1,250  $322  $1,572  

For the nine months ended June 30, 2019:
(in millions)Ordinary SharesAdditional Paid-in CapitalRetained Earnings
(Accumulated Deficit)
Accumulated Other Comprehensive Income (Loss)Shareholders' Equity Attributable
to Adient
Shareholders' Equity Attributable to Noncontrolling InterestsTotal Equity
Balance at September 30, 2018$—  $3,951  $(1,028) $(531) $2,392  $325  $2,717  
Net income (loss)—  —  (487) —  (487) 40  (447) 
Foreign currency translation adjustments—  —  —  26  26   30  
Realized and unrealized gains (losses) on derivatives—  —  —    —   
Dividends declared ($0.275 per share)
—  —  (26) —  (26) —  (26) 
Dividends attributable to noncontrolling interests—  —  —  —  —  (35) (35) 
Share based compensation—  10  —  —  10  —  10  
Formation of consolidated joint venture—  —  —  —  —  28  28  
Other—  (2) —  —  (2) —  (2) 
Balance at June 30, 2019$—  $3,959  $(1,541) $(499) $1,919  $362  $2,281  

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

For the three months ended June 30, 2019:
(in millions)Ordinary SharesAdditional Paid-in CapitalRetained Earnings
(Accumulated Deficit)
Accumulated Other Comprehensive Income (Loss)Shareholders' Equity Attributable
to Adient
Shareholders' Equity Attributable to Noncontrolling InterestsTotal Equity
Balance at March 31, 2019$—  $3,956  $(1,220) $(479) $2,257  $373  $2,630  
Net income (loss)—  —  (321) —  (321)  (314) 
Foreign currency translation adjustments—  —  —  (25) (25) (1) (26) 
Realized and unrealized gains (losses) on derivatives—  —  —    —   
Dividends attributable to noncontrolling interests—  —  —  —  —  (17) (17) 
Share based compensation —  —   —   
Other—   —  —   —   
Balance at June 30, 2019$—  $3,959  $(1,541) $(499) $1,919  $362  $2,281  



(in millions)Ordinary SharesAdditional Paid-in CapitalRetained Earnings
(Accumulated Deficit)
Accumulated Other Comprehensive Income (Loss)Shareholders' Equity Attributable
 to Adient
Shareholders' Equity Attributable to Noncontrolling InterestsTotal Equity
Balance at December 31, 2019$0 $3,963 $(1,716)$(504)$1,743 $341 $2,084 
Net income (loss)— — (19)— (19)14 (5)
Foreign currency translation adjustments— — — (124)(124)(7)(131)
Realized and unrealized gains (losses) on derivatives— — — (62)(62)— (62)
Dividends attributable to noncontrolling interests— — — —  (6)(6)
Share based compensation and other— — — 3 — 3 
Balance at March 31, 2020$0 $3,966 $(1,735)$(690)$1,541 $342 $1,883 

Adient plc | Form 10-Q | 23



The following table presents changes in AOCI attributable to Adient:

Three Months Ended
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)(in millions)2020201920202019(in millions)2021202020212020
Foreign currency translation adjustmentsForeign currency translation adjustmentsForeign currency translation adjustments
Balance at beginning of periodBalance at beginning of period$(632) $(472) $(558) $(523) Balance at beginning of period$(579)$(508)$(634)$(558)
Aggregate adjustment for the period, net of taxAggregate adjustment for the period, net of tax (25) (66) 26  Aggregate adjustment for the period, net of tax(26)(124)29 (74)
Balance at end of periodBalance at end of period$(624) $(497) $(624) $(497) Balance at end of period$(605)$(632)$(605)$(632)
Realized and unrealized gains (losses) on derivativesRealized and unrealized gains (losses) on derivativesRealized and unrealized gains (losses) on derivatives
Balance at beginning of periodBalance at beginning of period$(55) $(6) $(8) $(7) Balance at beginning of period$$$(28)$(8)
Current period changes in fair value, net of taxCurrent period changes in fair value, net of tax12   (30)  Current period changes in fair value, net of tax(10)(59)15 (42)
Reclassification to income, net of taxReclassification to income, net of tax12  —   —  Reclassification to income, net of tax(1)(3)(5)
Balance at end of periodBalance at end of period$(31) $(1) $(31) $(1) Balance at end of period$(11)$(55)$(11)$(55)
Pension and postretirement plansPension and postretirement plansPension and postretirement plans
Balance at beginning of periodBalance at beginning of period$(3) $(1) $(3) $(1) Balance at beginning of period$(3)$(3)$(3)$(3)
Balance at end of periodBalance at end of period$(3) $(1) $(3) $(1) Balance at end of period$(3)$(3)$(3)$(3)
Accumulated other comprehensive income (loss), end of periodAccumulated other comprehensive income (loss), end of period$(658) $(499) $(658) $(499) Accumulated other comprehensive income (loss), end of period$(619)$(690)$(619)$(690)

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
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)(in millions)2020201920202019(in millions)2021202020212020
Beginning balanceBeginning balance$35  $37  $51  $47  Beginning balance$42 $38 $43 $51 
Net incomeNet income—   14  24  Net income13 14 
Foreign currency translation adjustmentsForeign currency translation adjustments  —   Foreign currency translation adjustments(5)(10)(7)
DividendsDividends—  —  (23) (28) Dividends(14)(23)
Ending balanceEnding balance$42  $45  $42  $45  Ending balance$44 $35 $44 $35 


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
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)(in millions)2020201920202019(in millions)2021202020212020
Service costService cost$ $ $ $ Service cost$$$$
Interest costInterest cost    Interest cost
Expected return on plan assetsExpected return on plan assets(4) (4) (14) (12) Expected return on plan assets(4)(5)(8)(10)
Net actuarial and settlement (gain) loss    
Net periodic benefit costNet periodic benefit cost$ $ $ $ Net periodic benefit cost$$$$

Adient plc | Form 10-Q | 24


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 | 24




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 fiscal 2021, Adient committed to a restructuring plan ("2021 Plan") of $13 million that was offset by $9 million of prior year underspend. Of the restructuring costs recorded, $12 million relates to the EMEA segment and $1 million relates to the Asia segment. The restructuring actions relate to cost reduction initiatives and consist primarily of workforce reductions and lease contract terminations. The restructuring actions are expected to be substantially completed by fiscal 2022.

(in millions)Employee Severance and Termination BenefitsTotal
Original reserve$13 $13 
Balance at March 31, 2021$13 $13 

During fiscal 2020, Adient committed to a restructuring plan ("2020 Plan") of $86$205 million. Of the restructuring costs recorded, $15$20 million relates to the Americas segment, $62$175 million relates to the EMEA segment and $9$10 million relates to the Asia segment. The restructuring actions relate to cost reduction initiatives and consist primarily of workforce reductions. Also recorded in fiscal 2020 was $20 million of underspend related to prior year plan reserves. The restructuring actions are expected to be substantially completed by fiscal 2022. Also recorded in fiscal 2020 is $10 million of prior year underspend.

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

(in millions)Employee Severance and Termination BenefitsOtherCurrency
Translation
Total
Original Reserve$83  $ $—  $86  
Utilized—cash(22) —  —  (22) 
Noncash adjustment—other —  (3)  —  
Balance at June 30, 2020$61  $—  $ $64  
(in millions)Employee Severance and Termination BenefitsOtherCurrency
Translation
Total
Balance at September 30, 2020$168 $$$169 
Utilized—cash(60)(60)
Noncash adjustment—other(3)(1)
Balance at March 31, 2021$108 $(3)$$108 


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

(in millions)Employee Severance and Termination BenefitsOtherCurrency TranslationTotal
Balance at September 30, 2019$69  $ $(2) $70  
Utilized—cash(25) —  —  (25) 
Noncash adjustment—underspend(6) —  —  (6) 
Balance at June 30, 2020$38  $ $(2) $39  
(in millions)Employee Severance and Termination BenefitsOtherCurrency TranslationTotal
Balance at September 30, 2020$32 $$$35 
Utilized—cash(17)(17)
Noncash adjustment—underspend(1)
Balance at March 31, 2021$15 $$$18 


During the first six months of fiscal 2021, there was $17 million of cash utilized against the 2018, 2017 and 2016 Plan's reserve balances. The following table summarizesmajority of the changes in Adient's 2018 Plan reserve:

(in millions)Employee Severance and Termination BenefitsCurrency
Translation
Total
Balance at September 30, 2019$24  $(4) $20  
Utilized—cash(8) —  (8) 
Noncash adjustment—underspend(3)  (2) 
Balance at June 30, 2020$13  $(3) $10  

There were no material changescash utilized during fiscal 2020the period was related to the 2016 Plan's reserve balance. The 2018, 2017, and 2016 Plan's reserve balances at June 30, 2020 ofMarch 31, 2021 were $4 million, $3 million, and $24$4 million, respectively.

Adient plc | Form 10-Q | 25


Adient's fiscal 2021, 2020, 2019, 2018, 2017 and 2016 restructuring plans includedinclude workforce reductions of approximately 12,00018,000 employees. 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 June 30, 2020,March 31, 2021, approximately 7,80013,000 of the employees have been separated from Adient pursuant to the restructuring plans. In addition, the restructuring plans included 20NaN plant closures. As of June 30, 2020, 17March 31, 2021, 19 of the 20NaN 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, particularly related to the COVID-19 pandemic, could impact Adient's liquidity position, lead to impairment charges and/or require additional restructuring of its operations.

Refer to Note 5, "Goodwill and Other Intangible Assets," of the notes to consolidated financial statements for additional information related to impairment of intangible assets during the three months ended June 30, 2020.

14. Income Taxes

Adient has historically calculatedIn calculating the provision for income taxes, during interim reporting periods by applyingAdient uses an estimate of the annual effective tax rate forbased upon the fullfacts 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 and six months ended March 31, 2021, Adient’s income tax expense was $28 million equating to “ordinary”an effective tax rate of 23%, and $80 million equating to an effective tax rate of 23%, respectively. The three and six month income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items)tax expense was higher than the statutory rate impact of 12.5% primarily due to foreign tax rate differentials and the inability to record a tax benefit for the reporting period.losses in jurisdictions with valuation allowances. Due to the uncertainty related to the impact of the COVID-19 pandemic on the Company’sCompany’s operations at a jurisdictional level that is required to estimate an annual effective tax rate for the full fiscal year, Adient used a discrete effective tax rate method to calculate an income tax provision for the nine-monthsix-month period ended June 30,March 31, 2020. For the three and ninesix months ended June 30,March 31, 2020, Adient’sAdient’s income tax expense was $5$16 million equating to an effective tax rate of (2)%89% and $75$70 million equating to an effective tax rate of (19)(100)%, respectively. For theThe three months ended June 30, 2020,and six month income tax expense in fiscal 2020 was recognized ratherhigher than a tax benefit that would have been recognized by applying the statutory rate of 12.5% against pre-tax losses, primarily due to the impact of recognizing no tax benefit for losses in jurisdictions with valuation allowances, partially offset by a tax benefit related to an impairment charge recorded in the Asia segment related to customer relationship intangible asset. For the nine months ended June 30, 2020, income tax expense was recognized rather than a tax benefit that would have been recognized by applying the statutory rate of 12.5% against pre-tax losses, primarily due to the impact of recognizing no tax benefit for losses in jurisdictions with valuation allowances and foreign currency remeasurement of Mexican peso denominated deferred tax assets,assets. The six month income tax expense in fiscal 2020 was partially offset by a tax benefit related to the impairment of Adient’sAdient's YFAI investment and a tax benefit related to an impairment charge recorded in the Asia segment related to customer relationship intangible assets. For the three and nine months ended June 30, 2019, Adient’s income tax expense was $338 million equating to an effective tax rate of 1,127% and $412 million equating to an effective rate of (3,745)%, respectively. The three and nine month income tax expense was higher than the statutory rate impact of 12.5% primarily due to the recognition of valuation allowances in Luxembourg, Poland, and the United Kingdom and the impact of recognizing no tax benefit for losses in jurisdictions with valuation allowances.investment.

Valuation Allowances

As a result of the Company's thirdsecond quarter fiscal 20202021 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 changes to valuation allowances were required.

As a result of Adient's third quarter fiscal 2019 analysis of the realizability of its worldwide deferred tax assets, and after considering tax planning initiatives and other positive and negative evidence (including the external debt refinancing, the related incremental net financing costs, and the restructuring of the internal financing which occurred in the third quarter of fiscal 2019), Adient determined that it was more likely than not that deferred tax assets in Luxembourg and the United Kingdom would not be realized and recorded income tax expense of $229 million and $25 million, respectively, to establish valuation allowances. In addition, as a result of the valuation allowances, Adient recorded an income tax expense of $48 million to adjust the year-to-date tax expense to reflect the higher estimated annual effective tax rate.

As a result of Adient's second quarter fiscal 2019 analysis of the realizability of its worldwide deferred tax assets, and after considering tax planning initiatives and other positive and negative evidence (including the long-lived asset impairment recorded in the second quarter of fiscal 2019), Adient determined that it was more likely than not that deferred tax assets within
Adient plc | Form 10-Q | 26


certain Poland entities would not be realized and recorded a net income tax expense of $43 million in the second quarter of fiscal 2019 to establish a valuation allowance.

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.

Uncertain Tax Positions

At June 30, 2020,March 31, 2021, Adient had gross tax effected unrecognized tax benefits of $404$487 million. If recognized, $118$139 million of Adient's unrecognized tax benefits would impact the effective tax rate. Total net accrued interest at June 30, 2020March 31, 2021 was approximately $14$17 million (net of tax benefit). The interest and penalties accrued for the three and ninesix months ended June 30, 2020March 31, 2021 was $1 million and $4$2 million, respectively. 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

Adient plc | Form 10-Q | 26


Tax legislation was adopted during the six months ended March 31, 2021 in various jurisdictions, which did not have a material impact on Adient’s consolidated financial statements.

On March 27, 2020, the House passed the Coronavirus Aid, Relief, and Economic Security Act (The CARES Act), also known as the Third COVID-19 Supplemental Relief bill, and the president signed the legislation into law. Adient does not expect the provisions of the legislation to have a significant impact on the effective tax rate or the income tax payable and deferred income tax positions of the Company.

Other Tax Matters

During the thirdsecond quarter of fiscal 2019, Luxembourg enacted legislation reducing the nominal corporate tax rate to 17.0% from 18.0%. For2021, Adient this reduced its aggregate income tax rate to 24.9% from 26.0% and applies retroactively to the fiscal 2019 tax year. Asrecognized a result of the law change, Adient recorded income tax expense of $10$33 million pre-tax gain related to the write downsale of deferredits equity interest in Shenyang Jinbei Adient Automotive Components Co., Ltd. The tax assets.expense associated with this gain was $5 million.

During the first quarter of fiscal 2019, Guangzhou2021, Adient Automotive Seating Co., Ltd.recognized an $8 million pre-tax gain related to Brazil indirect tax recoveries. The tax expense associated with this gain 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.$3 million.

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

Other Tax Matters

During fiscalsix months ended March 31, 2020, Adient committed to arecognized net restructuring plan ("2020 Plan")expenses of $86$54 million. Refer to Note 13, “Restructuring“Restructuring and Impairment Costs, of the notes to the consolidated financial statements for additional information. The tax benefit associated with the restructuring charge was $3$1 million.

During the third quarter of fiscal 2020, an impairment charge of $27 million was recorded in the Asia segment related to customer relationship intangible assets. Refer to Note 5, “Goodwill and Other Intangible Assets,” of the notes to the consolidated financial statements for additional information. The tax benefit associated with the impairment charge was $5 million.

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“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. An additional impairment of $6 million was recorded in the third quarter of fiscal 2020 related to this investment, with 0 additional tax benefit being recorded.

During the second quarter of fiscal 2019, Adient recognized a pre-tax impairment charge on long-lived assets of $66 million. Refer to Note 13 "Restructuring and Impairment Costs," of the notes to the consolidated financial statements for additional
Adient plc | Form 10-Q | 27


information. The tax benefit associated with the impairment charge was $2 million, which was negatively impacted by geographic mix and Adient’s current tax position in these jurisdictions.


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, restructuring and impairment costs, restructuring related-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.

 Three Months Ended
June 30,
Nine Months Ended
June 30,
(in millions)2020201920202019
Net Sales
Americas$593  $2,010  $4,093  $5,860  
EMEA698  1,752  3,750  5,170  
Asia346  530  1,362  1,779  
Eliminations(11) (73) (132) (204) 
Total net sales$1,626  $4,219  $9,073  $12,605  

Three Months Ended
June 30,
Nine Months Ended
June 30,
(in millions)2020201920202019
Adjusted EBITDA
Americas$(83) $69  $117  $146  
EMEA(94) 53  17  114  
Asia71  110  311  387  
Corporate-related costs (1)
(16) (27) (59) (75) 
Restructuring and impairment costs (2)
(49) (15) (103) (159) 
Purchase accounting amortization (3)
(9) (11) (30) (32) 
Restructuring related charges (4)
(5) (5) (17) (27) 
Loss on business divestitures - net (5)
—  —  (25) —  
Impairment of nonconsolidated partially-owned affiliate (6)
(6) —  (222) —  
Depreciation
(67) (68) (214) (205) 
Stock based compensation
(7) (8) (8) (16) 
Other items (7)
(4) (3) (12) (6) 
Earnings (loss) before interest and income taxes(269) 95  (245) 127  
Net financing charges(58) (60) (156) (135) 
Other pension income (expense) (5)  (3) 
Income (loss) before income taxes$(326) $30  $(396) $(11) 
 Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)2021202020212020
Net Sales
Americas$1,644 $1,641 $3,381 $3,500 
EMEA1,636 1,488 3,240 3,052 
Asia588 444 1,142 1,016 
Eliminations(49)(62)(96)(121)
Total net sales$3,819 $3,511 $7,667 $7,447 

Adient plc | Form 10-Q | 2827


Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)2021202020212020
Adjusted EBITDA
Americas$64 $106 $196 $200 
EMEA141 62 255 111 
Asia121 63 272 240 
Corporate-related costs (1)
(23)(20)(42)(43)
Restructuring and impairment costs (2)
(5)(52)(12)(54)
Purchase accounting amortization (3)
(10)(11)(21)(21)
Restructuring related charges (4)
(2)(7)(6)(12)
Loss on business divestitures - net (5)
(25)
Gain on sale / (impairment) of nonconsolidated partially-owned affiliates (6)
33 33 (216)
Depreciation(69)(72)(139)(147)
Stock based compensation(13)(26)(1)
Other items (7)
(7)(6)(8)
Earnings (loss) before interest and income taxes230 66 512 24 
Net financing charges(110)(50)(169)(98)
Other pension income (expense)
Income (loss) before income taxes$122 $18 $347 $(70)
Notes:
Notes:

(1) Corporate-related costs not allocated to the segments include executive office, communications, corporate development, legal and corporate finance.
(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. During the three and six months ended March 31, 2021, a held-for-sale impairment charge of $2 million and $8 million, respectively, was recorded in EMEA. Restructuring charges during the three months and ninesix months ended June 30,March 31, 2020 primarily consist of workforce reductions and a $27 million pre-tax non-cash impairment charge related to long-lived assets in China. Restructuring charges during the three and nine months ended June 30, 2019 primarily consist of workforce reductions; the nine months ended June 30, 2019 also includes a $66 million non-cash impairment charge related to long-lived assets in the seat structure and mechanism operations.reductions.
(3) Reflects amortization of intangible assets including those related to partially owned affiliates recorded within equity income.
(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) ReflectsThe six months ended March 31, 2020 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) ReflectsThe three and six months ended March 31, 2021 reflects a pre-tax gain of $33 million on the sale of Adient's interest in SJA. The six months ended March 31, 2020 reflects the non-cash impairment of Adient's YFAI investment as described ininvestment. Refer to Note 3, "Acquisitions and Divestitures," of the notes to consolidated financial statements.
(7) The three months ended June 30, 2020March 31, 2021 reflects $4$7 million of transaction costs and the ninecosts. The six months ended June 30,March 31, 2021 reflects a one-time gain of $8 million associated with the retrospective recovery of indirect tax credits in Brazil resulting from a favorable court ruling, a $5 million gain on previously held interest at YFAS in an affiliate, and $11 million of transaction costs. The three months ended March 31, 2020 reflects $11$6 million of transaction costs. The six months ended March 31, 2020 reflects $7 million of transaction costs and $1 million of tax adjustments at YFAI. The three months ended June 30, 2019 reflects $1 million of Futuris integration costs and $2 million of transaction costs. The nine months ended June 30, 2019 reflects $4 million of Futuris integration costs and $2 million of transaction costs.

Adient plc | Form 10-Q | 2928


Geographic Information

Revenue by geographic area is as follows:

Net SalesNet SalesNet Sales
Three Months Ended
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)(in millions)2020201920202019(in millions)2021202020212020
AmericasAmericasAmericas
United StatesUnited States$519  $1,649  $3,469  $4,894  United States$1,486 $1,383 $3,034 $2,950 
MexicoMexico192  700  1,379  2,013  Mexico584 574 1,225 1,187 
Other AmericasOther Americas17  106  236  330  Other Americas82 96 174 219 
Regional eliminationRegional elimination(135) (445) (991) (1,377) Regional elimination(508)(412)(1,052)(856)
593  2,010  4,093  5,860  1,644 1,641 3,381 3,500 
EMEAEMEAEMEA
GermanyGermany150  375  765  1,106  Germany315 294 629 615 
Czech RepublicCzech Republic166  385  806  1,123  Czech Republic350 303 688 639 
Other EMEAOther EMEA571  1,500  3,217  4,412  Other EMEA1,389 1,310 2,774 2,647 
Regional eliminationRegional elimination(189) (508) (1,038) (1,471) Regional elimination(418)(419)(851)(849)
698  1,752  3,750  5,170  1,636 1,488 3,240 3,052 
AsiaAsiaAsia
ThailandThailand44  139  307  468  Thailand139 130 244 263 
ChinaChina130  126  372  410  China165 82 354 242 
JapanJapan34  104  262  389  Japan103 106 192 228 
Other AsiaOther Asia140  163  425  516  Other Asia186 127 363 286 
Regional eliminationRegional elimination(2) (2) (4) (4) Regional elimination(5)(1)(11)(3)
346  530  1,362  1,779  588 444 1,142 1,016 
Inter-segment eliminationInter-segment elimination(11) (73) (132) (204) Inter-segment elimination(49)(62)(96)(121)
TotalTotal$1,626  $4,219  $9,073  $12,605  Total$3,819 $3,511 $7,667 $7,447 

Adient plc | Form 10-Q | 30



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 June 30, 2020March 31, 2021 and September 30, 2019.2020. Equity in the net income of nonconsolidated partially-owned affiliates are reported in the "Equity income (loss)" line in the consolidated statements of income (loss) for the ninesix months ended June 30,March 31, 2021 and 2020, and 2019, respectively.

Adient plc | Form 10-Q | 29


Adient maintains total investments in partially-owned affiliates of $1.1$0.8 billion and $1.4$0.7 billion at June 30, 2020March 31, 2021 and September 30, 2019,2020, respectively. Operating information for nonconsolidated partially-owned affiliates is as follows:

Nine Months Ended
June 30,
Six Months Ended
March 31,
(in millions)(in millions)20202019(in millions)20212020
Income statement data:Income statement data:Income statement data:
Net salesNet sales$7,319  $11,736  Net sales$4,822 $5,457 
Gross profitGross profit$829  $1,358  Gross profit$534 $608 
Net incomeNet income$387  $494  Net income$326 $264 
Net income attributable to the entityNet income attributable to the entity$381  $480  Net income attributable to the entity$324 $259 

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


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 $11$10 million and $12$10 million at June 30, 2020March 31, 2021 and September 30, 2019,2020, 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.

Adient plc | Form 10-Q | 3130



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.

The following table sets forth the net sales to and purchases from related parties included in the consolidated statements of income:
Three Months Ended
June 30,
Nine Months Ended
June 30,
(in millions)2020201920202019
Net sales to related partiesNet sales$60  $97  $255  $277  
Purchases from related partiesCost of sales138  205  447  555  

Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)2021202020212020
Net sales to related partiesNet sales$69 $96 $139 $195 
Purchases from related partiesCost of sales148 132 294 309 

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)June 30,
2020
September 30,
2019
Accounts receivable due from related partiesAccounts receivable$61  $73  
Accounts payable due to related partiesAccounts payable87  137  

(in millions)March 31,
2021
September 30, 2020
Accounts receivable due from related partiesAccounts receivable$47 $49 
Accounts payable due to related partiesAccounts payable79 105 

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


Adient plc | Form 10-Q | 3231



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 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 other factors, some of which are beyond Adient’sAdient’s control, that could cause Adient’sAdient’s actual results to differ materially from those expressed or implied by such forward-looking statements, including, among others, Adient’s ability to consummate its strategic transactions in China, its deleveraging transactions or the amendment and extension of its Amended Agreement (collectively, the “Transactions”) that may yield additional value for shareholders at all or on the same or different terms as those described herein, the timing, benefits and outcomes of the Transactions, the effect of the announcements of the Transactions on Adient’s business relationships, operating results and business generally, the occurrence of any event, change or other circumstances that could give rise to the termination of the Transactions, the failure to satisfy conditions to consummation of the Transactions, including the receipt of regulatory approvals (and any conditions, limitations or restrictions placed on these approvals), risks related to:that the Transactions disrupt current plans and operations, including potential disruptions with respect to Adient’s employees, vendors, clients and customers as well as management diversion or potential litigation, the effects of local and national economic, credit and capital market conditions on the economy in general, and other risks and uncertainties, the continued financial and operational impacts of and uncertainties relating to the COVID-19 pandemic on Adient and its customers, suppliers, joint venture partners and other parties, the ability of Adient to closeexecute its sale of its fabrics business, including receipt of necessary regulatory approvals,turnaround plan, the ability of Adient to closeeffectively launch new business at forecast and profitable levels, the transactions subjectability of Adient to meet debt service requirements, the Yanfeng Agreement,terms of financing, the impact of tax reform legislation through the Tax Cuts and Jobs Act and/ or under the new U.S. presidential administration, uncertainties in U.S. administrative policy regarding trade agreements, tariffs and other international trade relations including as may be impacted by the ability of Adient to effectively launch new business at forecasted and profitable levels, the ability of Adient to execute its turnaround plan, the ability of Adient to identify, recruit and retain key leadership, the ability of Adient to meet debt service requirements, the terms of financing,change in U.S. presidential administration, general economic and business conditions, the strength of the U.S. or other economies, automotive vehicle production levels, mix and schedules, shifts in market shares among vehicles, vehicle segments or away from vehicles on which Adient significant content, changes in consumer demand, work stoppages and similar events, global climate change and related emphasis on ESG matters by various stakeholders, energy and commodity prices, the availability of raw materials and component products, currency exchange rates and cancellation of or changes to commercial arrangements.arrangements, and the ability of Adient to identify, recruit and retain key leadership. Additional information regarding these and other risks related to Adient’sAdient’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,II, Other Information - Item 1A of this report, as well as in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020, and Quarterly Report on Form 10-Q for the Quarterly Period ended December 31 2020, which are incorporated herein by reference. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included inwithin this report as well as within Part II, Item 8 of our Annual Report on Form 10-K for the Form 10-K.fiscal year ended September 30, 2020. All information presented herein is based on 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

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 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 and trim covers and fabrics.covers. Adient is a global seat supplier with 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 joint venture in China, Yanfeng Global Automotive Interior Systems Co., Ltd. (YFAI)

For recent developments regarding the planned divestitures of Adient's YFAI investment and the fabrics business, refer to Note 3, "Acquisitions and Divestitures," of the notes to consolidated financial statements.
Adient plc | Form 10-Q | 32


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 operates in 220202 wholly- and majority-owned manufacturing or assembly facilities, with operations in 3332 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").
Adient plc | Form 10-Q | 33




Recent Developments RegardingOn-Going Impact of COVID-19

The impact of the novel strain of the coronavirus identified in late 2019 (“COVID-19,”) has grown and related mutations, continues to be present throughout the world, including in all global and regional markets served by Adient. GovernmentalAlthough vaccines have been introduced that are expected to have the result of reducing the effect of COVID-19 and COVID-19 started to wane in certain geographic areas, it has seen a recent resurgence around the globe, and governmental authorities have implementedcontinue to implement numerous measures attempting to contain and mitigate the effects of COVID-19, including travel bans and restrictions, quarantines, social distancing orders, shelter in place orders and shutdowns of non-essential activities. Adient's manufacturing facilities are located in areas that have beencontinue to be affected by the pandemic. Adient's China facilities (including both consolidated and non-consolidated joint ventures) were effectively shut down during the lunar New Year festival (at

As previously disclosed, beginning at the end of January)January 2020 and did not return to operations until the end of March 2020. Currently, all of Adient's plants in China are operating and all of its customer plants in China have re-opened.

Beginning in late Marchcontinuing through June 2020, Adient experienced the shutdown of effectively all of its facilities in theall geographic regions (Asia, Americas and European regions coinciding with the shutdown of its customer facilitiesEMEA) at various points in those regions. Adient also experienced the shutdown of approximately 50% of its plants in Asia (outside China) during late March and early April. During May and June, productiontime. Production finally started to resume in all regions concurrent with Adient's customers resuming operations. Asand continued to ramp up through Adient’s fiscal fourth quarter, and as of June 30,December 31, 2020, the majorityvirtually all of Adient's plants havehad resumed production, but with production rates well below pre-pandemic levels. production.

It is likelypossible that the global automotive industry will experience significantly lower demand for new vehicle sales over the long-term as a result of the global economic slowdown caused by the COVID-19 pandemic because new vehicle sales are highly dependent on strong consumer confidence and low unemployment. Until consumers regain confidence in the markets and unemployment returns to lower levels, new vehicle sales will likelycould be significantly lower than historical and previously projected pre-pandemic sales levels.

Throughout fiscal year 2020 and into fiscal year 2021 Adient continues to actively monitor the threat and impacts of COVID-19. Adient has been actively monitoring the global outbreaktaken, and spread of COVID-19 and takingcontinues to take, steps to mitigate the potential risks to the Company posed by COVID-19 and its spread and related circumstances and impacts. In addition, Adient continues to assess and update its business continuity plans in the context of this pandemic, including analyzing constraints at its suppliers.suppliers, particularly labor-related shortages. Adient has taken precautions to help keep its workforce healthy and safe, including establishing a Global Response Team, implementing strict travel restrictions, enforcing rigorous hygiene protocols, increasing sanitization efforts at all facilities, enacting visitor restrictions, social distancing, face covering expectations, and temperature and health screenings and implementing remote working arrangements for the vast majority of Adient's employees who work outside the plants.

Adient took significant measures to reduce its overall cash burn rate (defined as net cash outflow associated with operating the company) during the shutdown, including the furlough of direct/salary plant workers, reductions of salaries in all areas of the globe and retirement benefits for U.S. employees outside the plants, reduced/delayed capex spending to coincide with the resumption of production and effectively eliminating all discretionary spending. The actions to reduce and defer compensation were global initiatives and included 20% salary reductions in the U.S. beginning on March 23, 2020 (with up to 10% incremental reductions and deferrals taking effect on April 13, 2020) and running until June 30, 2020, salary reductions of up to 20% for certain employees in many of the countries outside of the U.S., CEO salary reduction and deferral until July 15, 2020, and a 20% Board fee reduction. Effective July 1, 2020, Adient offered certain employees, including Adient’sAdient’s executive officers, RSUrestricted stock unit (RSU) awards in lieu of 10-30% of salary and other compensatory benefits that are being foregone by each recipient from the time period beginning July 1, 2020 through June 30, 2021. The RSU awards will vest in two tranches, with one half of the awards vesting six months from the grant date, and the remaining half vesting one year from the grant date.

In addition to the significant measures taken to reduce and contain costs, Adient has taken recent actiontook actions to provide additional liquidity, primarily including the draw down on its ABL revolving credit facility of $825 million at the end of March 2020 and the issuance of $600 million of senior secured notes due 2025 on April 20, 2020. Adient's ability to borrow against the ABL revolving credit facility is limited to its borrowing base, which consists primarily of accounts receivable, inventory and certain cash account balances at certain Adient subsidiaries. Such working capital account balances have decreased, as expected,Adient repaid $825 million of the ABL revolving credit facility during the third quarterand fourth quarters of fiscal 2020 as a result of the production shutdown. Adient therefore repaid $646 million during the third quarter of fiscal 2020, resulting in $179 million outstanding and $155maintains $945 million of availability under the ABL revolving credit facility as of June 30, 2020. During July 2020, Adient voluntarily repaid the outstanding balance of the ABL revolving credit balance.March 31, 2021.

Adient plc | Form 10-Q | 33


The recent automotive production shutdown across most of the world hasin fiscal 2020 also significantly impacted Adient’sAdient’s daily working capital. During the third quarter of fiscal 2020, Adient experienced significantly lower trade working capital balances (accounts receivable, inventory and accounts payable) due to the shutdown of production in the early part of the third quarter and resumption of production only toward the latter part of the quarter. Trade working capital was favorably impacted during the
Adient plc | Form 10-Q | 34


early part of the third quarter but was more than offset by the unfavorable impact to trade working capital during the latter part of the quarter. The continuing resumption of production in the fourth quarter is expected to haveof fiscal 2020 had a favorable impact to trade working capital as Adient returnsreturned to a more stabilized production run rate.

Adient expects to close on the sale of its YFAI joint venture investment (as part of the broader YF China transactions announced on January 31, 2020 and as modified on June 24, 2020) by the end of FY2020, providing additional liquidity of approximately $334 million. Adient also expects to close on the sale of its fabrics business by the end of FY2020, providing additional liquidity of approximately $175 million. Both transactions are subject to customary closing conditions and regulatory approvals in certain jurisdictions. Adient cannot guarantee that the closing conditions contained in the respective purchase agreements related to the sale of YFAI or the sale of the fabrics business will be satisfied or waived, or that the sale of YFAI and/or the sale of the fabrics business will be completed within the respective expected timeframes, on the respective proposed terms, or at all.

Adient has also pursued, wherever it qualifies, governmental assistance during this time.assistance. For example, Adient has begunbeen deferring the employer portion of FICA until FY2021fiscal 2021 or beyond and deferring VAT payments. Adient is seeking to take advantage of all such assistance to either defer payments to government authorities or to receive cash to help defray operating costs. Adient cannot guarantee that it will continue to qualify for, or receive any of, the assistance that it is pursuing.

Finally, Adient’s Chinese joint ventures are expected to pay dividends to Adient during the fiscal year ending September 30, 2020 of approximately $280 million, of which approximately $250 million had been received as of June 30, 2020. Adient, however, cannot guarantee the collection of the remaining cash dividends from its non-consolidated joint ventures.

The spread of COVID-19 and the measures taken to restrain the spread of the virus have had, and willmay continue to have, a material negative impact on Adient's financial results and liquidity, and such negative impact may continue well beyond the containment of such outbreak.COVID-19 through the results of widespread use of the vaccine or otherwise. Adient cannot assure that the assumptions used to estimate its liquidity requirements will be correct because it has never previously experienced such a widespread cessation of its operations as it experienced during fiscal year 2020, and it is unclear what the lasting impacts of the slowdown in the third quarter of fiscal 2020.automotive industry will be. In addition, the magnitude, duration, speed and potential resurgence or surges of the global pandemic isare all uncertain. Consequently, the impact of the pandemic and its myriad of effects on Adient's business, financial condition or longer-term financial or operational results areremain uncertain. Based on the actions it has taken and theits current assumptions regarding the impact of COVID-19, Adient believes that its current financial resources will be sufficient to fund the company's liquidity requirements for at least the next twelve months.


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. InDuring fiscal 2020, automotive production across the thirdglobe declined due to the economic slow down resulting from the COVID-19 pandemic. During the second quarter of fiscal 2020,2021, automotive light vehicle production on ais largely consistent with prior year, except that China has recovered from prior year operational interruptions due to COVID-19.

The global basis decreased significantly comparedautomotive industry is experiencing supply chain disruptions related to the third quarter of fiscal 2019. The significant decreasesemiconductor and petrochemical shortages. Adient continues to closely monitor these disruptions as well as material economics related to steel pricing in global light vehicle production during the first nine months of fiscal 2020 is primarily attributablean effort to minimize the impact of COVID-19, which causedsuch matters. Refer to the vast majoritydiscussion below, including the segment analysis, for additional information on the impacts of global production to be suspended by OEM's, starting in China primarily during February and March 2020 followed by Americas, Europe and other Asian countries during March 2020. During May and June, production started to resume in all regions.these items on Adient's results.

Light vehicle production levels by geographic region are provided below:

Light Vehicle ProductionLight Vehicle Production
Three Months Ended
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(units in millions)(units in millions)2020Change20192020Change2019(units in millions)2021Change20202021Change2020
GlobalGlobal12.0  (45.2)%21.9  52.0  (23.3)%67.8  Global20.0 13.6%17.6 43.2 8.0%40.0 
North AmericaNorth America1.3  (69.0)%4.2  8.9  (28.8)%12.5  North America3.6 (5.3)%3.8 7.5 (1.3)%7.6 
South AmericaSouth America0.2  (77.8)%0.9  1.6  (36.0)%2.5  South America0.7 —%0.7 1.4 —%1.4 
EuropeEurope2.1  (64.4)%5.9  12.0  (29.0)%16.9  Europe4.7 (2.1)%4.8 10.0 —%10.0 
ChinaChina6.0  9.1%5.5  16.6  (10.8)%18.6  China5.8 75.8%3.3 13.6 28.3%10.6 
Asia, excluding China, and OtherAsia, excluding China, and Other2.4  (55.6)%5.4  12.9  (25.4)%17.3  Asia, excluding China, and Other5.2 4.0%5.0 10.7 2.9%10.4 
Source: IHS Automotive, July 2020
Source: IHS Automotive, April 2021Source: IHS Automotive, April 2021

Adient plc | Form 10-Q | 35



Financial Results Summary
Significant aspects of Adient's financial results for the thirdsecond quarter of fiscal 20202021 include the following:
Adient plc | Form 10-Q | 34


Adient recorded net sales of $1,626$3,819 million for the thirdsecond quarter of fiscal 2020,2021, representing a decreasean increase of $2,593$308 million or 61%9% when compared to the thirdsecond quarter of fiscal 2019. Adient recorded net sales of $9,073 million for the first nine months of fiscal 2020, representing a decrease of $3,532 million, or 28% when compared to the first nine months of fiscal 2019.2020. The decreaseincrease in net sales is primarilyattributable to prior year operational interruptions due to COVID-19, the significant operational interruptions causedfavorable impact of foreign currencies, favorable commercial settlements and material economics, partially offset by prior year divestitures primarily consisting of the COVID-19 pandemic which resulted in lower sales volumes across all regions. fabrics businesses.
Gross profit was a loss of $153$298 million, or (9.4)%7.8% of net sales for the thirdsecond quarter of fiscal 20202021 compared to $211$237 million, or 5.0%6.8% of net sales for the thirdsecond quarter of fiscal 2019. Gross profit was $347 million, or 3.8% of net sales for the first nine months of fiscal 2020 compared to $588 million, or 4.7% of net sales for the first nine months of fiscal 2019.2020. Profitability, including gross profit as a percentage of net sales, was lowerhigher due to higher current quarter volumes primarily resulting from prior year operational interruptions due to COVID-19, the favorable impact of significantly lower sales volumes across all regions drivenforeign currencies, favorable commercial settlements and operational improvements, partially offset by the impactoperational inefficiencies and premium freight caused by unplanned production stoppages resulting from semiconductor and petrochemical shortages, and unfavorable impacts of COVID-19.material economics, net of recoveries.
Equity income was $48$85 million for the thirdsecond quarter of fiscal 2020,2021, compared to $64$8 million for the thirdsecond quarter of fiscal 2019.2020. The decreaseincrease is primarily attributable to the prior year impact for the planned divestiture of YFAI ($15 million) and the non-cash impairment of Adient's YFAI investment ($6 million), partially offset by the resumption of production within Adient's affiliates in China. Equity loss was $57 million for the first nine months of fiscal 2020, compared to equity income of $209 million for the first nine months of fiscal 2019. The decrease on a year-to-date basis is primarily attributable to a $222 million non-cash impairment of Adient's YFAI investment and to theCOVID-19 which caused lower production volumes at Adient's China affiliates and a $33 million one-time pre-tax gain associated with the sale of Adient's interest in SJA, a nonconsolidated partially-owned affiliate in China, during the second and third quarters of fiscal 2020 due to the impact of COVID-19.current quarter.

Net lossincome attributable to Adient was $325$69 million for the thirdsecond quarter of fiscal 2020,2021, compared to $321$19 million of net loss attributable to Adient for the thirdsecond quarter of fiscal 2019.2020. The higher level of lossincome in the thirdsecond quarter of fiscal 20202021 is primarily attributable to the overall decrease of profitability in fiscal 2020higher current quarter volumes primarily resulting from significantly lower volumesprior year operational interruptions due to COVID-19, along with increased restructuring and impairment costs of $34 million and a $6 million non-cash impairment charge on Adient's YFAI investment in the current year, offset by a lower income tax provision for the third quarter of fiscal 2020 of $333 million due to prior year valuation allowance charges, and lower overall SG&A of $50 million. Net loss attributable to Adient for the first nine months of 2020 was $511 million, compared to a net loss attributable to Adient of $487 million during the first nine months of fiscal 2019. The year over year increase in net loss attributable to Adient is primarily due to the impact of having significantly lower volumes due to COVID-19 along with a one-time non-cash impairment charge of $222 million on Adient's YFAI investment, a $25 million lossgain on the sale of the RECARO business and deconsolidation of Adient Aerospace,Adient's interest in SJA, a $27 million non-cash impairment charge related to long-lived assetsnonconsolidated partially-owned affiliate in China, and overallhigher equity income primarily at Adient's China affiliates, partially offset by higher net financing costs, partially offset by operating improvements and lower administrativecharges which included a $10 million write off of deferred financing costs and one-time charges in the prior year related$45 million of premium paid to impairment in the seat structuresrepurchase debt, and mechanism businesshigher overall selling, general and income tax charges to establish valuation allowances.administrative expense of $21 million including higher stock-based compensation and incentive compensation costs.

Adient plc | Form 10-Q | 3635


Consolidated Results of Operations

Three Months Ended
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)(in millions)2020Change20192020Change2019(in millions)2021Change20202021Change2020
Net salesNet sales$1,626  -61%$4,219  $9,073  -28%$12,605  Net sales$3,819 9%$3,511 $7,667 3%$7,447 
Cost of salesCost of sales1,779  -56%4,008  8,726  -27%12,017  Cost of sales3,521 8%3,274 7,028 1%6,947 
Gross profitGross profit(153) > -100%211  347  -41%588  Gross profit298 26%237 639 28%500 
Selling, general and administrative expensesSelling, general and administrative expenses115  -30%165  407  -20%511  Selling, general and administrative expenses148 17%127 297 2%292 
Loss on business divestitures - netLoss on business divestitures - net—  n/a—  25  n/a—  Loss on business divestitures - net— —%— — n/a25 
Restructuring and impairment costsRestructuring and impairment costs49  > 100%15  103  -35%159  Restructuring and impairment costs-90%52 12 -78%54 
Equity income (loss)Equity income (loss)48  -25%64  (57) > -100%209  Equity income (loss)85 > 100%182 > 100%(105)
Earnings (loss) before interest and income taxesEarnings (loss) before interest and income taxes(269) > -100%95  (245) > -100%127  Earnings (loss) before interest and income taxes230 > 100%66 512 > 100%24 
Net financing chargesNet financing charges58  -3%60  156  16%135  Net financing charges110 > 100%50 169 72%98 
Other pension expense (income)Other pension expense (income)(1) > -100% (5) > -100% Other pension expense (income)(2)—%(2)(4)—%(4)
Income (loss) before income taxesIncome (loss) before income taxes(326) > -100%30  (396) > 100%(11) Income (loss) before income taxes122 > 100%18 347 > 100%(70)
Income tax provision (benefit)Income tax provision (benefit) -99%338  75  -82%412  Income tax provision (benefit)28 75%16 80 14%70 
Net income (loss)Net income (loss)(331) -7%(308) (471) -11%(423) Net income (loss)94 > 100%267 > 100%(140)
Income (loss) attributable to noncontrolling interestsIncome (loss) attributable to noncontrolling interests(6) > -100%13  40  -38%64  Income (loss) attributable to noncontrolling interests25 19%21 48 4%46 
Net income (loss) attributable to AdientNet income (loss) attributable to Adient$(325) -1%$(321) $(511) -5%$(487) Net income (loss) attributable to Adient$69 > 100%$(19)$219 > 100%$(186)


Net Sales
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)2021Change20202021Change2020
Net sales$3,819 9%$3,511 $7,667 3%$7,447 

Three Months Ended
June 30,
Nine Months Ended
June 30,
(in millions)2020Change20192020Change2019
Net sales$1,626  -61%$4,219  $9,073  -28%$12,605  
Net sales increased by $308 million, or 9%, in the second quarter of fiscal 2021 as compared to the second quarter of fiscal 2020 due to higher volumes across all regions which was primarily the result of prior year operational interruptions due to COVID-19 and despite certain unplanned production stoppages resulting from semiconductor and petrochemical shortages ($194 million), the favorable impact of foreign currencies as the U.S. dollar remained weaker against other major currencies ($121 million), the favorable impact of material economics recoveries ($15 million) and commercial settlements ($10 million), partially offset by the impact of prior year divestitures primarily consisting of the fabrics business ($32 million).

Net sales increased by $220 million, or 3%, in the first six months of fiscal 2021 as compared to the first six months of fiscal 2020 primarily due to higher volumes in EMEA and Asia resulting from prior year operational interruptions due to COVID-19 ($178 million), the favorable impact of foreign currencies as the U.S. dollar remained weaker against other major currencies ($189 million), the favorable impact of material economics recoveries ($8 million) and commercial settlements ($29 million), partially offset by lower volumes in Americas due to timing of new program launches and certain unplanned production stoppages resulting from semiconductor and petrochemical shortages ($79 million), and the impact of prior year divestitures primarily consisting of the RECARO and fabrics businesses ($105 million).

Net
Adient plc | Form 10-Q | 36


Cost of Sales / Gross Profit
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)2021Change20202021Change2020
Cost of sales$3,5218%$3,274$7,0281%$6,947
Gross profit$29826%$237$63928%$500
% of sales7.8 %6.8 %8.3 %6.7 %

Cost of sales decreasedincreased by $2,593$247 million, or 61%8%, and gross profit increased by $61 million, or 26%, in the thirdsecond quarter of fiscal 20202021 as compared to the thirdsecond quarter of fiscal 2019 primarily2020. The year over year increase in cost of sales was due to lowerhigher volumes in all regions attributable to the significant interruption to Adient's global operations caused by COVID-19,($151 million), the unfavorable impact of foreign currencycurrencies ($106110 million), operational inefficiencies including premium freight and unplanned production stoppages resulting from semiconductor and petrochemical shortages and to a lesser extent COVID-19 related costs ($39 million), higher commodity costs ($23 million), partially offset by the prior year divestitures primarily consisting of the fabrics business ($23 million) and operational performance improvements ($53 million). Gross profit was favorably impacted by higher overall volumes, the favorable impact of foreign currencies, and favorable commercial settlements and net pricing adjustments.

Cost of sales increased by $81 million, or 1% and gross profit increased by $139 million, or 28%, in the first six months of fiscal 2021 as compared to the first six months of fiscal 2020. The cost of sales year-over-year increase is primarily attributable to higher sales volumes primarily in EMEA and Asia ($47 million), the unfavorable impact of foreign currencies ($175 million), higher commodity costs ($26 million), and operational inefficiencies including premium freight and unplanned production stoppages resulting from semiconductor and petrochemical shortages and to a lesser extent COVID-19 related costs ($51 million), partially offset by the impact of prior year divestitures primarily consisting of the RECARO and fabrics businesses ($77 million), overall operational performance improvements ($131 million), and one-time gain associated with retrospective recoveries of Brazil indirect tax credits ($8 million). The increase in gross profit was due to higher overall volumes, the favorable impact of foreign currencies, and business performance improvements including lower launch inefficiencies, reductions in operational waste and freight, and favorable commercial settlements and net pricing adjustments, partially offset by higher commodity costs. Refer to the segment analysis below for a discussion of segment profitability.


Selling, General and Administrative Expenses
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)2021Change20202021Change2020
Selling, general and administrative expenses$14817%$127$2972%$292
% of sales3.9%3.6%3.9%3.9%

Selling, general and administrative expenses (SG&A) increased by $21 million, or 17% in the second quarter of fiscal 2021 as compared to the second quarter of fiscal 2020. The year over year increase in SG&A is attributable to higher compensation costs, including stock-based compensation ($16 million) and other compensation due to lower levels of certain incentive compensation, and to a lesser extent other benefits, in the prior year that were not expected to recur ($28 million), the unfavorable impact of foreign currencies ($7 million), and higher transaction costs ($1 million), partially offset by lower overall engineering and other administrative spending ($17 million), prior year fabrics administrative costs ($7 million), prior year restructuring related to RECAROcharges ($452 million), and lower depreciation and amortization expense ($5 million). Refer to the segment analysis below for a discussion of segment net sales. profitability.

Net sales decreasedSelling, general and administrative expenses (SG&A) increased by $3,532$5 million, or 28%,2% in the first ninesix months of fiscal 20202021 as compared to the first ninesix months of fiscal 2019 primarily2020. SG&A was unfavorably impacted by higher compensation costs, including stock-based compensation ($25 million) and other compensation due to the significant operational interruptions relatedlower levels of certain incentive compensation, and to COVID-19 startinga lesser extent other benefits, in the second quarterprior year that were not expected to recur ($27 million), the unfavorable impact of fiscal 2020 which resulted in lower sales volumes across all regions, unfavorable foreign currency impactcurrencies ($23213 million), and the impact of divestitures primarily related to RECAROhigher transaction costs ($834 million), partially offset by favorable commercial settlementslower overall engineering and net pricing adjustments, including material economics, net of recoveries.other administrative spending ($38 million), prior year RECARO and fabrics administrative costs ($18 million), prior year restructuring related charges ($2 million), and lower depreciation and amortization expense ($6 million). Refer to the segment analysis below for a discussion of segment net sales.profitability.


Cost of Sales / Gross Profit
Three Months Ended
June 30,
Nine Months Ended
June 30,
(in millions)2020Change20192020Change2019
Cost of sales$1,779  -56%$4,008  $8,726  -27%$12,017  
Gross profit$(153) > -100%$211  $347  -41%$588  
% of sales(9.4)%5.0 %3.8 %4.7 %

Adient plc | Form 10-Q | 37


Cost of sales decreased by $2,229 million, or 56%, and gross profit decreased by $364 million, or 173%, in the third quarter of fiscal 2020 as compared to the third quarter of fiscal 2019. The year over year decrease in cost of sales was primarily due to the decrease in sales volumes along with overall business performance improvements, the favorable impact of foreign currency ($92 million), and the impact of divestitures primarily related to RECARO ($46 million). Gross profit was negatively impacted by the lower sales volume due to the COVID-19 impact, partially offset by the impact of business performance improvements including lower launch inefficiencies, and reductions in operational waste and freight along with favorable commercial settlements and net pricing adjustments. Refer to the segment analysis below for a discussion of segment profitability.

Cost of sales decreased by $3,291 million, or 27% and gross profit decreased by $241 million, or 41%, in the first nine months of fiscal 2020 as compared to the first nine months of fiscal 2019. The cost of sales year over year decrease is primarily attributable to lower sales volumes along with overall business performance improvements, the favorable impact of foreign currency ($212 million), and impact of divestitures primarily related to RECARO ($85 million). Gross profit was negatively impacted by the lower sales volume due to the COVID-19 impact, partially offset by the impact of business performance improvements including lower launch inefficiencies, and reductions in operational waste and freight along with favorable commercial settlements and net pricing adjustments. Refer to the segment analysis below for a discussion of segment profitability.


Selling, General and Administrative Expenses
Three Months Ended
June 30,
Nine Months Ended
June 30,
(in millions)2020Change20192020Change2019
Selling, general and administrative expenses$115  -30%$165  $407  -20%$511  
% of sales7.1 %3.9 %4.5 %4.1 %

Selling, general and administrative expenses (SG&A) decreased by $50 million, or 30% in the third quarter of fiscal 2020 as compared to the third quarter of fiscal 2019. The year over year decrease in SG&A is attributable to lower overall administrative and engineering spending of $32 million, including lower levels of incentive compensation and discretionary spending which are not expected to recur as part of the annual SG&A run rate, prior year Adient Aerospace and RECARO administrative costs of $13 million, and lower share based compensation expense of $1 million, partially offset by higher transaction costs related to the planned divestitures of YFAI and the fabrics business of $2 million. Refer to the segment analysis below for a discussion of segment profitability.

Selling, general and administrative expenses (SG&A) decreased by $104 million, or 20% in the first nine months of fiscal 2020 as compared to the first nine months of fiscal 2019. SG&A was favorably impacted by lower overall administrative and engineering spending of $71 million, including lower levels of incentive compensation and discretionary spending which are not expected to recur as part of the annual SG&A run rate, prior year Adient Aerospace and RECARO administrative costs of $29 million, and lower share based compensation expense of $8 million, partially offset by higher transaction costs related to the planned divestiture of YFAI and the fabrics business of $8 million. Refer to the segment analysis below for a discussion of segment profitability.


(Gain) Loss on Business Divestitures - net
Three Months Ended
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)(in millions)2020Change20192020Change2019(in millions)2021Change20202021Change2020
Loss on business divestitures - net$—  n/a$—  $25  n/a$—  
(Gain) loss on business divestitures - net(Gain) loss on business divestitures - net$— —%$— $— n/a$25 

The loss on business divestitures forin the first ninesix months of fiscal 2020 is comprised of a $21 million loss on the 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 notes to the consolidated financial statements for information related to these divestitures.


Adient plc | Form 10-Q | 38


Restructuring and Impairment Costs
Three Months Ended
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)(in millions)2020Change20192020Change2019(in millions)2021Change20202021Change2020
Restructuring and impairment costsRestructuring and impairment costs$49  > 100%$15  $103  -35%$159  Restructuring and impairment costs$-90%$52 $12 -78%$54 

Restructuring and impairment costs were higherlower by $34$47 million during the thirdsecond quarter of fiscal 2020 due primarily to one-time non-cash impairment charges of long-lived assets in China ($27 million),2021 and lower by $56$42 million during the ninesix months ended June 30, 2020March 31, 2021 due primarily to one-time non-cash impairment charges in the prior year related to the seat structures and mechanisms business ($66 million) and to overall lower levels of restructuring actions recorded in 2020.taken. Refer to Note 3, "Acquisitions and Divestitures," and Note 13, "Restructuring and Impairment Costs," of the notes to the consolidated financial statements for information related to Adient's restructuring plans.


Equity Income (Loss)
Three Months Ended
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)(in millions)2020Change20192020Change2019(in millions)2021Change20202021Change2020
Equity income (loss)Equity income (loss)$48  -25%$64  $(57) > -100%$209  Equity income (loss)$85 > 100%$$182 > 100%$(105)


Equity income was $48$85 million for the thirdsecond quarter of fiscal 2020,2021, compared to $64$8 million of income in the thirdsecond quarter of fiscal 2019.2020. The decreaseincrease is primarily attributable to the impact forof prior year operational interruptions at Adient's China affiliates due to COVID-19, and a $33 million one-time pre-tax gain associated with the planned divestiture of YFAI ($15 million) and the non-cash impairmentsale of Adient's YFAI investment ($6 million), partially offset byinterest in SJA, a nonconsolidated partially-owned affiliate in China, during the resumptioncurrent quarter. Adient sold the equity interest for $58 million. Net proceeds of production within Adient's affiliates$53 million were received in China. April 2021.

Equity lossincome was $57$182 million for the first ninesix months of fiscal 2020, which is $266 million lower2021, compared to a loss of $105 million for the first ninesix months of fiscal 2019.2020. The change is primarily attributable to the $222 millionprior year non-cash impairment charge recorded during the first nine months of fiscal 2020 related to Adient's YFAI investment anddivestiture ($216 million), a one-time gain associated with the impact fromsale of Adient's interest in SJA, a nonconsolidated partially-owned affiliate in China, during the planned divestiture of YFAIcurrent quarter ($1933 million) along with, prior year lower production volumes within Adient's China affiliates in China due to the impact of COVID-19 during the second quarter of fiscal 2020, and a one-time gain on previously held interest at YFAS in an affiliate during the first quarter of fiscal 2021 ($5 million), partially offset by $10 million ofprior year tax benefits from tax credits at various China affiliates that are not expected to recur. recur ($10 million).


Net Financing Charges
Three Months Ended
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)(in millions)2020Change20192020Change2019(in millions)2021Change20202021Change2020
Net financing chargesNet financing charges$58  -3%$60  $156  16%$135  Net financing charges$110 > 100%$50 $169 72%$98 

Net financing charges decreasedincreased in the third second quarter of fiscal 2021 as compared to the second quarter of fiscal 2020 primarily as compared toa result of premium paid on repurchase of debt ($45 million), a write off of the third quarter of fiscal 2019 due to a $13 million one-time charge in the prior year ofassociated deferred financing fees in conjunction with the debt refinancing in the third quarter of fiscal 2019, partially offset bycosts ($10 million), and higher levels of outstanding debt and higher average interest rates induring the current year. Net financing charges increased inquarter. Refer to Note 8, "Debt and Financing Arrangements," of the nine months ended June 30, 2020 as comparednotes to the nine months ended June 30, 2019 dueconsolidated financial statements for further information related to higher levels of outstandingAdient's debt and to higher average interest rates intransactions during the current year, partially offset byquarter and components of the $13 million one-time charge of deferrednet financing fees in the prior year. charges.
Adient plc | Form 10-Q | 38




Other Pension Expense (Income)
Three Months Ended
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)(in millions)2020Change20192020Change2019(in millions)2021Change20202021Change2020
Other pension expense (income)Other pension expense (income)$(1) > -100%$ $(5) > -100%$ Other pension expense (income)$(2)—%$(2)$(4)—%$(4)

Other pension expense (income) for the three and nine months ended June 30, 2020 included a $2 million pension settlement expense related to the settlement of two plans in the United States. Other pension expense (income) for the three and nine months ended June 30, 2019 included a $6 million mark-to-market expense related to the remeasurement of a United Kingdom
Adient plc | Form 10-Q | 39


pension plan.income remained consistent year over year. Refer to Note 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
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)(in millions)2020Change20192020Change2019(in millions)2021Change20202021Change2020
Income tax provision (benefit)Income tax provision (benefit)$ -99%$338  $75  -82%$412  Income tax provision (benefit)$28 75%$16 $80 14%$70 

DuringThe second quarter of fiscal 2021 income tax expense of $28 million was higher than the thirdstatutory rate of 12.5% primarily due to foreign tax rate differentials and the inability to record a tax benefit for losses in jurisdictions with valuation allowances. The second quarter of fiscal 2020 income tax expense of $5$16 million was recognized ratherhigher than a tax benefit that would have been recognized by applying the statutory rate of 12.5% against pre-tax losses, primarily due to the impact of recognizing no tax benefit for losses in jurisdictions with valuation allowances, partially offset by a $5 million tax benefit related to the impairment charge recorded in the Asia segment related to customer relationship intangible assets. The third quarter of fiscal 2019 income tax expense of $338 million primarily resulted from an income tax charge of $254 million to establish valuation allowances in Luxembourg and the United Kingdom and an income tax charge of $48 million to recognize the year-to-date impact of Adient's updated annualized tax rate, driven by the valuation allowances recorded in the third quarter of fiscal 2019.

During the first nine months of fiscal 2020 income tax expense of $75 million was recognized rather than a tax benefit that would have been recognized by applying the statutory rate of 12.5% against pre-tax losses, primarily due to the impact of recognizing no tax benefit for losses in jurisdictions with valuation allowances and $6an $8 million tax expense associated with foreign currency remeasurement of foreign denominated deferred tax assets.

The first six months of fiscal 2021 income tax expense of $80 million was higher than the statutory rate of 12.5% primarily due to foreign tax rate differentials and the inability to record a tax benefit for losses in jurisdictions with valuation allowances. The first six months of fiscal 2020 income tax expense of $70 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 and an $8 million tax expense associated with foreign currency remeasurement of Mexican peso deferred tax assets, partially offset by a $4 million tax benefit associated with the impairment of Adient’sAdient’s YFAI investment and a $5 million tax benefit related to the impairment charge recorded in the Asia segment related to customer relationship intangible assets. The first nine months of fiscal 2019 income tax expense of $412 million resulted primarily from establishing valuation allowances in Luxembourg, Poland, and the United Kingdom and the impact of recognizing no tax benefit for losses in jurisdictions with valuation allowances, partially offset by a tax rate change at a consolidated affiliate in China.investment.


Income Attributable to Noncontrolling Interests
Three Months Ended
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)(in millions)2020Change20192020Change2019(in millions)2021Change20202021Change2020
Income (loss) attributable to noncontrolling interestsIncome (loss) attributable to noncontrolling interests$(6) > -100%$13  $40  -38%$64  Income (loss) attributable to noncontrolling interests$25 19%$21 $48 4%$46 

The decreaseincrease in income attributable to noncontrolling interests for the threethree-months and nine monthssix-months ended June 30, 2020 isMarch 31, 2021 when compared to the same period in the prior year was primarily attributable to prior year lower income resulting from lower volumes, caused byattributable primarily to the impact of COVID-19 pandemic at certain Seating affiliates in varying jurisdictions in the current periods. jurisdictions.


Net Income (Loss) Attributable to Adient
Three Months Ended
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)(in millions)2020Change20192020Change2019(in millions)2021Change20202021Change2020
Net income (loss) attributable to AdientNet income (loss) attributable to Adient$(325) -1%$(321) $(511) -5%$(487) Net income (loss) attributable to Adient$69 > 100%$(19)$219 > 100%$(186)

Net lossincome attributable to Adient was $325$69 million for the thirdsecond quarter of fiscal 20202021, compared to $321$19 million of net loss attributable to Adient for the thirdsecond quarter of fiscal 2019.2020. The higher level of net lossincome in the thirdsecond quarter of fiscal 20202021 is primarily attributable to the overall decrease in profitability in fiscal 2020higher current quarter volumes primarily resulting from significantly lower volumesprior year operational interruptions due to COVID-19, along with increased restructuring and impairment costsa one-time gain on the sale of $34 million andinterest in a $6 million non-cash impairment charge onnonconsolidated partially-owned affiliate in China, higher equity income at Adient's YFAI investment in the current year,China affiliates, partially offset by higher net financing charges which included a lower income tax provision for the third quarter$10 million write off of fiscal 2020deferred
Adient plc | Form 10-Q | 39


financing costs and $45 million of $333premium paid to repurchase debt, and higher overall selling, general and administrative expense of $21 million due to a prior year valuation allowance changeincluding higher stock-based and lower overall SG&A of $50 million.performance-based incentive compensation costs.

Net lossincome attributable to Adient for the first ninesix months of 20202021 was $511$219 million compared to a net loss attributable to Adient of $487$186 million duringfor the first ninesix months of fiscal 2019.2020. The year over year increase in net lossincome attributable to Adient is
Adient plc | Form 10-Q | 40


primarily due to the impact of having significantly lower volumes due to COVID-19 along with aprior year one-time non-cash impairment charge of $222$216 million on Adient's YFAI investment, athe prior year $25 million loss on business divestitures including the sale of the RECARO business and deconsolidation of Adient Aerospace, higher current year volumes in EMEA and overallAsia, lower operational wastes, lower restructuring costs, favorable commercial settlements, and a current year one-time gain associated with sale of an equity interest in a partially-owned affiliate in China, partially offset by higher net financing costs, offset bycharges, higher profitability levels in fiscal 2020 resulting from operating improvements and lower administrativestock-based compensation costs and one-time charges in the prior year related to impairment in the seat structures and mechanism business of $66 million and income tax charges to establish valuation allowances of $43 million. other performance-based incentive compensation costs.


Comprehensive Income (Loss) Attributable to Adient
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)2021Change20202021Change2020
Comprehensive income (loss) attributable to Adient$32 > 100%$(205)$265 > 100%$(307)

Three Months Ended
June 30,
Nine Months Ended
June 30,
(in millions)2020Change20192020Change2019
Comprehensive income (loss) attributable to Adient$(293) 14%$(341) $(600) (32)%$(455) 

Comprehensive lossincome attributable to Adient was $293$32 million for the thirdsecond quarter of fiscal 20202021 compared to $341$205 million of comprehensive loss for the thirdsecond quarter of fiscal 2019.2020. The decreased level ofincrease in comprehensive lossincome attributable to Adient in the thirdsecond quarter of fiscal 20202021 is primarily due to the favorable impact inhigher net income ($92 million), less unfavorable foreign currency translation adjustments ($41106 million) primarily related to Chinese yuan, favorable impact in, lower realized and unrealized losses on derivatives ($1951 million), andpartially offset by the decreaseincrease in comprehensive income attributable to noncontrolling interests ($1112 million), offset by higher levels of net loss ($23 million).

Comprehensive lossincome attributable to Adient was $600$265 million for the first ninesix months of fiscal 20202021 compared to a comprehensive loss attributable to Adient of $455$307 million for the first ninesix months of fiscal 2019.2020. The increased level of comprehensive lossincome attributable to Adient in the first ninesix months of fiscal 20202021 is primarily due to higher net income ($407 million), the unfavorable impactfavorable change in foreign currency translation adjustments resulting from overall weakening of emerging market currencies ($98119 million), unfavorable impact and favorable change in realized and unrealized losses on derivatives ($29 million), and the unfavorable impact of higher levels of net loss ($4864 million), partially offset by the decreaseincrease in comprehensive income attributable to noncontrolling interests ($2918 million).


Segment Analysis

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").

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, 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.

The results for the three months and nine months ended June 30, 2020 presented below are not necessarily indicative of full-year results, particularly for fiscal 2020 givendue to the unprecedented situationon-going impacts of the COVID-19 pandemic that Adient is currently facing with the COVID-19 pandemic and the related significant interruption the impacts of the pandemic is having on Adient's operations.facing. Refer to the Recent Developments RegardingOn-Going Impact of COVID-19 section earlier in Item 2. of this Report, and to Part II, Item 1.A.the Risk Factors set forth in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020, for additional information related to the COVID-19 impacts on Adient.

Adient plc | Form 10-Q | 40


Financial information relating to Adient's reportable segments is as follows:
Adient plc | Form 10-Q | 41



Three Months Ended
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)(in millions)2020201920202019(in millions)2021202020212020
Net SalesNet SalesNet Sales
AmericasAmericas$593  $2,010  $4,093  $5,860  Americas$1,644 $1,641 $3,381 $3,500 
EMEAEMEA698  1,752  3,750  5,170  EMEA1,636 1,488 3,240 3,052 
AsiaAsia346  530  1,362  1,779  Asia588 444 1,142 1,016 
EliminationsEliminations(11) (73) (132) (204) Eliminations(49)(62)(96)(121)
Total net salesTotal net sales$1,626  $4,219  $9,073  $12,605  Total net sales$3,819 $3,511 $7,667 $7,447 

Three Months Ended
June 30,
Nine Months Ended
June 30,
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)(in millions)2020201920202019(in millions)2021202020212020
Adjusted EBITDAAdjusted EBITDAAdjusted EBITDA
AmericasAmericas$(83) $69  $117  $146  Americas$64 $106 $196 $200 
EMEAEMEA(94) 53  17  114  EMEA141 62 255 111 
AsiaAsia71  110  311  387  Asia121 63 272 240 
Corporate-related costs (1)
Corporate-related costs (1)
(16) (27) (59) (75) 
Corporate-related costs (1)
(23)(20)(42)(43)
Restructuring and impairment costs (2)
Restructuring and impairment costs (2)
(49) (15) (103) (159) 
Restructuring and impairment costs (2)
(5)(52)(12)(54)
Purchase accounting amortization (3)
Purchase accounting amortization (3)
(9) (11) (30) (32) 
Purchase accounting amortization (3)
(10)(11)(21)(21)
Restructuring related charges (4)
Restructuring related charges (4)
(5) (5) (17) (27) 
Restructuring related charges (4)
(2)(7)(6)(12)
Loss on business divestitures - net (5)
Loss on business divestitures - net (5)
—  —  (25) —  
Loss on business divestitures - net (5)
— — — (25)
Impairment of nonconsolidated partially-owned affiliate (6)
(6) —  (222) —  
Gain on sale / (impairment) of nonconsolidated partially-owned affiliates (6)
Gain on sale / (impairment) of nonconsolidated partially-owned affiliates (6)
33 — 33 (216)
DepreciationDepreciation(67) (68) (214) (205) Depreciation(69)(72)(139)(147)
Stock based compensationStock based compensation(7) (8) (8) (16) Stock based compensation(13)(26)(1)
Other items (7)
Other items (7)
(4) (3) (12) (6) 
Other items (7)
(7)(6)(8)
Earnings (loss) before interest and income taxesEarnings (loss) before interest and income taxes(269) 95  (245) 127  Earnings (loss) before interest and income taxes230 66 512 24 
Net financing chargesNet financing charges(58) (60) (156) (135) Net financing charges(110)(50)(169)(98)
Other pension income (expense)Other pension income (expense) (5)  (3) Other pension income (expense)
Income (loss) before income taxesIncome (loss) before income taxes$(326) $30  $(396) $(11) Income (loss) before income taxes$122 $18 $347 $(70)

Notes:

(1) Corporate-related costs not allocated to the segments include executive office, communications, corporate development, legal finance and marketing.corporate finance.
(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. During the three and six months ended March 31, 2021, a held-for-sale impairment charge of $2 million and $8 million, respectively, was recorded in EMEA. Restructuring charges during the three months and ninesix months ended June 30,March 31, 2020 primarily consist of workforce reductions and a $27 million pre-tax non-cash impairment charge related to long-lived assets in China. Restructuring charges during the three and nine months ended June 30, 2019 primarily consist of workforce reductions; the nine months ended June 30, 2019 also includes a $66 million non-cash impairment charge related to long-lived assets in the seat structure and mechanism operations.reductions.
(3) Reflects amortization of intangible assets including those related to partially owned affiliates recorded within equity income.
(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 along with restructuring costs at partially owned affiliates recorded within equity income. 420.
Adient plc | Form 10-Q | 42


(5) ReflectsThe six months ended March 31, 2020 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.
Adient plc | Form 10-Q | 41


(6) ReflectsThe three and six months ended March 31, 2021 reflects a pre-tax gain of $33 million on the sale of Adient's interest in SJA. The six months ended March 31, 2020 reflects the non-cash impairment of Adient's YFAI investment as described ininvestment. Refer to Note 3, "Acquisitions and Divestitures," of the notes to consolidated financial statements.
(7) The three months ended June 30, 2020March 31, 2021 reflects $4$7 million of transaction costs and the ninecosts. The six months ended June 30,March 31, 2021 reflects a one-time gain of $8 million associated with the retrospective recovery of indirect tax credits in Brazil resulting from a favorable court ruling, a $5 million gain on previously held interest at YFAS in an affiliate, and $11 million of transaction costs. The three months ended March 31, 2020 reflects $11$6 million of transaction costs. The six months ended March 31, 2020 reflects $7 million of transaction costs and $1 million of tax adjustments at YFAI. The three months ended June 30, 2019 reflects $1 million of Futuris integration costs and $2 million of transaction costs. The nine months ended June 30, 2019 reflects $4 million of Futuris integration costs and $2 million of transaction costs.


Americas
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)2021Change20202021Change2020
Net sales$1,644 —%$1,641 $3,381 -3%$3,500 
Adjusted EBITDA$64 -40%$106 $196 -2%$200 

Three Months Ended
June 30,
Nine Months Ended
June 30,
(in millions)2020Change20192020Change2019
Net sales$593  -70%$2,010  $4,093  -30%$5,860  
Adjusted EBITDA$(83) > -100%$69  $117  -20%$146  

Net sales decreasedincreased during the thirdsecond quarter of fiscal 20202021 by $1,417$3 million, despite certain unplanned production stoppages resulting from semiconductor and petrochemical shortages, due to lowerhigher production volumes ($1,376 million),primarily resulting primarily from the operational shutdowns duringinterruptions in the three months ended June 30, 2020 in responseprior year due to the COVID-19 pandemic, along with the unfavorable impact of foreign currency ($2918 million), and the unfavorablefavorable impact of the RECARO divestiturematerial economics recoveries ($141 million), partially offset by the impact of favorableunfavorable commercial settlements and net pricing adjustments ($($2 million).

Adjusted EBITDA decreased during the third quarter of fiscal 2020 by $152 million due to lower production volumes ($230 million), lower equity income ($1 million), and the unfavorable impact of foreign currencycurrencies ($514 million), partially offset by the impact of operational performance improvements ($36 million), lower administrative and engineering expense ($33 million) including lower levels of incentive compensation and discretionary spending which are not expected to recur as part of the annual run rate, the favorable impact of Adient Aerospace deconsolidation and RECARO divestiture ($7 million), favorable net material and pricing adjustments ($5 million) and favorable material economics, net of recoveries ($3 million).

Net sales decreased during the first nine months of fiscal 2020 by $1,767 million due to lower production volumes ($1,713 million) resulting primarily from the operational shutdowns that started in March 2020 in response to the COVID-19 pandemic as well as $55 million attributable to the GM labor strike during the first quarter of fiscal 2020, along with the unfavorable impact of foreign currency ($48 million), and the unfavorable impact of the RECARO divestiture ($27 million), partially offset by the favorable impact of commercial settlements and net pricing adjustments ($21 million).

Adjusted EBITDA decreased during the first nine monthssecond quarter of fiscal 20192021 by $29$42 million due primarily to loweroperational inefficiencies including premium freight and unplanned production volumesstoppages resulting from semiconductor and petrochemical shortages and to a lesser extent COVID-19 related costs ($27429 million), lower equity income ($2 million), and unfavorable impact of foreign currency ($3 million), partially offset by the impact of operational performance improvements ($88 million), lowerhigher administrative and engineering expense ($78 million)
includingdue primarily to lower levels of certain incentive compensation costs, and discretionary spending which areto a lesser extent other benefits, in the prior year that were not expected to recur as part of the annual run rate, the favorable impact of Adient Aerospace deconsolidation and RECARO divestiture ($1918 million), favorable net material and pricing adjustments ($46 million) and favorable material economics, net of recoveries ($14 million).


EMEA

Three Months Ended
June 30,
Nine Months Ended
June 30,
(in millions)2020Change20192020Change2019
Net sales$698  -60%$1,752  $3,750  -27%$5,170  
Adjusted EBITDA$(94) > -100%$53  $17  -85%$114  

Adient plc | Form 10-Q | 43


Net sales decreased during the third quarter of fiscal 2020 by $1,054 million due to lower production volumes ($963 million) resulting primarily from the operational shutdowns during the three months ended June 30, 2020 in response to the COVID-19 pandemic, the unfavorable impact of foreign currency ($68 million), the unfavorable impact of divestitures primarily related to RECARO ($12 million), and the unfavorable impact of commercial settlements and net pricing adjustments ($11 million).

Adjusted EBITDA decreased during the third quarter of fiscal 2020 by $147 million due to lower production volumes ($175 million) and the unfavorable impact of foreign currency ($5 million) and unfavorable material economics, net of recoveries ($9 million), and lower equity income ($4 million), partially offset by favorable volume and mix ($5 million), other operational performance improvements ($20 million), lower administrative and engineering expense ($21 million) including lower levels of incentive compensation and discretionary spending which are not expected to recur as part of the annual run rate, favorable net material and pricing adjustments ($32 million), and the favorable impact of the RECARO divestitureforeign currencies ($2 million).

Net sales decreased during the first ninesix months of fiscal 20202021 by $1,420$119 million due primarily to lower production volumes ($1,225 million) resulting primarily from timing of new program launches and certain unplanned production stoppages resulting from semiconductor and petrochemical shortages ($79 million), the operational shutdowns that started in March 2020 in response toimpact of the COVID-19 pandemic along withprior year divestiture of RECARO ($10 million), the unfavorable impact of foreign currencycurrencies ($18136 million), the unfavorable impact of the RECARO divestiture ($25 million) and the unfavorable impact of material economics recoveries ($106 million), partially offset by favorable commercial settlements and net pricing adjustments ($2112 million). The Americas will continue to experience higher levels of new program launches in the remainder of fiscal 2021.

Adjusted EBITDA decreased during the first ninesix months of fiscal 20202021 by $97$4 million due primarily to operational inefficiencies including premium freight and unplanned production stoppages resulting from semiconductor and petrochemical shortages and to a lesser extent COVID-19 related costs ($39 million), higher administrative expense due primarily to lower volumeslevels of certain incentive compensation costs, and to a lesser extent other benefits, in the prior year that were not expected to recur ($21916 million), and the unfavorable net commodity pricing adjustments ($9 million), partially offset by the favorable commercial settlements and net pricing adjustments ($31 million), favorable volume and mix ($9 million), the favorable impact of foreign currencies ($3 million), and other operational performance improvements ($17 million).


EMEA
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)2021Change20202021Change2020
Net sales$1,636 10%$1,488 $3,240 6%$3,052 
Adjusted EBITDA$141 > 100%$62 $255 > 100%$111 

Net sales increased during the second quarter of fiscal 2021 by $148 million due primarily to the favorable impact of foreign currency ($11115 million), unfavorable material economics,higher production volumes primarily resulting from the operational interruptions in the prior year due
Adient plc | Form 10-Q | 42


to COVID-19 and despite certain unplanned production stoppages resulting from semiconductor shortages ($24 million), the favorable impact of commercial settlements and net of recoverypricing adjustments ($1630 million), and lower equity incomethe favorable impact of material economics recoveries ($311 million), partially offset by the impact of prior year divestitures primarily consisting of the fabrics business ($32 million).

Adjusted EBITDA increased during the second quarter of fiscal 2021 by $79 million due to operational performance improvements including lower overhead and freight costs ($5516 million), the impact of favorable commercial settlements and net pricing adjustments ($36 million), lower administrative and engineering expense ($4016 million) including lower levels, and favorable volume and mix ($24 million), partially offset by the impact of incentive compensation and discretionary spending which are not expected to recur as partprior year divestitures primarily consisting of the annual run rate, favorablefabrics business ($3 million), unfavorable net material andcommodity pricing adjustments ($542 million) and operational inefficiencies as a result of unplanned production stoppages stemming from semiconductor shortages and to a lesser extent COVID-19 related costs ($8 million).

Net sales increased during the first six months of fiscal 2021 by $188 million due primarily to the favorable impact of foreign currency ($184 million), higher production volumes primarily resulting from the operational interruptions in the prior year due to COVID-19 ($30 million), the favorable impact of commercial settlements and net pricing adjustments ($44 million), and the favorable impact of material economics recoveries ($11 million), partially offset by the impact of prior year divestitures primarily consisting of the RECARO and fabrics businesses ($81 million).

Adjusted EBITDA increased during the first six months of fiscal 2021 by $144 million due to operational performance improvements including lower overhead and freight costs ($43 million), the impact of favorable commercial settlements and net pricing adjustments ($58 million), lower administrative and engineering expense ($35 million), and favorable volume and mix ($39 million), partially offset by the impact of prior year divestitures primarily consisting of the RECARO and fabrics businesses ($8 million), unfavorable impact of foreign currencies ($6 million), unfavorable net commodity pricing adjustments ($7 million), and operational inefficiencies as a result of unplanned production stoppages stemming from semiconductor shortages and to a lesser extent COVID-19 related to RECAROcosts ($310 million).


Asia
Three Months Ended
March 31,
Six Months Ended
March 31,
(in millions)2021Change20202021Change2020
Net sales$588 32%$444 $1,142 12%$1,016 
Adjusted EBITDA$121 92%$63 $272 13%$240 

Three Months Ended
June 30,
Nine Months Ended
June 30,
(in millions)2020Change20192020Change2019
Net sales$346  -35%$530  $1,362  -23%$1,779  
Adjusted EBITDA$71  -35%$110  $311  -20%$387  

Net sales decreasedincreased during the thirdsecond quarter of fiscal 20202021 by $184$144 million due to lowerhigher production volumes ($157 million)across the region, which was primarily resulting fromas a result of prior year operational interruptions due to COVID-19 ($139 million), the operational shutdowns in Asiafavorable impact of foreign currencies ($21 million), and the favorable impact of material economics recoveries ($3 million), partially offset by the impact of unfavorable commercial settlements and net pricing adjustments ($19 million).
Adjusted EBITDA increased during the three months ended June 30, 2020 in responsesecond quarter of fiscal 2021 by $58 million due primarily to the COVID-19 pandemic, the unfavorable impacthigher equity income as a result of the RECARO divestitureprior year operational interruptions at Adient's China affiliates due to COVID-19 ($1244 million), higher production volumes ($14 million), operational performance improvements including lower overhead and freight costs ($16 million), and the unfavorablefavorable impact of foreign currency ($135 million) and, partially offset by the unfavorable impact of commercial settlements and net pricing adjustments ($2 million).

Adjusted EBITDA decreased during the third quarter of fiscal 2020 by $39 million due to overall lower production volumes ($26 million) as a result of the COVID-19 pandemic, the unfavorable impact of foreign currency ($714 million), the unfavorable impact of the planned YFAI divestiturematerial economics, net of recoveries ($152 million), higher administrative and engineering expense ($43 million), and operational inefficiencies including premium freight and unplanned production stoppages resulting from semiconductor shortages and to a lesser extent COVID-19 related costs ($2 million).
Net sales increased during the first six months of fiscal 2021 by $126 million due to higher production volumes across the region, which was primarily as a result of prior year operational interruptions due to COVID-19 ($123 million), the unfavorable impact of the RECARO divestiture ($2 million), and unfavorable net material and pricing adjustments ($2 million), partially offset by operational performance improvements ($1 million), and higher equity income from China seating affiliates ($16 million).

Net sales decreased during the first nine months of fiscal 2020 by $417 million due to lower production volumes ($397 million) primarily resulting from the operational shutdowns in China and in other Asia countries during the nine months ended June 30, 2020 in response to the COVID-19 pandemic, the unfavorable impact of the RECARO divestiture ($25 million), the unfavorablefavorable impact of foreign currencycurrencies ($1141 million), and the unfavorablefavorable impact of material economics recoveries ($3 million), partially offset by the impact of unfavorable commercial settlements and net pricing adjustments ($27 million), and the impact of the prior year divestiture of RECARO ($14 million),

Adjusted EBITDA increased during the first six months of fiscal 2021 by $32 million due primarily to higher equity income as a result of the prior year operational interruptions at Adient's China affiliates due to COVID-19 ($51 million), higher production volumes ($3 million), operational performance improvements including lower overhead and freight costs ($27 million), lower administrative and engineering expense ($1 million), and the favorable impact of foreign currencies ($15 million), partially
Adient plc | Form 10-Q | 43


offset by the unfavorable impact of commercial settlements and net pricing adjustments ($1630 million).

Adjusted EBITDA decreased during the first nine months of fiscal 2020 by $76 million due to the impact of lower production volumes ($56 million), lower equity income from China seating affiliates ($5 million) as a result of the operational shutdowns of Adient's affiliates during the second quarter of fiscal 2020 in response to the COVID-19 pandemic, the unfavorable impact of the planned YFAI divestiture ($19 million), unfavorable material economics, net of recoveries ($2 million), prior year tax benefits at various affiliates that were not expected to recur ($10 million), the impact of prior year divestitures of YFAI ($18 million) and RECARO ($3 million), the unfavorable impact of foreign currency ($11 million), higher administrative and engineeringoperational inefficiencies including premium freight and unplanned production stoppages resulting from semiconductor shortages and to a lesser extent COVID-19 related costs ($42 million), and the unfavorable impact
Adient plc | Form 10-Q | 44


of the RECARO divestiture ($6 million), partially offset by operational performance improvements ($5 million) and favorable net material and pricing adjustments ($23 million).



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 activities, the revolving credit facility and other debt issuances, and existing cash balances. 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. See below and refer to Note 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. Refer to the "Recent Developments Regarding COVID-19" section for additional information on short term liquidity measures implemented in response to the COVID-19 pandemic.
Adient US LLC ("Adient US"), a wholly owned subsidiary of Adient, together with certain of Adient's other subsidiaries, maintains an asset-based revolving credit facility (the “ABL“ABL Credit Facility”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. On March 26, 2020, Adient borrowed $825 million in principal amount under the agreement. Adient repaid $646 million during the third quarter of fiscal 2020, resulting in $179 million outstanding at June 30, 2020, which is recorded as short-term debt. As of June 30, 2020, Adient'sMarch 31, 2021, Adient had not drawn down on the ABL Credit Facility and had availability under this facility was $155of $945 million (net of $107$69 million of letters of credit).
In addition, Adient US and Adient Global Holdings S.àà r.l., a wholly-owned subsidiary of Adient, maintain a term loan credit agreement (the “Term“Term Loan B Agreement”Agreement”) providing for a 5-year $800 million senior secured term loan facility that was fully drawn aton 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. In April 2021, Adient amended the Term Loan B Agreement ("Amended Agreement") which, among other changes (i) extended the maturity date for loans outstanding to April 8, 2028, (ii) reduced the interest rate margin applicable thereunder by 0.75% to 3.50%, in the case of Eurodollar Rate loans, and 2.50% (in the case of Base Rate loans) (in each case, with one 0.25% step down based on achievement of a specified first lien secured net leverage level starting with the fiscal quarter ending December 31, 2021) and (iii) made certain other negative covenant and mandatory prepayment changes in connection therewith. The amendment also established incremental term loans in an aggregate principal amount of $214 million resulting in total loans outstanding under the Amended Agreement of $1.0 billion. Adient paid $6 million related to the Amended Agreement and expects to write off $9 million of previously deferred financing costs as a result of the debt extinguishment, which will be reflected in the third quarter of fiscal 2021.

Adient US is also maintainsa party to an indenture relating to the issuance of $800 million aggregate principal amount of Senior First Lien Notes. TheseThe notes mature on May 15, 2026 and bear interest at a rate of 7.00% per annum. Interest on these notes is payable semi-annually in arrears on November 15 and May 15 of each year, commencing on November 15, 2019. During the second quarter of fiscal 2021, Adient repurchased $640 million of the outstanding balance of the Senior First Lien Notes at a price of 107% of the principal plus $17 million of accrued and unpaid interest. As a result, $9 million of previously deferred financing costs was written off to net financing charges. Adient redeemed an additional $80 million of the remaining balance of the Senior First Lien Notes in April 2021 at a price of 103% of the principal plus $2 million of accrued and unpaid interest, and intends to redeem the remaining $80 million in May 2021.

The ABL Credit Facility, Term Loan B Agreement and the Senior First Lien Notes due 2026 contain covenants that are usual and customary for facilities and transactionsdebt instruments 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’sAdient’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’sAdient’s and its restricted subsidiaries’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
Adient plc | Form 10-Q | 44


limited to, cross-default clauses with other debt arrangements, failure to 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 plc | Form 10-Q | 45


Adient Global Holdings Ltd. ("AGH"), a wholly-owned subsidiary of Adient, maintains $0.9 billion$900 million aggregate principal amount of 4.875% USD-denominated unsecured notes due 2026 and €1.02026. During the fourth quarter of fiscal 2020, Adient redeemed $103 million of face value of these notes, resulting in a remaining balance of $797 million as of September 30, 2020. AGH also maintains €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€152 million in an unsecured term loan from the European Investment Bank ("EIB") due in 2022. The loan bears interest at the 6-month EURIBOR rate plus 158 basis points. Adient amended the EIB loan agreement as of June 30, 2020 to increaseis compliant with the net leverage ratio of 4.5x at March 31, 2021 and expects to 6.75x from 5.25x at June 30, 2020. Future net leverage ratio requirements (5.25x at September 30, 2020 with step downs starting inbe compliant for the foreseeable future. During the first quarter of fiscal 2021) were not adjusted.2021, Adient is forecasting that it will not be in compliance with this net leverage ratio during the next 12 months and will be required to either obtain another amendment or waiver or will pay downrepaid $16 million of the EIB loan. Accordingly, Adient has classified thisloan, triggered in part by the redemption of debt as short term debt at June 30, 2020. in the prior year.

On April 20, 2020, Adient US offeredissued $600 million (net proceeds of $591 million) aggregate principal amount of 9.00% Senior First Lien Notes due 2025. These notes will mature on April 15, 2025, provided that if AGH has not refinanced (or otherwise redeemed) in whole its outstanding 3.50% unsecured notes due 2024 or any refinancing indebtedness thereof that matures earlier than 91 days prior to the maturity date of the Senior First Lien Notes due 2025 on or prior to May 15, 2024, these notes will mature on May 15, 2024. Interest on these notes will be paidis due on April 15 and October 15 each year, beginning on October 15, 2020. These notes contain covenants that are usual and customary, similar to the covenants on the Senior First Lien Notes due 2026 as described above. Adient incurred $10 million of debt issuance cost associated with this new debt in fiscal 2020.

As discussed in the “Recent Developments RegardingOn-Going Impact of COVID-19 section, the spread of COVID-19 and the measures taken to restrain the spread of the virus have had, and willmay continue to have, a material negative impact on Adient's financial results and liquidity, and such negative impact may continue well beyond the containment of such outbreak. Adient cannot assure that its assumptions used to estimate the liquidity requirements will be correct because it has never previously experienced such a widespread cessation of its operations as it experienced in the third quarter of fiscal 2020. In addition, the magnitude, duration, speed and potential resurgence of the global pandemic is uncertain. Consequently, the impact on Adient's business, financial condition or longer-term financial or operational results is uncertain. Based on the actions it has taken and its assumptions regarding the impact of COVID-19, Adient believes that its current financial resources will be sufficient to fund its liquidity requirements for at least the next twelve months.

Sources of Cash Flows
Nine Months Ended
June 30,
Six Months Ended
March 31,
(in millions)(in millions)20202019(in millions)20212020
Cash provided (used) by operating activitiesCash provided (used) by operating activities$(272) $306  Cash provided (used) by operating activities$140 $183 
Cash provided (used) by investing activitiesCash provided (used) by investing activities(280) (278) Cash provided (used) by investing activities(95)(208)
Cash provided (used) by financing activitiesCash provided (used) by financing activities679  300  Cash provided (used) by financing activities(762)752 
Capital expendituresCapital expenditures(258) (350) Capital expenditures(126)(185)

Operating Cash Flows: CashThe decrease in cash flows from operating activities decreasedis primarily due to higher levels of accounts receivable, inventory and other assets at March 31, 2021 compared to March 31, 2020, along with higher levels of interest and restructuring payments during the six months ended March 31, 2021 compared to the same prior year over year primarily as a result of lower profitability and overall unfavorable changes to working capital, primarily including unfavorable changes to accounts payableperiod, partially offset by favorable changes tohigher levels of accounts receivable. payable and overall profitability.

Investing Cash Flows: The increasedecrease in cash used by investing activities is primarily attributable to prior year proceedslower capital expenditures of $65$59 million, froma $19 million receipt of deferred consideration related to the sale of assets, includingYFAI in the sale of Detroit, Michigan propertiescurrent quarter, and an airplane, and a current year $37 million cash outflow related to the deconsolidation of Adient Aerospace partially offset by a year over year decrease in the prior year. See below for more information on capital expenditures ($92 million).expenditures.

Financing Cash Flows: The significant increase in cash providedused by financing activities is primarily attributabledue to the net $179repayment of long-term debt, including premium paid, of $687 million, certain required repayments on the EIB loan during the six months ended March 31, 2021, and the prior year draw down of the ABL revolver as of June 30, 2020, the $600 million of proceeds from the issuance of 9.00% Senior Notes (due 2025) in April 2020, and by non-recurring cash dividends paid in the prior year ($26 million) to shareholders, partially offset by higher levels of cash dividends paid to noncontrolling interest ($14 million) and prior year cash received related to the formation of the Adient Aerospace consolidated joint venture ($28 million). $825 million.

Adient plc | Form 10-Q | 45


Capital expenditures: Capital expenditures decreased year over year based on timing of program spend on product launches and continued tightening of controls around overall spending.

Adient plc | Form 10-Q | 46


Working capital
(in millions)June 30,
2020
September 30,
2019
Current assets$3,459  $4,116  
Current liabilities3,083  3,835  
Working capital$376  $281  
(in millions)March 31,
2021
September 30, 2020
Current assets$4,090 $4,482 
Current liabilities3,661 3,819 
Working capital$429 $663 

The increasedecrease in working capital of $95$234 million is primarily attributable to lowera decrease in cash of $708 million resulting from the repayment of long-term debt, including premium, of $687 million during the second quarter of fiscal 2021, and higher levels of accounts payable, as of June 30, 2020partially offset by lowerhigher levels of accounts receivable and inventory. Also contributing to the higher levels of working capital is the recognition of lease liabilities (current lease liability of $88 million at June 30, 2020 impacting working capital) occurring upon adoption of the new lease accounting standard in the first quarter of fiscal 2020.

Restructuring Costs

During fiscal 2020,2021, Adient committed to a restructuring plan ("20202021 Plan") of $86$13 million that was offset by $10$9 million of prior year underspend. Of the restructuring costs recorded, $15 million relates to the Americas segment, $62$12 million relates to the EMEA segment and $9$1 million relates to the Asia segment. 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 2020 restructuring plan will reduce annual operating costs by approximately $85$3 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 35%-40% will result in net savings. The restructuring actions relate to cost reduction initiatives and consist primarily of workforce reductions and lease contract terminations. The restructuring actions are expected to be substantially completed by fiscal 2022.

During fiscal 2020, Adient committed to a restructuring plan ("2020 Plan") of $205 million. Of the restructuring costs recorded, $20 million relates to the Americas segment, $175 million relates to the EMEA segment and $10 million relates to the Asia segment. The restructuring actions relate to cost reduction initiatives and consist primarily of workforce reductions. Also recorded in fiscal 2020 was $20 million of underspend related to prior year plan reserves. Adient currently estimates that upon completion of the restructuring actions, the fiscal 2020 restructuring plan will reduce annual operating costs by approximately $69 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 35%-40% will result in net savings. The restructuring actions are expected to be substantially completed by fiscal 2022.
During fiscal 2019, Adient committed to a restructuring plan ("2019 Plan") of $105 million. 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. The restructuring actions relate to cost reduction initiatives and consist primarily of workforce reductions. Also recorded in fiscal 2019 was $16 million of prior year underspend, a $9 million increase to a prior year reserve and $6 million of recoveries from a customer related to previous restructuring 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 2019 restructuring plan will reduce annual operating costs by approximately $109 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 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. Adient partially achieved these savings in fiscal year 2019.

InAdient's fiscal 2021, 2020, 2019, 2018, 2017 and 2016 restructuring plans include workforce reductions of approximately 18,000 employees. 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 March 31, 2021, approximately 13,000 of the employees have been separated from Adient committedpursuant to a restructuring plan ("2017 Plan") and recorded $46 million of restructuring and impairment costs in the consolidated statements of income. Of the restructuring costs recorded, $34 million relates toplans. In addition, 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 relate to cost reduction initiatives and consist primarily of workforce reductions andplans included twenty-four plant closures. Adient currently estimates that upon completionAs of March 31, 2021, nineteen 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 2019. The restructuring actions are expected to be substantially complete in fiscal 2021. twenty-four plants have been closed.

In fiscal 2016,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 committed to a restructuring plan ("2016 Plan") and recorded $332 million of restructuring and impairment costsis affected by the general business conditions in the consolidated statements of income. Ofautomotive industry. Future adverse developments in the restructuring and impairment costs recorded, $298 millionautomotive industry, particularly related to the EMEA segment, $32 million related to the Americas segment and $2 million related to the Asia segment. This is
Adient plc | Form 10-Q | 47


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. Adient currently estimates that upon completionor as a result of the COVID-19 pandemic, could impact Adient's liquidity position, lead to impairment charges and/or require additional restructuring actions, the fiscal 2016 restructuring plan will reduce annual operating costs by approximately $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 75%-80% will result in net savings. Adient partially achieved these savings in fiscal years 2016 through 2019.its operations.


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 fiscal year ended September 30, 2019. 2020.


Adient plc | Form 10-Q | 46


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.


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 fiscal year ended September 30, 2019,2020, 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 June 30, 2020.March 31, 2021.


New Accounting Pronouncements

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



Adient plc | Form 10-Q | 47


Other Information

Not applicable


Item 3.Quantitative and Qualitative Disclosures About Market Risk

As of June 30, 2020,March 31, 2021, 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 fiscal year ended September 30, 2019.2020.


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.

Adient plc | Form 10-Q | 48


Changes in Internal Control over Financial Reporting
There were no changes in internal control over financial reporting during the three months ended June 30, 2020March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Adient plc | Form 10-Q | 4948



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 17, "Commitments and Contingencies," of the notes to 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 itsthe fiscal year ended September 30, 2019.2020.


Item 1A.Risk Factors

There are no material changes fromAdient has updated or supplemented the below risk factors asto reflect recent developments and these should be read in combination with those previously disclosedreported in Adient'sAdient’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019, except that Adient has updated2020. To the below risk factors to reflect recent developments. Theextent applicable, the following risk factor updates supersedeupdate supersedes the corresponding risk factorsfactor previously reported in Adient's Annual Report on Form 10-K for the fiscal year ended September 30, 2019.2020 as well as Adient’s From 10-Q for the quarter ended December 31, 2020.

Adient's financial condition and results of operations have been, and are expected to continue to be, adversely affected by the recent coronavirus outbreak.

The global outbreak of COVID-19 has caused a material adverse effect on the level of economic activity around the world, including in all markets served by Adient. In response to this outbreak, the governments of many countries, states, cities and other geographic regions have taken preventative or protective actions, such as imposing restrictions on travel and business operations. Adient has implemented numerous measures attempting to manage and mitigate the effects of the virus. While the Company has implemented programs to mitigate the impact of these measures on the results of operations, there can be no assurance that these programs will be successful. Adient cannot predict the degree to, or the time period over, which its sales and operations will be affected by this outbreak and preventative measures, and the effects could be material.

The COVID-19 pandemic poses the risk that Adient or its affiliates and joint ventures, employees, suppliers, customers and others may be restricted or prevented from conducting business activities for indefinite or intermittent periods of time, including as a result of employee health and safety concerns, shutdowns, shelter in place orders, travel restrictions and other actions and restrictions that may be requested or mandated by governmental authorities. For example, the Company experienced a temporary shutdown of its facilities in the second quarter of fiscal 2020 in China as a result of government-mandated actions to control the spread of COVID-19. Additionally, beginning in late March 2020, the Company experienced a temporary shutdown of effectively all of its facilities in the Americas and European regions coinciding with the shutdown of its customer facilities in these regions. Further, certain government orders related to COVID-19 mitigation efforts may restrict Adient's ability to operate its business and may impact the financial condition and results of operations. Finally, while other of its facilities have been designated by customers as an essential business to its customers’ business in jurisdictions in which facility closures have been mandated, the Company can give no assurance that this will not change in the future or that businesses will continue to be classified as essential in each of the jurisdictions in which Adient operates.

Additionally, restrictions on the Company's access to its manufacturing facilities or on support operations or workforce, or similar limitations for its distributors and suppliers, could continue to limit customer demand and/or the Company's capacity to meet customer demand and have a material adverse effect on the business, financial condition and results of operations. In addition, Adient has modified its business practices (including employee travel, employee work locations, and cancellation of
Adient plc | Form 10-Q | 50


physical participation in meetings, events and conferences), and it may take further actions as may be required by government authorities, for the continued health and safety of the employees, or that the Company otherwise determines are in the best interests of the employees, customers, partners, and suppliers. Further, the Company has experienced, and may continue to experience, disruptions or delays in its supply chain as a result of such actions, which is likely to result in higher supply chain costs to Adient in order to maintain the supply of materials and components for the products.

The Company's management of the impact of COVID-19 has and will continue to require significant investment of time from its management and employees, as well as resources across the global enterprise. The focus on managing and mitigating the impacts of COVID-19 on the business may cause the Company to divert or delay the application of its resources toward other or new initiatives or investments, which may cause a material adverse impact on the results of operations.

Adient may also experience impacts from market downturns and changes in consumer behavior related to pandemic fears and impacts on its workforce as a result of COVID-19. The Company has experienced a significant decline in demand from its customers as a result of the impact of efforts to contain the spread of COVID-19. In addition, customers may choose to delay or abandon projects on which the Company provides products and/or services in response to the adverse impact of COVID-19 and the measures to contain its spread have had on the global economy.

Further, the impacts of COVID-19 have caused significant uncertainty and volatility in the credit markets. Adient relies on the credit markets to provide it with liquidity to operate and grow its businesses beyond the liquidity that operating cash flows provide. If the Company's access to capital were to become significantly constrained, or if costs of capital increased significantly due to the impact of COVID-19 including, volatility in the capital markets, a reduction in Adient's credit ratings or other factors, then the financial condition, results of operations and cash flows could be materially adversely affected.

If the COVID-19 pandemic becomes more pronounced in the markets in which the Company or its automotive industry customers operate, or there is a resurgence in the virus in markets currently recovering from the spread of COVID-19, then the Company's operations in areas impacted by such events could experience further materially adverse financial impacts due to market changes and other resulting events and circumstances. The extent to which the COVID-19 outbreak continues to impact the Company's financial condition will depend on future developments that are highly uncertain and cannot be predicted, including new government actions or restrictions, new information that may emerge concerning the severity of COVID-19, the longevity of COVID-19 and the impact of COVID-19 on economic activity To the extent the COVID-19 pandemic materially adversely affects the Company's business and financial results, it may also have the effect of significantly heightening many of the other risks associated with the Company's business and indebtedness, including those described in the most recent Annual Report on Form 10-K for the year ended September 30, 2019.

The COVID-19 pandemic presents significant challenges to Adient's liquidity.

Adient's continued access to sources of liquidity depends on multiple factors, including global economic conditions, the COVID-19 pandemic’s effects on its customers and their production rates, the condition of global financial markets, the availability of sufficient amounts of financing, its operating performance and credit ratings. Adient's ability to borrow against the ABL Credit Facility is limited to its borrowing base, which consists primarily of accounts receivable, inventory and certain cash account balances. Such working capital account balances fluctuate significantly depending on production levels and operating activities. Adient repaid $646 million of the outstanding ABL Credit Facility balance during the third quarter of fiscal 2020.

Adient also issued $600 million of senior secured notes due 2025 on April 20, 2020 to provide additional liquidity during the current COVID-19 pandemic. These notes will bear interest at 9% and will result in higher levels of net financing charges over the term of these notes. In addition, Adient's overall indebtedness has increased as a result of the issuance of these notes.

As a result of the impacts of the COVID-19 pandemic, Adient may be required to raise additional capital and its access to and cost of financing will depend on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, its prospects and credit ratings.

Adient may not be able to consummate the sale of YFAI and/or the sale of its fabrics business, or the time required to consummate the sale of YFAI and/or the sale of its fabrics business may be longer than anticipated.

Consummation of the sale of YFAI and the sale of its fabrics business are each subject to certain closing conditions, including expiration of waiting periods under anti-trust laws and other customary closing conditions. There can be no assurance that the closing conditions contained in the respective purchase agreements related to the sale of YFAI or the sale of the fabrics business will be satisfied or waived, or that the sale of YFAI and/or the sale of the fabrics business will be completed within the
Adient plc | Form 10-Q | 51


respective expected timeframes, on the respective proposed terms, or at all. In addition, the failure to consummate or a delay in consummating the sale of YFAI and/or the sale of its fabrics business would materially reduce Adient’s anticipated cash flow and could have a material adverse effect on the amounts available for general corporate or other purposes.

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’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 endended on December 31, 2020.

On December 30, 2020, during which the U.K. and the European Union will seek to agree on the terms ofentered into an agreement regarding their future relationship. Uncertaintiesrelationship, the Trade and Cooperation Agreement, which was ratified by the parties and entered into full force on May 1, 2021. However, significant political and economic uncertainties remain in connection with the future of the U.K. and its relationship with the European UnionUnion. These uncertainties have caused and may continue to cause disruptions to capital and currency markets worldwide. The consequences of athe withdrawal by the U.K. from the European Union and the impact on markets, as well as the impact on Adient’sAdient’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. uncertain.

Adient plc | Form 10-Q | 49


This market volatility may lead to an increase in Adient’sAdient’s cost of borrowing or the availability of credit, which may adversely impact Adient’sAdient’s financial performance. The U.K.’s’s withdrawal from the European Union may also have a detrimental effect on Adient’sAdient’s customers and suppliers, which would, in turn, adversely affect Adient’sAdient’s revenues and financial condition. In
addition, the U.K.’s’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 partnershipsAdient may adversely affect Adient's business and financial results.not be able to consummate its strategic transformation in China or the time required to consummate its strategic transformation in China may be longer than anticipated.

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 goalsConsummation of the joint venture. Adient may compete against its joint venture partners in certain2021 Yanfeng Transaction, Ancillary Transactions and Additional Equity Sales (each 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 partnershipsforegoing as previously defined) are each subject to renewal orcertain closing conditions, including customary government and regulatory approvals, certain People’s Republic of China state-owned asset required approvals and processes, 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 regulatorywaiting periods under antitrust laws and other customary closing conditions. There can be no assurance that the closing conditions of closing and is cross-conditioned on other transactions that Adient has entered into with Yanfengcontained in the respective agreements related to the YFAI2021 Yanfeng Transaction, Ancillary Transactions and AYM joint ventures. TheAdditional Equity Sales will be satisfied or waived, or that the 2021 Yanfeng Transaction, Ancillary Transactions and Additional Equity Sales will be completed within the respective expected timeframes, on the respective proposed terms, or at all. In addition, the failure to renewconsummate or extenda delay in consummating the terms of Adient’s joint venture partnerships2021 Yanfeng Transaction, Ancillary Transactions and Additional Equity Sales would materially reduce Adient’s anticipated cash flow and could impact other areas of Adient’s business, including its business relationships. The above risks, if realized, could result in anhave a material 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 ofamounts available for debt repayment, to fund the regions of the world in which Adient operates, such as Asia, South America
Adient plc | Form 10-Q | 52


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 plantChongqing Boxun Industrial Co.,Ltd. put right, 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.

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.corporate purposes.


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 June 30, 2020.
March 31, 2021.


Item 3.Defaults Upon Senior Securities

None.


Item 4.Mine Safety Disclosures

Not applicable.


Item 5.Other Information

None.


Adient plc | Form 10-Q | 5350



Item 6.Exhibit Index

EXHIBIT INDEX
Exhibit No.Exhibit Title
10.1  
10.2 
10.3 
10.4 
10.5 
10.6 
10.7 
31.1  
31.2  
32.1  
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
#Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Adient hereby undertakes to furnish copies of any of the omitted schedules and exhibits upon request by the SEC.
*Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto.


Adient plc | Form 10-Q | 5451


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:AugustMay 6, 20202021
By:/s/ Jeffrey M. Stafeil
Jeffrey M. Stafeil
Executive Vice President and Chief Financial Officer
Date:AugustMay 6, 20202021

Adient plc | Form 10-Q | 5552