Adient (ADNT) 8-K Condensed Consolidated Statements of Income

Appendix

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Adient plc

Condensed Consolidated Statements of Income

(Unaudited)

	Three Months Ended June 30,
(in millions, except per share data)	2020		2019
Net sales	$	1,626	$	4,219
Cost of sales	1,779		4,008
Gross profit	(153)		211
Selling, general and administrative expenses	115		165
Restructuring and impairment costs	49		15
Equity income (loss)	48		64
Earnings (loss) before interest and income taxes	(269)		95
Net financing charges	58		60
Other pension expense (income)	(1)		5
Income (loss) before income taxes	(326)		30
Income tax provision (benefit)	5		338
Net income (loss)	(331)		(308)
Income attributable to noncontrolling interests	(6)		13
Net income (loss) attributable to Adient	$	(325)	$	(321)
Diluted earnings (loss) per share	$	(3.46)	$	(3.43)
Shares outstanding at period end	93.9		93.6
Diluted weighted average shares	93.9		93.6

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Adient plc

Condensed Consolidated Statements of Financial Position

(Unaudited)

	June 30,		September 30,
(in millions)	2020		2019
Assets
Cash and cash equivalents	$	1,032	$	924
Accounts receivable - net	1,161		1,905
Inventories	737		793
Assets held for sale	31		—
Other current assets	498		494
Current assets	3,459		4,116
Property, plant and equipment - net	1,592		1,671
Goodwill	2,039		2,150
Other intangible assets - net	350		405
Investments in partially-owned affiliates	1,090		1,399
Assets held for sale	165		—
Other noncurrent assets	924		601
Total assets	$	9,619	$	10,342
Liabilities and Shareholders' Equity
Short-term debt	$	380	$	30
Accounts payable and accrued expenses	1,798		3,073
Liabilities held for sale	26		—
Other current liabilities	879		732
Current liabilities	3,083		3,835
Long-term debt	4,147		3,708
Liabilities held for sale	10		—
Other noncurrent liabilities	765		559
Redeemable noncontrolling interests	42		51
Shareholders' equity attributable to Adient	1,250		1,848
Noncontrolling interests	322		341
Total liabilities and shareholders' equity	$	9,619	$	10,342

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Adient plc

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended June 30,
(in millions)	2020		2019
Operating Activities
Net income (loss) attributable to Adient	$	(325)	$	(321)
Income attributable to noncontrolling interests	(6)		13
Net income (loss)	(331)		(308)
Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:
Depreciation	67		68
Amortization of intangibles	8		11
Pension and postretirement benefit expense (benefit)	2		7
Pension and postretirement contributions, net	(3)		(4)
Equity in earnings of partially-owned affiliates, net of dividends received	188		106
Deferred income taxes	(18)		264
Non-cash restructuring and impairment charges	27		—
Impairment of nonconsolidated partially owned affiliate	6		—
Equity-based compensation	7		8
Other	5		11
Changes in assets and liabilities:
Receivables	198		129
Inventories	46		51
Other assets	39		43
Restructuring reserves	(27)		(20)
Accounts payable and accrued liabilities	(669)		(134)
Accrued income taxes	—		34
Cash provided (used) by operating activities	(455)		266
Investing Activities
Capital expenditures	(73)		(98)
Sale of property, plant and equipment	1		7
Changes in long-term investments	—		3
Cash provided (used) by investing activities	(72)		(88)
Financing Activities
Increase (decrease) in short-term debt	(654)		(2)
Increase (decrease) in long-term debt	600		1,600
Repayment of long-term debt	(2)		(1,201)
Debt financing costs	(9)		(37)
Dividends paid to noncontrolling interests	(8)		(10)
Other	—		(1)
Cash provided (used) by financing activities	(73)		349
Effect of exchange rate changes on cash and cash equivalents	(8)		7
Increase (decrease) in cash and cash equivalents	(608)		534

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Footnotes

1. Segment Results

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.

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

	Three Months Ended June 30,
(in millions)	2020		2019
Net Sales
Americas	$	593	$	2,010
EMEA	698		1,752
Asia	346		530
Eliminations	(11)		(73)
Total net sales	$	1,626	$	4,219

	Three Months Ended June 30,
(in millions)	2020		2019
Adjusted EBITDA
Americas	$	(83)	$	69
EMEA	(94)		53
Asia	71		110
Corporate-related costs (1)	(16)		(27)
Restructuring and impairment costs (2)	(49)		(15)
Purchase accounting amortization (3)	(9)		(11)
Restructuring related charges (4)	(5)		(5)
Impairment of nonconsolidated partially owned affiliate (8)	(6)		—
Stock based compensation	(7)		(8)
Depreciation	(67)		(68)
Other items (5)	(4)		(3)
Earnings (loss) before interest and income taxes	(269)		95
Net financing charges	(58)		(60)
Other pension income (expense)	1		(5)
Income (loss) before income taxes	$	(326)	$	30

Refer to the Footnote Addendum for footnote explanations.

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2. Earnings Per Share

The following table reconciles the numerators and denominators used to calculate basic and diluted earnings (loss) per share:

	Three Months Ended June 30,
(in millions, except per share data)	2020		2019
Income available to shareholders
Net income (loss) attributable to Adient	$	(325)	$	(321)
Weighted average shares outstanding
Basic weighted average shares outstanding	93.9		93.6
Effect of dilutive securities:
Stock options, unvested restricted stock and unvested performance share awards	—		—
Diluted weighted average shares outstanding	93.9		93.6

Potentially dilutive securities whose effect would have been antidilutive are excluded from the computation of diluted earnings per share, which for the three months ended June 30, 2020 and 2019 is a result of being in a loss position.

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3. Non-GAAP Measures

Adjusted EBIT, Adjusted EBIT margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income attributable to Adient, Adjusted effective tax rate, Adjusted earnings per share, Adjusted equity income, Adjusted free cash flow and Net debt as well as other measures presented on an adjusted basis are not recognized terms under U.S. GAAP and do not purport to be alternatives to the most comparable U.S. GAAP amounts. Since all companies do not use identical calculations, our definition and presentation of these measures may not be comparable to similarly titled measures reported by other companies. Management uses the identified non-GAAP measures to evaluate the operating performance of the Company and its business segments and to forecast future periods. Management believes these non-GAAP measures assist investors and other interested parties in evaluating Adient's on-going operations and provide important supplemental information to management and investors regarding financial and business trends relating to Adient's financial condition and results of operations. Investors should not consider these non-GAAP measures as alternatives to the related GAAP measures. Reconciliations of non-GAAP measures to their closest U.S. GAAP equivalent are presented below. Reconciliations of non-GAAP measures related to guidance for any future period have not been provided due to the unreasonable efforts it would take to provide such reconciliations.

• Adjusted EBIT is defined as income before income taxes and noncontrolling interests excluding net financing charges, restructuring, impairment and related costs, purchase accounting amortization, transaction gains/losses, other significant non-recurring items, and net mark-to-market adjustments on pension and postretirement plans. Adjusted EBIT margin is adjusted EBIT as a percentage of net sales.

• Adjusted EBITDA is defined as adjusted EBIT excluding depreciation and stock based compensation. Certain corporate-related costs are not allocated to the business segments in determining Adjusted EBITDA. Adjusted EBITDA margin is adjusted EBITDA as a percentage of net sales.

• Adjusted net income attributable to Adient is defined as net income attributable to Adient excluding restructuring, impairment and related costs, purchase accounting amortization, transaction gains/losses, other significant non-recurring items, net mark-to-market adjustments on pension and postretirement plans, the tax impact of these items and other discrete tax charges/benefits.

• Adjusted effective tax rate is defined as adjusted income tax provision as a percentage of adjusted income before income taxes.

• Adjusted earnings per share is defined as Adjusted net income attributable to Adient divided by diluted weighted average shares.

• Adjusted equity income is defined as equity income excluding amortization of Adient's intangible assets related to its non-consolidated joint ventures and other unusual or one-time items impacting equity income.

• Free cash flow is defined as cash from operating activities less capital expenditures.

• Net debt is calculated as gross debt less cash and cash equivalents.

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Summarized Income Statement Information

(Refer to the Footnote Addendum for footnote explanations and details

of reconciling items between GAAP results and Adjusted results)

	Three Months Ended June 30,
	2020										2019
(in millions, except per share data)	GAAP Results		Adj.		Adjusted Results		GAAP Results		Adj.		Adjusted Results
Net sales	$	1,626	$	—	$	1,626	$	4,219	$	—	$	4,219
Cost of sales (6)	1,779		(1)		1,778		4,008		(6)		4,002
Gross profit	(153)		1		(152)		211		6		217
Selling, general and administrative expenses (7)	115		(12)		103		165		(11)		154
Restructuring and impairment costs (2)	49		(49)		—		15		(15)		—
Equity income (loss) (8)	48		11		59		64		2		66
Earnings (loss) before interest and income taxes (EBIT)	(269)		73		(196)		95		34		129
Memo accounts:
Depreciation					67						68
Equity based compensation					7						8
Adjusted EBITDA					$	(122)					$	205
Net financing charges (12)	58		—		58		60		(13)		47
Other pension expense (income) (11)	(1)		(2)		(3)		5		(6)		(1)
Income (loss) before income taxes	(326)		75		(251)		30		53		83
Income tax provision (benefit) (9)	5		9		14		338		(306)		32
Net income (loss) attributable to Adient	(325)		64		(261)		(321)		357		36
Diluted earnings (loss) per share	(3.46)		0.68		(2.78)		(3.43)		3.81		0.38
Diluted weighted average shares	93.9		—		93.9		93.6		0.4		94.0

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Segment Performance:

	Three months ended June 30, 2020
	Americas			EMEA			Asia			Corporate/Eliminations		Consolidated
Net sales	$	593		$	698		$	346		$	(11)	$	1,626
Adjusted EBITDA	$	(83)		$	(94)		$	71		$	(16)	$	(122)
Adjusted EBITDA margin	(14.0)		%	(13.5)		%	20.5		%	N/A		(7.5)		%
	Three months ended June 30, 2019
	Americas			EMEA			Asia			Corporate/Eliminations		Consolidated
Net sales	$	2,010		$	1,752		$	530		$	(73)	$	4,219
Adjusted EBITDA	$	69		$	53		$	110		$	(27)	$	205
Adjusted EBITDA margin	3.4		%	3.0		%	20.8		%	N/A		4.9		%

The following table reconciles income (loss) before income taxes to adjusted income before income taxes and presents the related effective tax rate and adjusted effective tax rate:

	Three Months Ended June 30,
	2020									2019
(in millions, except effective tax rate)	Income (loss) before income taxes		Tax impact		Effective tax rate	Income (loss) before income taxes		Tax impact		Effective tax rate
As reported	$	(326)	$	5	(1.5)%	$	30	$	338	n/m
Adjustments	75		9		12.0%	53		(306)		n/m
As adjusted	$	(251)	$	14	(5.6)%	$	83	$	32	38.6%

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The following table reconciles net income (loss) attributable to Adient to adjusted net income (loss) attributable to Adient:

	Three Months Ended June 30,
(in millions)	2020		2019
Net income (loss) attributable to Adient	$	(325)	$	(321)
Restructuring and impairment costs	49		15
Purchase accounting amortization	9		11
Restructuring related charges	5		5
Impairment of nonconsolidated partially owned affiliate -YFAI	6		—
Pension mark-to-market and settlement loss(11)	2		6
Deferred financing fee charge (12)	—		13
Other items (5)	4		3
Impact of adjustments on noncontrolling interests (10)	(2)		(2)
Tax impact of above adjustments and other tax items (9)	(9)		306
Adjusted net income attributable to Adient	$	(261)	$	36

Refer to the Footnote Addendum for footnote explanations

The following table reconciles diluted earnings (loss) per share as reported to adjusted diluted earnings per share:

	Three Months Ended June 30,
	2020		2019
Diluted earnings (loss) per share as reported	$	(3.46)	$	(3.43)
Restructuring and impairment costs	0.53		0.16
Purchase accounting amortization	0.10		0.12
Restructuring related charges	0.05		0.05
Impairment of nonconsolidated partially owned affiliate -YFAI	0.06		—
Pension mark-to-market and settlement loss(11)	0.02		0.06
Deferred financing fee charge (12)	—		0.14
Other items (5)	0.04		0.04
Impact of adjustments on noncontrolling interests (10)	(0.02)		(0.02)
Tax impact of above adjustments and other tax items (9)	(0.10)		3.26
Adjusted net income attributable to Adient	$	(2.78)	$	0.38

The following table presents calculations of net debt:

	June 30,		September 30,
(in millions)	2020		2019
Cash	$	1,032	$	924
Total debt	4,527		3,738
Net debt	$	3,495	$	2,814

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The following table reconciles cash from operating activities to free cash flow:

	Three Months Ended June 30,
(in millions)	2020		2019
Operating cash flow	$	(455)	$	266
Capital expenditures	(73)		$	(98)
Free cash flow	$	(528)	$	168

The following table reconciles adjusted EBITDA to free cash flow:

	FY20						FY19
(in millions)	Q3		YTD		Q3		YTD
Adjusted EBITDA	$	(122)	$	386	$	205	$	572
(+/-) Net equity in earnings	184		74		103		(16)
(-) Restructuring (cash)	(29)		(70)		(23)		(112)
(+/-) Net Customer Tooling	(12)		(15)		13		43
(+/-) Past Due Receivables	48		57		(2)		—
(+/-) Trade Working Capital (Net AR/AP + Inventory)	(531)		(441)		(3)		(76)
(+/-) Accrued Compensation	42		(41)		9		48
(-) Interest paid	(43)		(148)		(12)		(82)
(+/-) Tax refund/taxes paid	(24)		(79)		(40)		(88)
(+/-) Other	32		5		16		17
Operating cash flow	(455)		(272)		266		306
Capital expenditures	(73)		(258)		(98)		(350)
Free cash flow	$	(528)	$	(530)	$	168	$	(44)

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Footnote Addendum

(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 along with one-time asset impairment charges, as follows:

	Three Months Ended June 30,
(in millions)	2020		2019
Restructuring charges	$	(22)	$	(15)
Futuris China intangible assets impairment	(27)		—
	$	(49)	$	(15)

(3) Reflects amortization of intangible assets including those related to partially owned affiliates recorded within equity income.

(4) Reflects non-qualified restructuring charges for costs that are directly attributable to restructuring activities, but do not meet the definition of restructuring under ASC 420 including restructuring costs at partially owned affiliates recorded within equity income.

(5) Other items include:

	Three Months Ended June 30,
(in millions)	2020		2019
Futuris integration	$	—	$	(1)
Transaction costs	(4)		(2)
	$	(4)	$	(3)

(6) The adjustments to cost of sales include:

	Three Months Ended June 30,
(in millions)	2020		2019
Purchase accounting amortization	$	—	$	(2)
Restructuring related charges	(1)		(3)
Futuris integration	—		(1)
	$	(1)	$	(6)

(7) The adjustments to selling, general and administrative costs include:

	Three Months Ended June 30,
(in millions)	2020		2019
Purchase accounting amortization	$	(8)	$	(9)
Transaction costs	(4)		(2)
	$	(12)	$	(11)

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(8) The adjustments to equity income include:

	Three Months Ended June 30,
(in millions)	2020		2019
Impairment of nonconsolidated partially owned affiliate - YFAI	$	6	$	—
Restructuring related charges	4		2
Purchase accounting amortization	1		—
	$	11	$	2

(9) The adjustments to income tax provision (benefit) include:

	Three Months Ended June 30,
(in millions)	2020		2019
Valuation allowances	$	—	$	(254)
Benefits associated with restructuring and impairment charges	7		3
Tax rate change	—		(58)
Other reconciling items	2		3
	$	9	$	(306)

(10) Reflects the impact of adjustments, primarily purchase accounting amortization and changes in income tax rates, on noncontrolling interests.

(11) During the three months ended June 30, 2020, Adient settled certain pension plans in the United States and recorded a settlement loss of $2 million. During the three months ended June 30, 2019, Adient was required to remeasure one of its United Kingdom pension plans and, as a result, recorded a $6 million mark-to-market loss.

(12) During the three months ended June 30, 2019, Adient refinanced its debt arrangements and correspondingly recorded a one-time charge for deferred financing fees associated with the previous debt arrangements.