10-Q 1 a3312018adientform10q.htm 10-Q Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM
10-Q
 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2018
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
 
 
adienta20.jpg
 
 
 
Adient plc
 
 
(exact name of Registrant as specified in its charter)
 
 
Ireland
 
98-1328821
 
 
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer
 Identification No.)
 
 
25-28 North Wall Quay, IFSC, Dublin 1, Ireland
 
 
(Address of principal executive offices)
 
 
Registrant's telephone number, including area code: 414-220-8900
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
 
(Title of class)
 
(Name of exchange on which registered)
 
 
Ordinary Shares, par value $0.001
 
New York Stock Exchange
 
 
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x
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 x
No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
 
Accelerated filer ¨
 
Non-accelerated filer ¨
Smaller reporting company ¨
 
Emerging growth company ¨
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ¨
No x
At March 31, 2018, 93,370,292 ordinary shares were outstanding.


Adient plc | Form 10-Q | 1



Adient plc
Form 10-Q
For the Three and Six Months Ended March 31, 2018

TABLE OF CONTENTS


Adient plc | Form 10-Q | 2



PART I - FINANCIAL INFORMATION
 
 
Item 1.
Unaudited Financial Statements


Adient plc
Consolidated Statements of Income (Loss)
(unaudited)

 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions, except per share data)
 
2018
 
2017
 
2018
 
2017
Net sales
 
$
4,596

 
$
4,201

 
$
8,800

 
$
8,227

Cost of sales
 
4,312

 
3,822

 
8,314

 
7,498

Gross profit
 
284

 
379

 
486

 
729

Selling, general and administrative expenses
 
188

 
178

 
384

 
395

Restructuring and impairment costs
 
315

 
6

 
315

 
6

Equity income
 
85

 
89

 
181

 
183

Earnings (loss) before interest and income taxes
 
(134
)
 
284

 
(32
)
 
511

Net financing charges
 
37

 
33

 
70

 
68

Income (loss) before income taxes
 
(171
)
 
251

 
(102
)
 
443

Income tax provision (benefit)
 
(28
)
 
37

 
237

 
65

Net income (loss)
 
(143
)
 
214

 
(339
)
 
378

Income (loss) attributable to noncontrolling interests
 
25

 
24

 
45

 
46

Net income (loss) attributable to Adient
 
$
(168
)
 
$
190

 
$
(384
)
 
$
332

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
(1.80
)
 
$
2.03

 
$
(4.12
)
 
$
3.54

Diluted
 
$
(1.80
)
 
$
2.02

 
$
(4.12
)
 
$
3.53

 
 
 
 
 
 
 
 
 
Cash dividends declared per share
 
$
0.275

 
$

 
$
0.550

 
$
0.275

 
 
 
 
 
 
 
 
 
Shares used in computing earnings per share:
 
 
 
 
 
 
 
 
Basic
 
93.4

 
93.7

 
93.3

 
93.7

Diluted
 
93.4

 
94.1

 
93.3

 
94.0


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
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
2017
 
2018
 
2017
Net income (loss)
 
$
(143
)
 
$
214

 
$
(339
)
 
$
378

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
142

 
92

 
218

 
(357
)
Realized and unrealized gains (losses) on derivatives
 
10

 
11

 

 
9

Other comprehensive income (loss)
 
152

 
103

 
218

 
(348
)
Total comprehensive income (loss)
 
9

 
317

 
(121
)
 
30

Comprehensive income (loss) attributable to noncontrolling interests
 
35

 
28

 
60

 
48

Comprehensive income (loss) attributable to Adient
 
$
(26
)
 
$
289

 
$
(181
)
 
$
(18
)

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)
 
March 31, 2018
 
September 30, 2017
Assets
 
 
 
 
Cash and cash equivalents
 
$
353

 
$
709

Accounts receivable - net
 
2,580

 
2,224

Inventories
 
781

 
735

Other current assets
 
882

 
831

Current assets
 
4,596

 
4,499

Property, plant and equipment - net
 
2,611

 
2,502

Goodwill
 
2,293

 
2,515

Other intangible assets - net
 
534

 
543

Investments in partially-owned affiliates
 
2,012

 
1,793

Other noncurrent assets
 
1,043

 
1,318

Total assets
 
$
13,089

 
$
13,170

Liabilities and Shareholders' Equity
 
 
 
 
Short-term debt
 
$
173

 
$
36

Current portion of long-term debt
 
2

 
2

Accounts payable
 
3,106

 
2,958

Accrued compensation and benefits
 
365

 
444

Restructuring reserve
 
174

 
236

Other current liabilities
 
615

 
652

Current liabilities
 
4,435

 
4,328

Long-term debt
 
3,503

 
3,440

Pension and postretirement benefits
 
142

 
129

Other noncurrent liabilities
 
575

 
653

Long-term liabilities
 
4,220

 
4,222

Commitments and Contingencies (Note 14)
 


 


Redeemable noncontrolling interests
 
39

 
28

Preferred shares issued, par value $0.001; 100,000,000 shares authorized
Zero shares issued and outstanding at March 31, 2018
 

 

Ordinary shares issued, par value $0.001; 500,000,000 shares authorized
93,370,292 shares issued and outstanding at March 31, 2018
 

 

Additional paid-in capital
 
3,955

 
3,942

Retained earnings
 
299

 
734

Accumulated other comprehensive income (loss)
 
(185
)
 
(397
)
Shareholders' equity attributable to Adient
 
4,069

 
4,279

Noncontrolling interests
 
326

 
313

Total shareholders' equity
 
4,395

 
4,592

Total liabilities and shareholders' equity
 
$
13,089

 
$
13,170


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)

 
 
Six Months Ended
March 31,
(in millions)
 
2018
 
2017
Operating Activities
 
 
 
 
Net income (loss) attributable to Adient
 
$
(384
)
 
$
332

Income attributable to noncontrolling interests
 
45

 
46

Net income (loss)
 
(339
)
 
378

Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:
 
 
Depreciation
 
197

 
164

Amortization of intangibles
 
24

 
9

Pension and postretirement benefit expense (benefit)
 
(5
)
 
2

Pension and postretirement contributions, net
 
11

 
(16
)
Equity in earnings of partially-owned affiliates, net of dividends received (includes purchase accounting amortization of $11 and $10, respectively)
 
(103
)
 
(136
)
Deferred income taxes
 
232

 
(4
)
Non-cash impairment charges
 
299

 

Equity-based compensation
 
30

 
22

Other
 
6

 
1

Changes in assets and liabilities:
 
 
 
 
Receivables
 
(303
)
 
(154
)
Inventories
 
(26
)
 
4

Other assets
 
(21
)
 
(7
)
Restructuring reserves
 
(82
)
 
(72
)
Accounts payable and accrued liabilities
 
13

 
(51
)
Accrued income taxes
 
(83
)
 
3

Cash provided (used) by operating activities
 
(150
)
 
143

Investing Activities
 
 
 
 
Capital expenditures
 
(266
)
 
(302
)
Sale of property, plant and equipment
 
2

 
17

Changes in long-term investments
 
(5
)
 
(6
)
Other
 

 
(2
)
Cash provided (used) by investing activities
 
(269
)
 
(293
)
Financing Activities
 
 
 
 
Net transfers from (to) Parent prior to separation
 


606

Cash transferred from former Parent post separation
 


315

Increase (decrease) in short-term debt
 
135


(25
)
Repayment of long-term debt
 
(1
)

(100
)
Cash dividends
 
(51
)


Dividends paid to noncontrolling interests
 
(34
)

(17
)
Other
 
(4
)

3

Cash provided (used) by financing activities
 
45

 
782

Effect of exchange rate changes on cash and cash equivalents
 
18

 
(8
)
Increase (decrease) in cash and cash equivalents
 
(356
)
 
624

Cash and cash equivalents at beginning of period
 
709

 
105

Cash and cash equivalents at end of period
 
$
353

 
$
729


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
On October 31, 2016, Adient plc ("Adient") became an independent company as a result of the separation of the automotive seating and interiors business (the "separation") from Johnson Controls International plc ("the former Parent"). Adient was incorporated under the laws of Ireland in fiscal 2016 for the purpose of holding these businesses. Adient's ordinary shares began trading "regular-way" under the ticker symbol "ADNT" on the New York Stock Exchange on October 31, 2016. Upon becoming an independent company, the capital structure of Adient consisted of 500 million authorized ordinary shares and 100 million authorized preferred shares (par value of $0.001 per ordinary and preferred share). The number of Adient ordinary shares issued on October 31, 2016 was 93,671,810.
Adient is the world's largest automotive seating supplier. Adient has a leading market position in the Americas, Europe and China, and has longstanding relationships with the largest global original equipment manufacturers, or OEMs, in the automotive space. Adient's proprietary technologies extend into virtually every area of automotive seating solutions, including complete seating systems, frames, mechanisms, foam, head restraints, armrests, trim covers and fabrics. Adient is an independent seat supplier with global scale and the capability to design, develop, engineer, manufacture, and deliver complete seat systems and components in every major automotive producing region in the world. Adient also participates in the automotive interiors market primarily through its global automotive interiors joint venture in China, Yanfeng Global Automotive Interior Systems Co., Ltd., or YFAI.
Basis of Presentation
The accompanying consolidated financial statements are presented on a consolidated basis and include all of the accounts and operations of Adient and its consolidated subsidiaries. Intercompany accounts and transactions have been eliminated. The consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. The interim consolidated financial statements and accompanying notes are unaudited and should be read in conjunction with Adient’s annual consolidated financial statements and the notes thereto included in its Annual Report on Form 10-K for the fiscal year ended September 30, 2017.
During the second quarter of fiscal 2018, Adient changed its reportable segments to Seating, Seat Structures and Mechanisms ("SS&M"), and Interiors. As a result, the prior period presentation of reportable segments has been recast to conform to the current segment reporting structure. Refer to Note 12, "Segment Information " for additional information on Adient's reportable segments.
Consolidated VIEs
Based upon the criteria set forth in the Financial Accounting Standards Board (the FASB) Accounting Standards Codification (ASC) 810, "Consolidation," Adient has determined that it was the primary beneficiary in two variable interest entities (VIEs) for the reporting periods ended March 31, 2018 and September 30, 2017, as Adient absorbs significant economics of the entities and has the power to direct the activities that are considered most significant to the entities.
The two VIEs manufacture seating products in North America for the automotive industry. Adient funds the entities' short-term liquidity needs through revolving credit facilities and has the power to direct the activities that are considered most significant to the entities through its key customer supply relationships.

Adient plc | Form 10-Q | 7



The carrying amounts and classification of assets (none of which are restricted) and liabilities included in Adient's consolidated statements of financial position for the consolidated VIEs are as follows:
(in millions)
 
March 31, 2018
 
September 30, 2017
Current assets
 
$
253

 
$
232

Noncurrent assets
 
62

 
56

Total assets
 
$
315

 
$
288

 
 
 
 
 
Current liabilities
 
$
203

 
$
169

Total liabilities
 
$
203

 
$
169

Revisions
As disclosed in the fiscal 2017 Annual Report on Form 10-K, Adient revised previously reported results to correctly report equity income from a non-consolidated affiliate in the Seating segment related to engineering costs that were inappropriately capitalized. Adient also revised previously reported net sales and cost of sales to correctly report certain sales on a net versus gross basis in the Seating segment. The following tables disclose the quarterly impact for the three and six months ended March 31, 2017 of such previously disclosed revisions. Adient assessed the materiality of these misstatements on prior periods’ financial statements in accordance with SEC Staff Accounting Bulletin ("SAB") No. 99, Materiality, codified in ASC 250, Presentation of Financial Statements, and concluded that these misstatements were not material, individually or in the aggregate, to any previously issued financial statements. In accordance with ASC 250 (SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), the consolidated financial statements and notes to consolidated financial statements as of March 31, 2017 have been revised. Adient will revise remaining fiscal 2017 interim periods in future quarterly filings. The following tables show the impact of these revisions on impacted line items from Adient's consolidated financial statements.
 
 
Consolidated Statements of Income (Loss)
 
 
Three Months Ended
 March 31, 2017
 
Six Months Ended
 March 31, 2017
(in millions, except per share data)
 
As Reported
 
Adjustment
 
As Revised
 
As Reported
 
Adjustment
 
As Revised
Net sales
 
$
4,212

 
$
(11
)
 
$
4,201

 
$
8,250

 
$
(23
)
 
$
8,227

Cost of sales
 
3,833

 
(11
)
 
3,822

 
7,521

 
(23
)
 
7,498

Gross profit
 
379

 

 
379

 
729

 

 
729

Equity income
 
91

 
(2
)
 
89

 
192

 
(9
)
 
183

Earnings before interest and income taxes
 
286

 
(2
)
 
284

 
520

 
(9
)
 
511

Income before income taxes
 
253

 
(2
)
 
251

 
452

 
(9
)
 
443

Net income (loss)
 
216

 
(2
)
 
214

 
387

 
(9
)
 
378

Net income (loss) attributable to Adient
 
192

 
(2
)
 
190

 
341

 
(9
)
 
332

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
2.05

 
$
(0.02
)
 
$
2.03

 
$
3.64

 
$
(0.10
)
 
$
3.54

Diluted
 
$
2.04

 
$
(0.02
)
 
$
2.02

 
$
3.63

 
$
(0.10
)
 
$
3.53


Adient plc | Form 10-Q | 8



 
 
Consolidated Statements of Comprehensive Income (Loss)
 
 
Three Months Ended
March 31, 2017
 
Six Months Ended
March 31, 2017
(in millions)
 
As Reported
 
Adjustment
 
As Revised
 
As Reported
 
Adjustment
 
As Revised
Total comprehensive income (loss)
 
$
319

 
$
(2
)
 
$
317

 
$
39

 
$
(9
)
 
$
30

Comprehensive income (loss) attributable to Adient
 
291

 
(2
)
 
289

 
(9
)
 
(9
)
 
(18
)
 
 
Consolidated Statements of Cash Flows
 
 
Six Months Ended
March 31, 2017
(in millions)
 
As Reported
 
Adjustment
 
As Revised
Operating Activities
 
 
 
 
 
 
Net income (loss)
 
$
387

 
$
(9
)
 
$
378

Equity in earnings of partially-owned affiliates, net of dividends received
 
(145
)
 
9

 
(136
)
Cash provided (used) by operating activities
 
143

 

 
143

In the second quarter of fiscal 2018, Adient recorded expense of $8 million for an out of period adjustment, primarily impacting cost of goods sold, to correct a prior period error related to an unrecorded obligation. Adient has concluded that this adjustment was not material to previously reported financial statements nor to current or estimated full year fiscal 2018 results.

Earnings Per Share
The following table shows the computation of basic and diluted earnings per share:
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions, except per share data)
 
2018
 
2017
 
2018
 
2017
Numerator:
 
 
 
 
 
 
 
 
Net income (loss) attributable to Adient
 
$
(168
)
 
$
190

 
$
(384
)
 
$
332

 
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
 
Shares outstanding
 
93.4

 
93.7

 
93.3

 
93.7

Effect of dilutive securities
 

 
0.4

 

 
0.3

Diluted shares
 
93.4

 
94.1

 
93.3

 
94.0

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
(1.80
)
 
$
2.03

 
$
(4.12
)
 
$
3.54

Diluted
 
$
(1.80
)
 
$
2.02

 
$
(4.12
)
 
$
3.53

Potentially dilutive securities whose effect would have been antidilutive are excluded from the computation of diluted earnings per share.
New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In July 2015, the FASB issued ASU No. 2015-11, "Simplifying the Measurement of Inventory." ASU No. 2015-11 requires inventory that is recorded using the first-in, first-out method to be measured at the lower of cost or net realizable value. ASU

Adient plc | Form 10-Q | 9



No. 2015-11 was effective retrospectively for Adient for the quarter ending December 31, 2017. The adoption of this guidance did not have an impact on Adient's consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-07, "Investments-Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting." ASU No. 2016-07 eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retrospectively. ASU No. 2016-07 was effective prospectively for Adient for increases in the level of ownership interest or degree of influence that result in the adoption of the equity method that occur during or after the quarter ending December 31, 2017. The adoption of this guidance did not impact Adient's consolidated financial statements.
In October 2016, the FASB issued ASU No. 2016-17, "Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control." ASU No. 2016-17 changes the evaluation of whether a reporting entity is the primary beneficiary of a Variable Interest Entity (VIE) by changing how a reporting entity that is a single decision maker of a VIE treats indirect interests in the entity held through related parties that are under common control with the reporting entity. ASU No. 2016-17 was effective for Adient for the quarter ended December 31, 2017. The adoption of this guidance did not have an impact on Adient's consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. Under ASU No. 2017-04, goodwill impairment testing is done by comparing the fair value of the reporting unit to its carrying value. If the carrying amount exceeds the fair value, Adient would recognize an impairment charge for the amount that the reporting unit's carrying value exceeds the fair value, not to exceed the total amount of goodwill allocated to that reporting unit. ASU No. 2017-04 eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. Adient early adopted ASU 2017-04 during the quarter ended March 31, 2018. Refer to Note 4, "Goodwill and Other Intangible Assets” for information on the interim goodwill impairment test performed in conjunction with the change in segment reporting.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives And Hedging (Topic 815): Targeted Improvements to Accounting for Hedge Activities. The new standard amends the hedge accounting recognition and presentation requirements in ASC 815. ASU No. 2017-12 amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. As permitted by ASU 2017-12, Adient early adopted this standard in the second quarter of 2018 on a prospective basis. The adoption of this guidance did not have an impact on Adient's consolidated financial statements. Refer to Note 7, "Derivative Instruments and Hedging Activities," of the notes to the consolidated financial statements for Adient's derivative and hedging disclosures.
In February 2018, the FASB issued ASU No. 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." ASU No. 2018-02 gives entities the option to reclassify the stranded tax effects of the Tax Cuts and Jobs Act (the "Act") on items within accumulated other comprehensive income to retained earnings. The standard was early adopted by Adient in the second quarter of fiscal 2018 retrospectively. The adoption of this guidance did not have a material impact on Adient's consolidated financial statements.
In March 2018, the FASB issued ASU No. 2018-05, "Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act ("SAB 118")." ASU 2018-05 expands income tax accounting and disclosure guidance to include SAB 118 issued by the SEC in December 2017. SAB 118 provides guidance on accounting for the income tax effects of the Act and allows for a measurement period not to exceed one year for companies to finalize the provisional amounts recorded as of December 31, 2017. This standard was adopted in the second quarter of fiscal 2018. Refer to Note 11, "Income Taxes" of the notes to the consolidated financial statements for Adient's income tax disclosures.
Recently Issued Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." ASU No. 2014-09 clarifies the principles for recognizing revenue when an entity either enters into a contract with customers to transfer goods or services or enters into a contract for the transfer of non-financial assets. In March 2016 the FASB issued ASU No. 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)," in April 2016 the FASB issued ASU No. 2016-10, "Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing," and in May 2016 the FASB issued ASU No. 2016-12, ‘‘Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,’’ each of which provide additional clarification on certain topics addressed in ASU No. 2014-09. ASU No. 2016-08, ASU No. 2016-10 and ASU No. 2016-12 follow the same

Adient plc | Form 10-Q | 10



implementation guidelines as ASU No. 2014-09 and ASU No. 2015-14. This guidance will be effective October 1, 2018 for Adient. The accounting changes under the new standard will require new processes and procedures to collect the data required for proper reporting and disclosure. Adient is undergoing its review of the impact of adopting this standard and is developing and executing an implementation plan which will include changes to internal processes and controls. Under current guidance Adient generally recognizes revenue when products are shipped and risk of loss has transferred to the customer. Under the new standard, the customized nature of some of Adient's products combined with contractual provisions that provide an enforceable right to payment, may require Adient to recognize revenue prior to the product being shipped to the customer. Adient is also assessing pricing provisions contained in certain customer contracts. It is possible that pricing provisions contained in some of Adient's customer contracts may provide the customer with a material right, potentially resulting in a different allocation of the transaction price than under current guidance. Adient expects to expand disclosures in line with the requirements of the new standard. Adient anticipates applying the modified retrospective method which would require Adient to recognize the cumulative effect of initially applying the standard as an adjustment to opening retained earnings at the date of initial application.
2. Acquisitions and Divestitures

On January 16, 2018, Adient announced its joint venture with The Boeing Company ("Boeing") called Adient Aerospace, LLC ("Adient Aerospace"). Adient's ownership position in Adient Aerospace will be 50.01%. Adient Aerospace will develop, manufacture, and sell 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. Adient Aerospace's results will be included within the Seating segment.

On September 22, 2017, Adient completed the acquisition of Futuris Global Holdings LLC ("Futuris"), a manufacturer of full seating systems, seat frames, seat trim, headrests, armrests and seat bolsters. The acquisition will provide substantial synergies through vertical integration, purchasing and logistics improvements. The acquisition also provided for an immediate manufacturing presence on the west coast of the U.S. to service customers such as Tesla as well as strategic locations in China and Southeast Asia.

During the six months ended March 31, 2018, Adient recorded certain measurement period adjustments related to Futuris which resulted in an increase to goodwill of $6 million. The impact of the Futuris acquisition on consolidated results include $116 million and $236 million of incremental net sales and an immaterial impact on net income for the three and six months ended March 31, 2018, respectively. The impact of the Guangzhou Adient Automotive Seating Co., Ltd. ("GAAS") consolidation in July 2017 on consolidated results include $74 million and $163 million of incremental net sales and an immaterial impact on net income in the three and six months ended March 31, 2018, respectively.

The purchase price allocations related to Futuris and GAAS are based on preliminary valuations to determine the fair value of the net assets as of the acquisition dates and are subject to final adjustments.

3. Inventories

Inventories consisted of the following:
(in millions)
 
March 31, 2018
 
September 30, 2017
Raw materials and supplies
 
$
583

 
$
552

Work-in-process
 
38

 
37

Finished goods
 
160

 
146

Inventories
 
$
781

 
$
735



Adient plc | Form 10-Q | 11



4. Goodwill and Other Intangible Assets

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

(in millions)
 
Seating
 
SS&M
 
Total
Balance at September 30, 2017
 
$
2,515

 
$

 
$
2,515

Business acquisitions
 
6

 

 
6

Realignment of goodwill
 
(299
)
 
299

 

Impairment
 

 
(299
)
 
(299
)
Currency translation and other
 
71

 

 
71

Balance at March 31, 2018
 
$
2,293

 
$

 
$
2,293


During the second quarter of fiscal 2018, Adient began reporting three segments: Seating, SS&M and Interiors. Accordingly, goodwill previously reported in the Seating segment has been reallocated to the SS&M segment using a relative fair value approach and subsequently determined to be fully impaired. Refer to Note 12, "Segment Information" for more information on Adient's reportable segments.

Adient evaluates its goodwill and intangible assets for impairment on an annual basis, or as facts and circumstances warrant. As a result of the change in reportable segments during the second quarter of fiscal 2018, Adient conducted goodwill impairment analyses of the newly allocated goodwill balances under the new reportable segment structure. Adient performs impairment reviews for its reporting units, which have been determined to be Adient's reportable segments, using a fair value method based on management's judgments and assumptions or third party valuations. 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 reportable segments using both a multiple of EBITDA for the Seating segment and a discounted cash flow analysis approach for SS&M, which utilized Level 3 unobservable inputs. These calculations contain uncertainties as they require management to make assumptions about market comparables, future cash flows, the appropriate discount rate and growth rate to reflect the risk inherent in the future cash flows. The estimated future cash flows reflect management's latest assumptions of the financial projections based on current and anticipated competitive landscape and product profitability based on historical trends. A change in any of these estimates and assumptions could produce a different fair value, which could have a material impact on Adient's results of operations. As a result of the analyses, Adient determined that goodwill associated with the SS&M reportable segment was fully impaired. Consequently, a pre-tax goodwill impairment charge of $299 million was recognized in the three months ended March 31, 2018 in the consolidated statements of income (loss) within the restructuring and impairment costs line item. The goodwill impairment charge represented a triggering event for additional impairment considerations of other long lived assets, including an analysis of the recoverability of long lived assets as of March 31, 2018. No further impairments were identified.

Adient's other intangible assets, primarily from business acquisitions valued based on independent appraisals, consisted of:
 
 
March 31, 2018
 
September 30, 2017
(in millions)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Intangible assets
 
 
 
 
 
 
 
 
 
 
 
 
Patented technology
 
$
31

 
$
(17
)
 
$
14

 
$
30

 
$
(15
)
 
$
15

Customer relationships
 
560

 
(87
)
 
473

 
545

 
(64
)
 
481

Trademarks
 
62

 
(29
)
 
33

 
59

 
(26
)
 
33

Miscellaneous
 
23

 
(9
)
 
14

 
22

 
(8
)
 
14

Total intangible assets
 
$
676

 
$
(142
)
 
$
534

 
$
656

 
$
(113
)
 
$
543


Amortization of other intangible assets for the six months ended March 31, 2018 and 2017 was $24 million and $9 million, respectively.


Adient plc | Form 10-Q | 12



5. 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:
 
 
Six Months Ended
March 31,
(in millions)
 
2018
 
2017
Balance at beginning of period
 
$
19

 
$
13

Accruals for warranties issued during the period
 
2

 
2

Changes in accruals related to pre-existing warranties (including changes in estimates)
 
(2
)
 
3

Settlements made (in cash or in kind) during the period
 
(3
)
 
(4
)
Balance at end of period
 
$
16

 
$
14



Adient plc | Form 10-Q | 13



6. Debt and Financing Arrangements
Debt consisted of the following:
(in millions)
 
March 31, 2018
 
September 30, 2017
Long-term debt:
 
 
 
 
Term Loan A - LIBOR plus 1.75% due in 2021
 
$
1,200

 
$
1,200

4.875% Notes due in 2026
 
900

 
900

3.50% Notes due in 2024
 
1,232

 
1,180

European Investment Bank Loan - EURIBOR plus 0.90% due in 2022
 
203

 
195

Capital lease obligations
 
4

 
4

Other
 
1

 
1

Less: debt issuance costs
 
(35
)
 
(38
)
Gross long-term debt
 
3,505

 
3,442

Less: current portion
 
2

 
2

Net long-term debt
 
$
3,503

 
$
3,440

 
 
 
 
 
Short-term debt:
 
 
 
 
Revolving credit facility
 
$
150

 
$

Other bank borrowings
 
23

 
36

Total short-term debt
 
$
173

 
$
36

Net Financing Charges
Adient's net financing charges line item in the consolidated statements of income contained the following components:
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
2017
 
2018
 
2017
Interest expense, net of capitalized interest costs
 
$
36

 
$
32

 
$
70

 
$
65

Banking fees and debt issuance cost amortization
 
2

 
2

 
4

 
4

Interest income
 
(1
)
 

 
(2
)
 
(1
)
Net foreign exchange
 

 
(1
)
 
(2
)
 

Net financing charges
 
$
37

 
$
33

 
$
70

 
$
68

7. 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 8, "Fair Value Measurements," of the notes to consolidated financial statements for information related to the fair value measurements and valuation methods utilized by Adient for each derivative type.
Adient has global operations and participates in the foreign exchange markets to minimize its risk of loss from fluctuations in foreign currency exchange rates. Adient primarily uses foreign currency exchange contracts to hedge certain foreign exchange rate exposures. Adient hedges 70% to 90% of the nominal amount of each of its known foreign exchange transactional exposures. Gains and losses on derivative contracts offset gains and losses on underlying foreign currency exposures. These contracts have been designated as cash flow hedges under ASC 815, "Derivatives and Hedging," and the effective portion of the hedge gains or losses due to changes in fair value are initially recorded as a component of accumulated other comprehensive income (AOCI) and are subsequently reclassified into earnings when the hedged transactions occur and affect earnings. Any ineffective portion of the

Adient plc | Form 10-Q | 14



hedge is reflected in the consolidated statements of income. These contracts were highly effective in hedging the variability in future cash flows attributable to changes in currency exchange rates at March 31, 2018 and September 30, 2017.
Adient selectively uses equity swaps to reduce market risk associated with certain of its stock-based compensation plans, such as its deferred compensation plans. The equity swaps are recorded at fair value. Changes in fair value of the equity swaps are reflected in the consolidated statements of income within selling, general and administrative expenses.
At March 31, 2018, the €1.0 billion aggregate principal amount of 3.50% euro-denominated unsecured notes due 2024 was designated as a net investment hedge to selectively hedge portions of Adient's net investment in Europe. The currency effects of Adient's euro-denominated bonds are reflected in AOCI account within shareholders' equity attributable to Adient where they offset gains and losses recorded on Adient's net investment in Europe.
Adient entered into cross-currency interest rate swaps in the second quarter of 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. At March 31, 2018, Adient had two cross-currency interest rate swaps outstanding totaling approximately €160 million designated as net investment hedges in Adient’s net investment in Europe.

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)
 
March 31,
2018
 
September 30,
2017
 
March 31,
2018
 
September 30,
2017
Other current assets
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
$
12

 
$
4

 
$

 
$

Other noncurrent assets
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 

 
1

 

 

Equity swaps
 

 

 

 
3

Cross-currency interest rate swaps
 
2

 

 

 

Total assets
 
$
14

 
$
5

 
$

 
$
3

 
 
 
 
 
 
 
 
 
Other current liabilities
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
$
6

 
$
6

 
$
1

 
$
2

Other noncurrent liabilities
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
1

 
3

 

 

Equity swaps
 

 

 
4

 

Long-term debt
 
 
 
 
 
 
 
 
Foreign currency denominated debt
 
1,232

 
1,180

 

 

Total liabilities
 
$
1,239

 
$
1,189

 
$
5

 
$
2


Adient enters into International Swaps and Derivatives Associations (ISDA) master netting agreements with counterparties that permit the net settlement of amounts owed under the derivative contracts. The master netting agreements generally provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event. Adient has not elected to offset the fair value positions of the derivative contracts recorded in the consolidated statements of financial position. Collateral is generally not required of Adient or the counterparties under the master netting agreements. As of both March 31, 2018 and September 30, 2017, no cash collateral was received or pledged under the master netting agreements.

Adient plc | Form 10-Q | 15



The gross and net amounts of derivative instruments and other amounts used in hedging activities are as follows:
 
 
Assets
 
Liabilities
(in millions)
 
March 31,
2018
 
September 30,
2017
 
March 31,
2018
 
September 30,
2017
Gross amount recognized
 
$
14

 
$
8

 
$
1,244

 
$
1,191

Gross amount eligible for offsetting
 
(6
)
 
(2
)
 
(6
)
 
(2
)
Net amount
 
$
8

 
$
6

 
$
1,238

 
$
1,189

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
March 31,
 
Six Months Ended
March 31,
 
2018
 
2017
 
2018
 
2017
Foreign currency exchange derivatives
 
$
15

 
$
8

 
$
8

 
$
1

The following table presents the location and amount of the effective portion of pretax gains (losses) on cash flow hedges reclassified from AOCI into Adient's consolidated statements of income:
(in millions)
 
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
 
2018
 
2017
 
2018
 
2017
Foreign currency exchange derivatives
 
Cost of sales
 
$
1

 
$
(7
)
 
$
2

 
$
(10
)
The following table presents the location and amount of pretax gains (losses) on derivatives not designated as hedging instruments recognized in Adient's consolidated statements of income (loss):
(in millions)
 
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
 
2018
 
2017
 
2018
 
2017
Foreign currency exchange derivatives
 
Cost of sales
 
$
1

 
$
(2
)
 
$
(1
)
 
$
(16
)
Foreign currency exchange derivatives
 
Net financing charges
 
(1
)
 
4

 
(2
)
 
35

Equity swap
 
Selling, general and administrative
 
(12
)
 

 
(15
)
 
(1
)
Total
 
 
 
$
(12
)
 
$
2

 
$
(18
)
 
$
18

The effective portion of pretax gains (losses) recorded in currency translation adjustment (CTA) within other comprehensive income (loss) related to net investment hedges was $(37) million and $(54) million for the three and six months ended March 31, 2018, respectively, and $(17) million and $50 million for the three and six months ended March 31, 2017. For the three and six months ended March 31, 2018 and 2017, no gains or losses were reclassified from CTA into income for Adient's outstanding net investment hedges, and no gains or losses were recognized in income for the ineffective portion of cash flow hedges.

Adient plc | Form 10-Q | 16



8. Fair Value Measurements
ASC 820, "Fair Value Measurement," defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a three-level fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.
ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
Recurring Fair Value Measurements
The following tables present Adient's fair value hierarchy for those assets and liabilities measured at fair value:
 
 
Fair Value Measurements Using:
(in millions)
 
Total as of
March 31,
2018
 
Quoted Prices
in Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Other current assets
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
$
12

 
$

 
$
12

 
$

Other noncurrent assets
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 

 

 

 

Cross-currency interest rate swaps
 
2

 

 
2

 

Total assets
 
$
14

 
$

 
$
14

 
$

Other current liabilities
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
$
7

 
$

 
$
7

 
$

Other noncurrent liabilities
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
1

 

 
1

 

Equity swaps
 
4

 

 
4

 

Total liabilities
 
$
12

 
$

 
$
12

 
$


Adient plc | Form 10-Q | 17



 
 
Fair Value Measurements Using:
(in millions)
 
Total as of
September 30,
2017
 
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
 
$
4

 
$

 
$
4

 
$

Other noncurrent assets
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
1

 

 
1

 

Equity swaps
 
3

 

 
3

 

Total assets
 
$
8

 
$

 
$
8

 
$

Other current liabilities
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
$
8

 
$

 
$
8

 
$

Other noncurrent liabilities
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
3

 

 
3

 

Total liabilities
 
$
11

 
$

 
$
11

 
$

Valuation Methods
Foreign currency exchange derivatives Adient selectively hedges anticipated transactions 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, 2018 and September 30, 2017. The changes in fair value of foreign currency exchange derivatives not designated as hedging instruments under ASC 815 are recorded in the consolidated statements of income.
Equity swaps Adient selectively uses equity swaps to reduce market risk associated with certain of its stock-based compensation plans, such as its deferred compensation plans. The equity swaps are recorded at fair value. Changes in fair value of the equity swaps are reflected in the consolidated statements of income within selling, general and administrative expenses.
Cross-currency interest rate swaps Adient selectively uses cross-currency interest rate swaps to hedge portions of its net investment in Europe. In March 2018, Adient entered into two floating to floating cross-currency interest rate swaps totaling approximately €160 million designated as net investment hedges in Adient's net investment in Europe.


Adient plc | Form 10-Q | 18



9. Equity and Noncontrolling Interests
(in millions)
 
Ordinary Shares
 
Additional Paid-in Capital
 
Retained Earnings
 
Parent's Net Investment
 
Accumulated Other Comprehensive Income (Loss)
 
Shareholders' Equity Attributable
 to Adient
 
Shareholders' Equity Attributable to Noncontrolling Interests
 
Total Equity
Balance at September 30, 2016
 
$

 
$

 
$

 
$
4,452

 
$
(276
)
 
$
4,176

 
$
131

 
$
4,307

Net income (loss)
 

 

 
267

 
65

 

 
332

 
34

 
366

Change in Parent's net investment
 

 

 

 
(880
)
 

 
(880
)
 

 
(880
)
Transfers from former Parent
 

 
332

 

 

 

 
332

 

 
332

Reclassification of Parent's net investment and issuance of ordinary shares in connection with separation
 

 
3,637

 

 
(3,637
)
 

 

 

 

Foreign currency translation adjustments
 

 

 

 

 
(359
)
 
(359
)
 
2

 
(357
)
Realized and unrealized gains (losses) on derivatives
 

 

 

 

 
9

 
9

 

 
9

Repurchase and retirement of ordinary shares
 

 

 
(26
)
 

 

 
(26
)
 

 
(26
)
Dividends attributable to noncontrolling interests
 

 

 

 

 

 

 
(21
)
 
(21
)
Change in noncontrolling interest share
 

 

 

 

 

 

 
5

 
5

Share based compensation
 

 
5

 

 

 

 
5

 

 
5

Balance at March 31, 2017
 
$

 
$
3,974

 
$
241

 
$

 
$
(626
)
 
$
3,589

 
$
151

 
$
3,740

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at September 30, 2017
 
$

 
$
3,942

 
$
734

 
$

 
$
(397
)
 
$
4,279

 
$
313

 
$
4,592

Net income (loss)
 

 

 
(384
)
 

 

 
(384
)
 
29

 
(355
)
Foreign currency translation adjustments
 

 

 

 

 
203

 
203

 
13

 
216

Employee retirement plans
 

 

 

 

 
9

 
9

 

 
9

Dividends declared ($0.55 per share)
 

 

 
(51
)
 

 

 
(51
)
 

 
(51
)
Dividends attributable to noncontrolling interests
 

 

 

 

 

 

 
(30
)
 
(30
)
Change in noncontrolling interest share
 

 

 

 

 

 

 
1

 
1

Share based compensation
 

 
10

 

 

 

 
10

 

 
10

Other
 

 
3

 

 

 

 
3

 

 
3

Balance at March 31, 2018
 
$

 
$
3,955

 
$
299

 
$

 
$
(185
)
 
$
4,069

 
$
326

 
$
4,395


The change in Parent's net investment during the fiscal quarter ended December 31, 2016 includes all intercompany activity with the former Parent prior to separation, including a $1.5 billion non-cash settlement.

In September 2017, Adient declared a dividend of $0.275 per ordinary share, which was paid in November 2017. In November 2017, Adient declared a dividend of $0.275 per ordinary share, which was paid in February 2018. In March 2018, Adient declared a dividend of $0.275 per ordinary share, which is payable in May 2018.


Adient plc | Form 10-Q | 19



The following table presents changes in AOCI attributable to Adient:
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
2017
 
2018
 
2017
Foreign currency translation adjustments
 
 
 
 
 
 
 
 
Balance at beginning of period
 
$
(327
)
 
$
(707
)
 
$
(398
)
 
$
(260
)
Aggregate adjustment for the period (net of $0 tax effect for all periods)
 
132

 
88

 
203

 
(359
)
Balance at end of period
 
(195
)
 
(619
)
 
(195
)
 
(619
)
Realized and unrealized gains (losses) on derivatives
 
 
 
 
 
 
 
 
Balance at beginning of period
 
(7
)
 
(16
)
 
3

 
(14
)
Current period changes in fair value (net of tax effect of $1, $2, $(1) and $1)
 
11

 
6

 
1

 
2

Reclassification to income (net of tax effect of $0, $2, $(1) and $3)*
 
(1
)
 
5

 
(1
)
 
7

Balance at end of period
 
3

 
(5
)
 
3

 
(5
)
Pension and postretirement plans
 
 
 
 
 
 
 
 
Balance at beginning of period
 
(2
)
 
(2
)
 
(2
)
 
(2
)
Net reclassifications to AOCI
 
9

 

 
9

 

Balance at end of period
 
7

 
(2
)
 
7

 
(2
)
Accumulated other comprehensive income (loss), end of period
 
$
(185
)
 
$
(626
)
 
$
(185
)
 
$
(626
)
* Refer to Note 7, "Derivative Instruments and Hedging Activities," of the notes to consolidated financial statements for disclosure of the line items on the consolidated statements of income affected by reclassifications from AOCI into income related to derivatives.

The following table presents changes in the redeemable noncontrolling interests:
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
2017
 
2018
 
2017
Beginning balance
 
$
29

 
$
38

 
$
28

 
$
34

Net income
 
9

 
7

 
16

 
12

Foreign currency translation adjustments
 
1

 
1

 
2

 

Dividends
 

 

 
(8
)
 

Change in noncontrolling interest share
 

 

 
1

 

Ending balance
 
$
39

 
$
46

 
$
39

 
$
46




Adient plc | Form 10-Q | 20



10. Restructuring and Impairment Costs

To better align its resources with its growth 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.

In fiscal 2018, Adient committed to a restructuring plan ("2018 Plan") of $38 million that was offset by $17 million of underspend in the 2016 Plan and $5 million of underspend related to prior plan years. Of the restructuring costs recorded, $22 million relates to the SS&M segment and $16 million relates to the Seating segment. The restructuring actions relate to cost reduction initiatives and consist primarily of workforce reductions. The restructuring actions are expected to be substantially completed by fiscal 2019.

The following table summarizes the changes in Adient's 2018 Plan reserve:
(in millions)
 
Employee Severance and Termination Benefits
 
Total
Original Reserve
 
$
38

 
$
38

Utilized—cash
 
(3
)
 
(3
)
Balance at March 31, 2018
 
$
35

 
$
35


In fiscal 2017, Adient committed to a restructuring plan ("2017 Plan") within the Seating segment and recorded $46 million of restructuring and impairment costs in the consolidated statements of income. This is the total amount expected to be incurred for this restructuring plan. The restructuring actions relate to cost reduction initiatives and consist primarily of workforce reductions and plant closures. The restructuring actions are expected to be substantially complete in fiscal 2018.

Adient maintained $11 million of Futuris restructuring reserves as of September 30, 2017 all of which was paid during the three months ended December 31, 2017.

The following table summarizes the changes in Adient's 2017 Plan reserve:
(in millions)
 
Employee Severance and Termination Benefits
 
Other
 
Currency
Translation
 
Total
Original Reserve
 
$
42

 
$
4

 
$

 
$
46

Utilized—cash
 
(4
)
 
(4
)
 

 
(8
)
Balance at September 30, 2017
 
38

 

 

 
38

Utilized—cash
 
(9
)
 

 

 
(9
)
Utilized—noncash
 

 

 
1

 
1

Balance at March 31, 2018
 
$
29

 
$

 
$
1

 
$
30


In fiscal 2016, Adient committed to a restructuring plan ("2016 Plan") and recorded $332 million of restructuring and impairment costs in the consolidated statements of income. This is the total amount expected to be incurred for this restructuring plan. The restructuring actions relate to cost reduction initiatives and consist primarily of workforce reductions, plant closures and asset impairments. Of the restructuring and impairment costs recorded, $217 million relates to the Seating segment, $98 million relates to the SS&M segment and $17 million relates to the Interiors segment. The asset impairment charge recorded during fiscal 2016 related primarily to information technology assets within the Seating segment that will not be used going forward by Adient. The restructuring actions are expected to be substantially complete in fiscal 2020.

Since the announcement of the 2016 Plan in fiscal 2016, Adient has experienced lower employee severance and termination benefit cash payouts than previously calculated of approximately $17 million, due to changes in cost reduction actions. The planned workforce reductions disclosed for the 2016 Plan have been updated for Adient's revised actions.

Adient plc | Form 10-Q | 21



The following table summarizes the changes in Adient's 2016 Plan reserve:
(in millions)
 
Employee Severance and Termination Benefits
 
Long-Lived Asset Impairments
 
Other
 
Currency
Translation
 
Total
Original Reserve
 
$
223

 
$
87

 
$
22

 
$