UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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Adient plc

Form 10-Q

For the Three Months Ended June 30, 20222023

TABLE OF CONTENTS

Adient plc

Consolidated Statements of Income (Loss)

(unaudited)

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

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

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

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. 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.

Basis of Presentation

The unaudited consolidated financial statements of Adient have been prepared in accordance with the rules and regulations of the US Securities and Exchange Commission and in accordance with accounting principles generally accepted accounting principles in the United States of America ("(“U.S. GAAP"GAAP”). DuringThese interim consolidated financial statements include all adjustments (consisting of normal recurring adjustments) that management believes are necessary for a fair statement of the second halfresults of fiscal 2021operations, financial position and continuing intocash flows of Adient for the first nine monthsinterim periods presented. Interim results are not necessarily indicative of fiscal 2022,full-year results particularly as Adient, faced, along with the entire global automotive industry, widespreadcontinues to recover from supply chain disruptions, primarily related to semiconductor chip shortages. Although Adient’s seating products are not highly dependent directlymanages inflationary pressures and volatile commodity pricing on semiconductor chips, Adient is directly impacted by the lower production levels at OEM’scertain input costs, and as a direct result of these supply chain disruptions. These disruptions have led to unplanned down time at Adient’s production facilities, often with very little warning, which creates operating inefficiencies and limits Adient’s ability to adequately mitigate such inefficiencies. Further, the Russia/Ukraine conflict has created additional risks to the macroeconomic environment of the global automotive industry by restricting availabilities of certain key raw material components. Refer to Note 3, "Acquisitions and Divestitures," of the notes to the consolidated financial statements for additional information onit addresses the impacts from the Russia/Ukraine conflict.

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 2two variable interest entities (VIEs) for the reporting periods ended June 30, 2022,2023, and September 30, 2021, respectively,2022, 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 2two 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.

Earnings Per Share

The effect of common stock equivalents which would have been anti-dilutive was excluded from the calculation of diluted earnings per share for the three and nine months ended June 30, 2021.2023 and was immaterial. Potentially dilutive securities whose effect would have been antidilutiveanti-dilutive are excluded from the computation of diluted earnings per share which for the three and nine months ended June 30, 2022 and for the three months ended June 30, 2021 isas a result of being in a loss position.

On October 1, 2021,2022, Adient adopted Accounting Standards Codification (ASU) 2018-14 Compensation2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Retirement Benefits - Defined Benefit Plans - GeneralContracts in Entity’s Own Equity (Subtopic 715-20)815-40). ASU 20218-14 eliminates, adds,2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and modifies certain disclosure requirementsequity by reducing the number of accounting models for employers that sponsor defined benefit pension or other postretirement plans. The guidance is to be applied on a retrospective basis.convertible debt and convertible preferred stock. The adoption of this guidance on October 1, 20212022 did not significantly impact Adient's consolidated financial statements for the nine months ended June 30, 2022.2023.

On October 1, 2021,2022, Adient adopted ASU 2019-12, Income Taxes2021-10, Government Assistance (Topic 740): Simplifying832) - Disclosures by Business Entities about Government Assistance. The ASU requires annual disclosures of: (i) information about the Accountingnature of government assistance transactions and the related accounting policy used to account for Income Taxes. ASU 2019-12 modifies ASC 740, Income Taxes,the transactions; (ii) the balance sheet and income statement line items affected by simplifying accountingthe transactions, and the amounts for income taxes. As part of its overall simplification initiative to reduce costseach financial statement line item; and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements, the FASB’s amendments may impact both interim(iii) significant transaction terms and annual reporting periods.conditions. The adoption of this guidance on October 1, 20212022 did not significantly impact Adient's consolidated financial statements for the nine months ended June 30, 2022.2023.

Adient has considered the ASUsASU summarized below, effective after fiscal 2022, none of2023, which areis not expected to significantly impact the consolidated financial statements:

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 concluded that these activities are not in the scope of ASC 606.

Adient has elected to includeincludes 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 contractscontract 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 identifiedexist at September 30, 20212022 or at June 30, 2022.2023. 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 consolidated financial statements for disaggregated revenue by geographical market.

Also,In fiscal 2022, Adient has entered into agreements whereby Adient would transfertransferred all of the issued and outstanding equity interests in 2two joint ventures in China held directly by Adient, each of which represents 25% of their total issued and outstanding equity interests, to Yanfeng for $3 million. As a result, Adient concluded that indicators of other-than-temporary impairment were present related to the investments in these joint ventures, and recorded a non-cash impairment charge of $3 million during the second quarter of fiscal 2022. The transactions are expected to besales of the joint ventures were completed during the second halfnine months ended June 30, 2023, wherein Adient received $3 million of fiscal 2022.total sale proceeds.

During the first quarter of fiscal 2022, Chongqing Boxun Industrial Co., Ltd. ("Boxun") exercised its 50%right to sell its 25% equity interest in Shenyang JinbeiChongqing Adient Automotive Components Co., Ltd. ("SJA"CQADNT") to Adient. As a result, Adient reclassified the joint venture partner for $58redeemable noncontrolling interests balance of $186 million to other current liabilities on December 31, 2021 as the obligation was determined to be unconditional. The acquisition of Boxun's 25% interest closed in January 2022 which resulted in a $33 million one-time gain recognized during the second quarterAdient owning 100% 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.CQADNT.

Following Russia's invasion of Ukraine in February 2022, Adient has determined to withdraw from the Russian market. As a result, Adient recorded a charge of $3 million during the second quarter of fiscal 2022, which included a $2 million impairment of Adient's Russian entity and $1 million of allowance for doubtful accounts in EMEA. Adient's Russian operation, which primarily produces automotive seating trim products for the domestic market, recorded $7 million of net sales and de minimis amount of net incomeThe withdrawal was finalized in fiscal 2021. In July 2022, Adient entered into a sale agreement and finalized the sale transaction of its Russian operation for one ruble. In conjunction with the sale transaction, Adient will record an additional charge of $3 million related to accumulated foreign currency translation losses that are reflected in accumulated other comprehensive income (loss) under shareholders' equity on Adient's consolidated statements of financial position as of June 30,year 2022.

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

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:

Amortization of other intangible assets for the nine months ended June 30, 2023 and 2022 was $38 million and 2021 was $40 million, and $29 million, respectively.

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:

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 components of lease costs included in the consolidated statement of income (loss) for the three and nine months ended June 30, 20222023 and 20212022 were as follows:

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

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, 20222023 are as follows:

Supplemental cash flow information related to leases is as follows:

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 and certain other restrictions, including a minimum fixed charge coverage ratio. The ABL Credit Facility, willas amended in November 2022, is set to mature on May 6, 2024,November 2, 2027, subject to acertain springing maturity date 91 days earlier if certain amounts remain outstanding at that time under the Term Loan B Agreement (defined below).provisions. 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. It also provides flexibility for future amendments to the ABL Facility to incorporate certain sustainability-based pricing provisions. 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 November 24, 2021, Adient entered into an amendment to its ABL Credit Facility (the “ABL Amendment”) to amend certain terms and provisions, including to (i) change the interest rate benchmark rates applicable under the ABL Credit Facility for borrowings denominated in euro, Swedish krona and pounds sterling to EURIBOR, STIBOR, and SONIA, in each case subject to certain adjustments, and (ii) update the provisions in our ABL Credit Facility by which U.S. dollar LIBOR will eventually be replaced with SOFR or another interest rate benchmark, in each case, to reflect the most recent standards and practices used in the industry. Interest is payable on the ABL Credit Facility at a fluctuating rate of interest determined by reference to LIBOR,Term SOFR, in the case of amounts outstanding in dollars, EURIBOR, in the case of amounts outstanding in euros, STIBOR, in the case of amounts outstanding in Swedish krona and SONIA, in the case of amounts outstanding in pounds sterling, in each case, plus an applicable margin of 1.50% to 2.00%. As of June 30, 2022,2023, Adient had not drawn down on the ABL Credit Facility and had availability under this facility of $780$1,008 million (net of $42$16 million of letters of credit).

In addition, Adient US and Adient Global Holdings S.à r.l., a wholly-owned subsidiary of Adient, maintain a term loan credit agreement (the “Term Loan B Agreement”) that initially provided for a 5-year $800 million senior secured term loan facility, as amended in fiscal 2021, (the "Term Loan B Agreement") that was fully drawn on closing. Thehad an outstanding balance of $985 million as of September 30, 2022. During the second quarter of fiscal 2023, Adient prepaid $350 million of the Term Loan B Agreement amortizes in equal quarterly installments at a rateprincipal, and wrote off $2 million of 1.00% per annumpreviously deferred financing costs to net financing charges. As of the original principal amount thereof, withJune 30, 2023, the remaining balance originallyof this debt was $635 million, maintained fully at Adient Global Holdings S.à r.l., which is due at final maturity on May 6, 2024.April 8, 2028. Interest on the Term Loan B Agreement accrues at the Eurodollar rate plus an applicable margin originally 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)3.25%. 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

The ABL Credit Facility and Term Loan B Agreement and the Senior First Lien Notes due 2026 contain covenants that are usual and customary for facilities and debt 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’s capital stock or certain other debt; make other restricted payments; and consolidate or merge with, or convey, transfer or lease all or substantially all of Adient’s and its restricted subsidiaries’ assets, to another person. These covenants are subject to a number of other limitations and exceptions set forth in the agreements. The agreements also provide for customary events of default, including, but not limited to, 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.

During the second quarter of fiscal 2023, Adient Global Holdings Ltd. ("AGH"), a wholly-owned subsidiary of Adient, issued (i) $500 million (net proceeds of $494 million) in aggregate principal amount of 7% senior secured notes due 2028 and (ii) $500 million (net proceeds of $494 million) in aggregate principal amount of 8.250% senior unsecured notes due 2031. Interest on both of these notes will be paid on April 15 and October 15 each year, beginning on October 15, 2023. These notes contain covenants that are usual and customary. The total net proceeds of $988 million along with cash on hand were used primarily to redeem $350 million of the senior secured term loan facility under the Term Loan B Agreement as described above, and repurchase €700 million ($743 million) of the 3.50% unsecured notes due 2024 as described below. Adient paid $16 million in debt issuance costs for these new debt issuances.

AGH previously maintained $900 million aggregate principal amount of 4.875% USD-denominated unsecured notes due 2026. 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. Adient further redeemedand $2 million of the notes during fiscal 2020 and 2021, respectively, resulting in a remaining balance of $795 million as of June 30, 20222023 and September 30, 2021. 2022.