10-Q 1 a6302018adientform10q.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 June 30, 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
 
 
adienta33.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 June 30, 2018, 93,371,798 ordinary shares were outstanding.


Adient plc | Form 10-Q | 1



Adient plc
Form 10-Q
For the Three and Nine Months Ended June 30, 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
June 30,
 
Nine Months Ended
June 30,
(in millions, except per share data)
 
2018
 
2017
 
2018
 
2017
Net sales
 
$
4,494

 
$
4,007

 
$
13,294

 
$
12,234

Cost of sales
 
4,248

 
3,636

 
12,562

 
11,134

Gross profit
 
246

 
371

 
732

 
1,100

Selling, general and administrative expenses
 
177

 
169

 
561

 
564

Restructuring and impairment costs
 
57

 

 
372

 
6

Equity income
 
87

 
91

 
268

 
274

Earnings (loss) before interest and income taxes
 
99

 
293

 
67

 
804

Net financing charges
 
39

 
31

 
109

 
99

Income (loss) before income taxes
 
60

 
262

 
(42
)
 
705

Income tax provision (benefit)
 
(13
)
 
39

 
224

 
104

Net income (loss)
 
73

 
223

 
(266
)
 
601

Income (loss) attributable to noncontrolling interests
 
19

 
22

 
64

 
68

Net income (loss) attributable to Adient
 
$
54

 
$
201

 
$
(330
)
 
$
533

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.58

 
$
2.15

 
$
(3.54
)
 
$
5.69

Diluted
 
$
0.58

 
$
2.14

 
$
(3.54
)
 
$
5.67

 
 
 
 
 
 
 
 
 
Cash dividends declared per share
 
$
0.275

 
$

 
$
0.825

 
$
0.275

 
 
 
 
 
 
 
 
 
Shares used in computing earnings per share:
 
 
 
 
 
 
 
 
Basic
 
93.4

 
93.4

 
93.3

 
93.6

Diluted
 
93.7

 
93.9

 
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
June 30,
 
Nine Months Ended
June 30,
(in millions)
 
2018
 
2017
 
2018
 
2017
Net income (loss)
 
$
73

 
$
223

 
$
(266
)
 
$
601

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
(250
)
 
131

 
(32
)
 
(226
)
Realized and unrealized gains (losses) on derivatives
 
(18
)
 
3

 
(18
)
 
12

Other comprehensive income (loss)
 
(268
)
 
134

 
(50
)
 
(214
)
Total comprehensive income (loss)
 
(195
)
 
357

 
(316
)
 
387

Comprehensive income (loss) attributable to noncontrolling interests
 
4

 
23

 
64

 
71

Comprehensive income (loss) attributable to Adient
 
$
(199
)
 
$
334

 
$
(380
)
 
$
316


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)
 
June 30,
2018
 
September 30, 2017
Assets
 
 
 
 
Cash and cash equivalents
 
$
378

 
$
709

Accounts receivable - net
 
2,234

 
2,224

Inventories
 
774

 
735

Other current assets
 
786

 
831

Current assets
 
4,172

 
4,499

Property, plant and equipment - net
 
2,402

 
2,502

Goodwill
 
2,216

 
2,515

Other intangible assets - net
 
501

 
543

Investments in partially-owned affiliates
 
1,764

 
1,793

Assets held for sale
 
66

 

Other noncurrent assets
 
1,217

 
1,318

Total assets
 
$
12,338

 
$
13,170

Liabilities and Shareholders' Equity
 
 
 
 
Short-term debt
 
$
15

 
$
36

Current portion of long-term debt
 
2

 
2

Accounts payable
 
2,851

 
2,958

Accrued compensation and benefits
 
324

 
444

Restructuring reserve
 
143

 
236

Other current liabilities
 
690

 
652

Current liabilities
 
4,025

 
4,328

Long-term debt
 
3,422

 
3,440

Pension and postretirement benefits
 
134

 
129

Other noncurrent liabilities
 
563

 
653

Long-term liabilities
 
4,119

 
4,222

Commitments and Contingencies (Note 14)
 


 


Redeemable noncontrolling interests
 
41

 
28

Preferred shares issued, par value $0.001; 100,000,000 shares authorized
Zero shares issued and outstanding at June 30, 2018
 

 

Ordinary shares issued, par value $0.001; 500,000,000 shares authorized
93,371,798 shares issued and outstanding at June 30, 2018
 

 

Additional paid-in capital
 
3,960

 
3,942

Retained earnings
 
327

 
734

Accumulated other comprehensive income (loss)
 
(447
)
 
(397
)
Shareholders' equity attributable to Adient
 
3,840

 
4,279

Noncontrolling interests
 
313

 
313

Total shareholders' equity
 
4,153

 
4,592

Total liabilities and shareholders' equity
 
$
12,338

 
$
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)

 
 
Nine Months Ended
June 30,
(in millions)
 
2018
 
2017
Operating Activities
 
 
 
 
Net income (loss) attributable to Adient
 
$
(330
)
 
$
533

Income attributable to noncontrolling interests
 
64

 
68

Net income (loss)
 
(266
)
 
601

Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:
 
 
Depreciation
 
300

 
248

Amortization of intangibles
 
36

 
13

Pension and postretirement benefit expense (benefit)
 
(14
)
 
3

Pension and postretirement contributions, net
 
8

 
(23
)
Equity in earnings of partially-owned affiliates, net of dividends received (includes purchase accounting amortization of $16 and $16, respectively)
 
10

 
(217
)
Deferred income taxes
 
242

 
(9
)
Non-cash impairment charges
 
351

 

Equity-based compensation
 
43

 
33

Other
 
7

 
3

Changes in assets and liabilities:
 
 
 
 
Receivables
 
(57
)
 
81

Inventories
 
(54
)
 
15

Other assets
 
(50
)
 
48

Restructuring reserves
 
(108
)
 
(144
)
Accounts payable and accrued liabilities
 
(46
)
 
(349
)
Accrued income taxes
 
(162
)
 
(3
)
Cash provided (used) by operating activities
 
240

 
300

Investing Activities
 
 
 
 
Capital expenditures
 
(404
)
 
(417
)
Sale of property, plant and equipment
 
5

 
27

Changes in long-term investments
 
(4
)
 
(6
)
Loans to affiliates
 
(11
)
 

Other
 

 
(2
)
Cash provided (used) by investing activities
 
(414
)
 
(398
)
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
 
(23
)

(38
)
Increase (decrease) in long-term debt
 


183

Repayment of long-term debt
 
(2
)

(301
)
Share repurchases
 


(40
)
Cash dividends
 
(77
)

(26
)
Dividends paid to noncontrolling interests
 
(57
)

(47
)
Other
 
(3
)

2

Cash provided (used) by financing activities
 
(162
)
 
654

Effect of exchange rate changes on cash and cash equivalents
 
5

 
8

Increase (decrease) in cash and cash equivalents
 
(331
)
 
564

Cash and cash equivalents at beginning of period
 
709

 
105

Cash and cash equivalents at end of period
 
$
378

 
$
669


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 June 30, 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)
 
June 30,
2018
 
September 30, 2017
Current assets
 
$
242

 
$
232

Noncurrent assets
 
65

 
56

Total assets
 
$
307

 
$
288

 
 
 
 
 
Current liabilities
 
$
220

 
$
169

Total liabilities
 
$
220

 
$
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 nine months ended June 30, 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 June 30, 2017 have been revised. 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
 June 30, 2017
 
Nine Months Ended
 June 30, 2017
(in millions, except per share data)
 
As Reported
 
Adjustment
 
As Revised
 
As Reported
 
Adjustment
 
As Revised
Net sales
 
$
4,017

 
$
(10
)
 
$
4,007

 
$
12,267

 
$
(33
)
 
$
12,234

Cost of sales
 
3,646

 
(10
)
 
3,636

 
11,167

 
(33
)
 
11,134

Gross profit
 
371

 

 
371

 
1,100

 

 
1,100

Equity income
 
94

 
(3
)
 
91

 
286

 
(12
)
 
274

Earnings before interest and income taxes
 
296

 
(3
)
 
293

 
816

 
(12
)
 
804

Income before income taxes
 
265

 
(3
)
 
262

 
717

 
(12
)
 
705

Net income (loss)
 
226

 
(3
)
 
223

 
613

 
(12
)
 
601

Net income (loss) attributable to Adient
 
204

 
(3
)
 
201

 
545

 
(12
)
 
533

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
2.18

 
$
(0.03
)
 
$
2.15

 
$
5.82

 
$
(0.13
)
 
$
5.69

Diluted
 
$
2.17

 
$
(0.03
)
 
$
2.14

 
$
5.80

 
$
(0.13
)
 
$
5.67


Adient plc | Form 10-Q | 8



 
 
Consolidated Statements of Comprehensive Income (Loss)
 
 
Three Months Ended
 June 30, 2017
 
Nine Months Ended
 June 30, 2017
(in millions)
 
As Reported
 
Adjustment
 
As Revised
 
As Reported
 
Adjustment
 
As Revised
Total comprehensive income (loss)
 
$
360

 
$
(3
)
 
$
357

 
$
399

 
$
(12
)
 
$
387

Comprehensive income (loss) attributable to Adient
 
337

 
(3
)
 
334

 
328

 
(12
)
 
316

 
 
Consolidated Statements of Cash Flows
 
 
Nine Months Ended
 June 30, 2017
(in millions)
 
As Reported
 
Adjustment
 
As Revised
Operating Activities
 
 
 
 
 
 
Net income (loss)
 
$
613

 
$
(12
)
 
$
601

Equity in earnings of partially-owned affiliates, net of dividends received
 
(229
)
 
12

 
(217
)
Cash provided (used) by operating activities
 
300

 

 
300

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
June 30,
 
Nine Months Ended
June 30,
(in millions, except per share data)
 
2018
 
2017
 
2018
 
2017
Numerator:
 
 
 
 
 
 
 
 
Net income (loss) attributable to Adient
 
$
54

 
$
201

 
$
(330
)
 
$
533

 
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
 
Shares outstanding
 
93.4

 
93.4

 
93.3

 
93.6

Effect of dilutive securities
 
0.3

 
0.5

 

 
0.4

Diluted shares
 
93.7

 
93.9

 
93.3

 
94.0

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.58

 
$
2.15

 
$
(3.54
)
 
$
5.69

Diluted
 
$
0.58

 
$
2.14

 
$
(3.54
)
 
$
5.67

Potentially dilutive securities whose effect would have been antidilutive are excluded from the computation of diluted earnings per share. The impact of excluding antidilutive securities was insignificant for all periods presented.





Adient plc | Form 10-Q | 9



Receivables
Receivables consist of amounts billed and currently due from customers and revenues that have been recognized for accounting purposes but not yet billed to customers. Adient extends credit to customers in the normal course of business and maintains an allowance for doubtful accounts resulting from the inability or unwillingness of customers to make required payments. The allowance for doubtful accounts is based on historical experience, existing economic conditions and any specific customer collection issues Adient has identified. Adient enters into supply chain financing programs in certain foreign jurisdictions to sell accounts receivable without recourse to third-party financial institutions. Sales of accounts receivable are reflected as a reduction of accounts receivable on the consolidated statements of financial position and the proceeds are included in cash flows from operating activities in the consolidated statements of cash flows. During the third quarter of fiscal 2018, Adient entered into an additional €200 million accounts receivable transfer and servicing arrangement. As of June 30, 2018, $94 million has been funded under the program.

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 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.

Adient plc | Form 10-Q | 10



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 June 2018, the FASB issues ASU No. 2018-08, "Not-For-Profit Entities (Topic 718): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made", which is intended to clarify and improve the scope and the accounting guidance for contributions received and contributions made. The amendments in ASU No. 2018-08 should assist entities in (1) evaluating whether transactions should be accounted for as contributions (nonreciprocal transaction) within the scope of Topic 958, Not-for-Profit Entities, or as exchange (reciprocal) transactions subject to other guidance and (2) determining whether a contribution is conditional. ASU No. 2018-08 will be effective for Adient for the quarter ending December 31, 2018, with early adoption permitted. Adient is currently assessing the potential impact of adopting this guidance on its consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-07, “Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting”, which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from nonemployees. ASU No. 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which the grantor acquires goods and services to be used or consumed in its own operations by issuing share-based payment awards. ASU NO. 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606. ASU No. 2018-07 will be effective for Adient for the quarter ending December 31, 2019, with early adoption permitted, but no earlier than Adient's adoption of ASC 606. Adient is currently assessing the potential impact of adopting this guidance on its consolidated financial statements.
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 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.

Adient plc | Form 10-Q | 11




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 nine months ended June 30, 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 $130 million and $366 million of incremental net sales and an immaterial impact on net income for the three and nine months ended June 30, 2018, respectively. The impact of the Guangzhou Adient Automotive Seating Co., Ltd. ("GAAS") consolidation in July 2017 on consolidated results include $89 million and $252 million of incremental net sales and an immaterial impact on net income in the three and nine months ended June 30, 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.

Assets held for sale

As of June 30, 2018, Adient committed to a plan to sell its Detroit, Michigan properties and its airplanes and is actively marketing the sale of these assets. As a result, these assets have been classified as assets held for sale and were required to be adjusted to the lower of fair value less cost to sell or carrying value. This resulted in an impairment charge of $52 million within restructuring and impairment costs on the consolidated statement of income for the three months ended June 30, 2018, of which $42 million related to Seating assets and $10 million related to corporate assets. The impairment was measured using a market approach utilizing an appraisal to determine fair values of the assets. The inputs utilized in the analyses are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement" and primarily consist of third-party appraisals.

3. Inventories

Inventories consisted of the following:
(in millions)
 
June 30,
2018
 
September 30, 2017
Raw materials and supplies
 
$
570

 
$
552

Work-in-process
 
37

 
37

Finished goods
 
167

 
146

Inventories
 
$
774

 
$
735



Adient plc | Form 10-Q | 12



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
 
(6
)
 

 
(6
)
Balance at June 30, 2018
 
$
2,216

 
$

 
$
2,216


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:
 
 
June 30, 2018
 
September 30, 2017
(in millions)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Intangible assets
 
 
 
 
 
 
 
 
 
 
 
 
Patented technology
 
$
21

 
$
(14
)
 
$
7

 
$
30

 
$
(15
)
 
$
15

Customer relationships
 
539

 
(92
)
 
447

 
545

 
(64
)
 
481

Trademarks
 
58

 
(29
)
 
29

 
59

 
(26
)
 
33

Miscellaneous
 
30

 
(12
)
 
18

 
22

 
(8
)
 
14

Total intangible assets
 
$
648

 
$
(147
)
 
$
501

 
$
656

 
$
(113
)
 
$
543


Amortization of other intangible assets for the nine months ended June 30, 2018 and 2017 was $36 million and $13 million, respectively.


Adient plc | Form 10-Q | 13



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:
 
 
Nine Months Ended
June 30,
(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)
 
(6
)
 
(1
)
Settlements made (in cash or in kind) during the period
 
(4
)
 
(5
)
Balance at end of period
 
$
11

 
$
9


6. Debt and Financing Arrangements
Debt consisted of the following:
(in millions)
 
June 30,
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
 
1,162

 
1,180

European Investment Bank Loan - EURIBOR plus 0.90% due in 2022
 
192

 
195

Capital lease obligations
 
3

 
4

Other
 
1

 
1

Less: debt issuance costs
 
(34
)
 
(38
)
Gross long-term debt
 
3,424

 
3,442

Less: current portion
 
2

 
2

Net long-term debt
 
$
3,422

 
$
3,440

Net Financing Charges
Adient's net financing charges line item in the consolidated statements of income contained the following components:
 
 
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
(in millions)
 
2018
 
2017
 
2018
 
2017
Interest expense, net of capitalized interest costs
 
$
38

 
$
31

 
$
108

 
$
96

Banking fees and debt issuance cost amortization
 
4

 
2

 
8

 
6

Interest income
 
(3
)
 
(2
)
 
(5
)
 
(3
)
Net foreign exchange
 

 

 
(2
)
 

Net financing charges
 
$
39

 
$
31

 
$
109

 
$
99


Adient plc | Form 10-Q | 14



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 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 June 30, 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 June 30, 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 June 30, 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.


Adient plc | Form 10-Q | 15



The following table presents the location and fair values of derivative instruments and other amounts used in hedging activities included in Adient's consolidated statements of financial position:
 
 
Derivatives and Hedging
Activities Designated as
Hedging Instruments
under ASC 815
 
Derivatives and Hedging
Activities Not Designated as
Hedging Instruments
under ASC 815
(in millions)
 
June 30,
2018
 
September 30,
2017
 
June 30,
2018
 
September 30,
2017
Other current assets
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
$
2

 
$
4

 
$
2

 
$

Other noncurrent assets
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 

 
1

 

 

Equity swaps
 

 

 

 
3

Cross-currency interest rate swaps
 
13

 

 

 

Total assets
 
$
15

 
$
5

 
$
2

 
$
3

 
 
 
 
 
 
 
 
 
Other current liabilities
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
$
22

 
$
6

 
$

 
$
2

Other noncurrent liabilities
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
3

 
3

 

 

Equity swaps
 

 

 
2

 

Long-term debt
 
 
 
 
 
 
 
 
Foreign currency denominated debt
 
1,162

 
1,180

 

 

Total liabilities
 
$
1,187

 
$
1,189

 
$
2

 
$
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 June 30, 2018 and September 30, 2017, no cash collateral was received or pledged under the master netting agreements.
The gross and net amounts of derivative instruments and other amounts used in hedging activities are as follows:
 
 
Assets
 
Liabilities
(in millions)
 
June 30,
2018
 
September 30,
2017
 
June 30,
2018
 
September 30,
2017
Gross amount recognized
 
$
17

 
$
8

 
$
1,189

 
$
1,191

Gross amount eligible for offsetting
 
(3
)
 
(2
)
 
(3
)
 
(2
)
Net amount
 
$
14

 
$
6

 
$
1,186

 
$
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
June 30,
 
Nine Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
Foreign currency exchange derivatives
 
$
(25
)
 
$
3

 
$
(17
)
 
$
4


Adient plc | Form 10-Q | 16



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
June 30,
 
Nine Months Ended
June 30,
 
 
2018
 
2017
 
2018
 
2017
Foreign currency exchange derivatives
 
Cost of sales
 
$
(2
)
 
$
(3
)
 
$

 
$
(13
)
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
June 30,
 
Nine Months Ended
June 30,
 
 
2018
 
2017
 
2018
 
2017
Foreign currency exchange derivatives
 
Cost of sales
 
$
3

 
$
(1
)
 
$
2

 
$
(17
)
Foreign currency exchange derivatives
 
Net financing charges
 
(3
)
 
1

 
(5
)
 
36

Equity swap
 
Selling, general and administrative
 
(7
)
 
1

 
(22
)
 

Total
 
 
 
$
(7
)
 
$
1

 
$
(25
)
 
$
19

The effective portion of pretax gains (losses) recorded in currency translation adjustment (CTA) within other comprehensive income (loss) related to net investment hedges was $81 million and $27 million for the three and nine months ended June 30, 2018, respectively, and $(71) million and $(21) million for the three and nine months ended June 30, 2017. For the three and nine months ended June 30, 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.
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.







Adient plc | Form 10-Q | 17



Recurring Fair Value Measurements
The following tables present Adient's fair value hierarchy for those assets and liabilities measured at fair value:
 
 
Fair Value Measurements Using:
(in millions)
 
Total as of
June 30,
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
 
$
4

 
$

 
$
4

 
$

Other noncurrent assets
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 

 

 

 

Cross-currency interest rate swaps
 
13

 

 
13

 

Total assets
 
$
17

 
$

 
$
17

 
$

Other current liabilities
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
$
22

 
$

 
$
22

 
$

Other noncurrent liabilities
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
3

 

 
3

 

Equity swaps
 
2

 

 
2

 

Total liabilities
 
$
27

 
$

 
$
27

 
$

 
 
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 June 30, 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.

Adient plc | Form 10-Q | 18



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.
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)
 

 

 
468

 
65

 

 
533

 
50

 
583

Change in Parent's net investment
 

 

 

 
(880
)
 

 
(880
)
 

 
(880
)
Transfers from former Parent
 

 
326

 

 

 

 
326

 

 
326

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

 
3,637

 

 
(3,637
)
 

 

 

 

Foreign currency translation adjustments
 

 

 

 

 
(229
)
 
(229
)
 
2

 
(227
)
Realized and unrealized gains (losses) on derivatives
 

 

 

 

 
12

 
12

 

 
12

Dividends declared ($0.275 per share)
 

 

 
(26
)
 

 

 
(26
)
 

 
(26
)
Repurchase and retirement of ordinary shares
 

 
(40
)
 

 

 

 
(40
)
 

 
(40
)
Dividends attributable to noncontrolling interests
 

 

 

 

 

 

 
(41
)
 
(41
)
Change in noncontrolling interest share
 

 

 

 

 

 

 
5

 
5

Share based compensation
 

 
9

 

 

 

 
9

 

 
9

Balance at June 30, 2017
 
$

 
$
3,932

 
$
442

 
$

 
$
(493
)
 
$
3,881

 
$
147

 
$
4,028

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at September 30, 2017
 
$

 
$
3,942

 
$
734

 
$

 
$
(397
)
 
$
4,279

 
$
313

 
$
4,592

Net income (loss)
 

 

 
(330
)
 

 

 
(330
)
 
45

 
(285
)
Foreign currency translation adjustments
 

 

 

 

 
(32
)
 
(32
)
 

 
(32
)
Realized and unrealized gains (losses) on derivatives
 

 

 

 

 
(18
)
 
(18
)
 

 
(18
)
Employee retirement plans
 

 

 

 

 

 

 

 

Dividends declared ($0.825 per share)
 

 

 
(77
)
 

 

 
(77
)
 

 
(77
)
Dividends attributable to noncontrolling interests
 

 

 

 

 

 

 
(46
)
 
(46
)
Change in noncontrolling interest share
 

 

 

 

 

 

 
1

 
1

Share based compensation
 

 
15

 

 

 

 
15

 

 
15

Other
 

 
3

 

 

 

 
3

 

 
3

Balance at June 30, 2018
 
$

 
$
3,960

 
$
327

 
$

 
$
(447
)
 
$
3,840

 
$
313

 
$
4,153


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

Adient plc | Form 10-Q | 19



a dividend of $0.275 per ordinary share, which was paid in May 2018. In June 2018, Adient declared a dividend of $0.275 per ordinary share, which is payable in August 2018.

The following table presents changes in AOCI attributable to Adient:
 
 
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
(in millions)
 
2018
 
2017
 
2018
 
2017
Foreign currency translation adjustments
 
 
 
 
 
 
 
 
Balance at beginning of period
 
$
(195
)
 
$
(619
)
 
$
(398
)
 
$
(260
)
Aggregate adjustment for the period, net of tax
 
(235
)
 
130

 
(32
)
 
(229
)
Balance at end of period
 
(430
)
 
(489
)
 
(430
)
 
(489
)
Realized and unrealized gains (losses) on derivatives
 
 
 
 
 
 
 
 
Balance at beginning of period
 
3

 
(5
)
 
3

 
(14
)
Current period changes in fair value, net of tax
 
(20
)
 

 
(18
)
 
1

Reclassification to income, net of tax*
 
2

 
3

 

 
11

Balance at end of period
 
(15
)
 
(2
)
 
(15
)
 
(2
)
Pension and postretirement plans
 
 
 
 
 
 
 
 
Balance at beginning of period
 
7

 
(2
)
 
(2
)
 
(2
)
Net reclassifications to AOCI
 
(9
)
 

 

 

Balance at end of period
 
(2
)
 
(2
)
 
(2
)
 
(2
)
Accumulated other comprehensive income (loss), end of period
 
$
(447
)
 
$
(493
)
 
$
(447
)
 
$
(493
)
* 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
June 30,
 
Nine Months Ended
June 30,
(in millions)
 
2018
 
2017
 
2018
 
2017
Beginning balance
 
$
39

 
$
46

 
$
28

 
$
34

Net income
 
3

 
6

 
19

 
18

Foreign currency translation adjustments
 
(2
)
 
1

 

 
1

Dividends
 
1

 
(31
)
 
(7
)
 
(31
)
Change in noncontrolling interest share
 

 

 
1

 

Ending balance
 
$
41

 
$
22

 
$
41

 
$
22




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 $43 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, $27 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
 
Other
 
Currency
Translation
 
Total
Original Reserve
 
$
43

 
$

 
$

 
$
43

Utilized—cash
 
(7
)
 
(2
)
 

 
(9
)
Utilized—noncash
 

 

 
(2
)
 
(2
)
Balance at June 30, 2018
 
$
36

 
$
(2
)
 
$
(2
)
 
$
32


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