UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

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

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 D01 H104
(Address of principal executive offices)
734-254-5000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading symbol	Name of exchange on which registered
Ordinary Shares, par value $0.001	ADNT	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☑  No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ☑  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☑	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  ☑

At March 31, 2021, 94,208,305 ordinary shares were outstanding.

Adient plc

Form 10-Q

For the Three Months Ended March 31, 2021

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
Item 1.	Unaudited Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4.	Controls and Procedures	48
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.	Defaults Upon Senior Securities	50
Item 4.	Mine Safety Disclosures	50
Item 5.	Other Information	50
Item 6.	Exhibits	51
	Signatures	52

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)	2021		2020		2021		2020
Net sales	$	3,819	$	3,511	$	7,667	$	7,447
Cost of sales	3,521		3,274		7,028		6,947
Gross profit	298		237		639		500
Selling, general and administrative expenses	148		127		297		292
Loss on business divestitures - net	—		—		—		25
Restructuring and impairment costs	5		52		12		54
Equity income (loss)	85		8		182		(105)
Earnings (loss) before interest and income taxes	230		66		512		24
Net financing charges	110		50		169		98
Other pension expense (income)	(2)		(2)		(4)		(4)
Income (loss) before income taxes	122		18		347		(70)
Income tax provision (benefit)	28		16		80		70
Net income (loss)	94		2		267		(140)
Income (loss) attributable to noncontrolling interests	25		21		48		46
Net income (loss) attributable to Adient	$	69	$	(19)	$	219	$	(186)
Earnings (loss) per share:
Basic	$	0.73	$	(0.20)	$	2.33	$	(1.98)
Diluted	$	0.72	$	(0.20)	$	2.30	$	(1.98)
Shares used in computing earnings per share:
Basic	94.2		93.8		94.1		93.8
Diluted	96.0		93.8		95.4		93.8

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

Adient plc | Form 10-Q | 3

Adient plc

Consolidated Statements of Comprehensive Income (Loss)

(unaudited)

	Three Months Ended March 31,				Six Months Ended March 31,
(in millions)	2021		2020		2021		2020
Net income (loss)	$	94	$	2	$	267	$	(140)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(35)		(141)		37		(82)
Realized and unrealized gains (losses) on derivatives	(11)		(62)		17		(47)
Other comprehensive income (loss)	(46)		(203)		54		(129)
Total comprehensive income (loss)	48		(201)		321		(269)
Comprehensive income (loss) attributable to noncontrolling interests	16		4		56		38
Comprehensive income (loss) attributable to Adient	$	32	$	(205)	$	265	$	(307)

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

Adient plc | Form 10-Q | 4

Adient plc

Consolidated Statements of Financial Position

(unaudited)

(in millions, except share and per share data)	March 31, 2021		September 30, 2020
Assets
Cash and cash equivalents	$	984	$	1,692
Accounts receivable - net	1,757		1,641
Inventories	756		685
Assets held for sale	56		43
Other current assets	537		421
Current assets	4,090		4,482
Property, plant and equipment - net	1,551		1,581
Goodwill	2,059		2,057
Other intangible assets - net	432		443
Investments in partially-owned affiliates	848		707
Assets held for sale	26		27
Other noncurrent assets	969		964
Total assets	$	9,975	$	10,261
Liabilities and Shareholders' Equity
Short-term debt	$	14	$	202
Current portion of long-term debt	8		8
Accounts payable	2,378		2,179
Accrued compensation and benefits	376		374
Liabilities held for sale	60		46
Restructuring reserve	150		237
Other current liabilities	675		773
Current liabilities	3,661		3,819
Long-term debt	3,646		4,097
Pension and postretirement benefits	135		145
Other noncurrent liabilities	647		622
Long-term liabilities	4,428		4,864
Commitments and Contingencies (Note 17)
Redeemable noncontrolling interests	44		43
Preferred shares issued, par value $0.001; 100,000,000 shares authorized, Zero shares issued and outstanding at March 31, 2021	—		—
Ordinary shares issued, par value $0.001; 500,000,000 shares authorized, 94,208,305 shares issued and outstanding at March 31, 2021	—		—
Additional paid-in capital	3,985		3,974
Accumulated deficit	(1,877)		(2,096)
Accumulated other comprehensive income (loss)	(619)		(665)
Shareholders' equity attributable to Adient	1,489		1,213
Noncontrolling interests	353		322
Total shareholders' equity	1,842		1,535
Total liabilities and shareholders' equity	$	9,975	$	10,261

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

Adient plc | Form 10-Q | 5

Adient plc

Consolidated Statements of Cash Flows

(unaudited)

	Six Months Ended March 31,
(in millions)	2021		2020
Operating Activities
Net income (loss) attributable to Adient	$	219	$	(186)
Income attributable to noncontrolling interests	48		46
Net income (loss)	267		(140)
Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:
Depreciation	139		147
Amortization of intangibles	19		19
Pension and postretirement contributions, net	(12)		(18)
Equity in earnings of partially-owned affiliates, net of dividends received (includes purchase accounting amortization of $2 and $2, respectively)	(139)		(103)
(Gain) on sale/impairment of nonconsolidated partially-owned affiliates	(33)		216
Premium and transaction costs paid on repurchase of debt	46		—
Deferred income taxes	(3)		5
Non-cash impairment charges	10		—
Loss on divestitures - net	—		25
Equity-based compensation	26		1
Other	6		5
Changes in assets and liabilities:
Receivables	(120)		508
Inventories	(71)		(30)
Other assets	(85)		38
Restructuring reserves	(95)		(33)
Accounts payable and accrued liabilities	135		(466)
Accrued income taxes	50		9
Cash provided (used) by operating activities	140		183
Investing Activities
Capital expenditures	(126)		(185)
Sale of property, plant and equipment	12		4
Settlement of cross-currency interest rate swap	—		10
Receipt of deferred consideration	19		—
Changes in long-term investments	—		(37)
Cash provided (used) by investing activities	(95)		(208)
Financing Activities
Increase (decrease) in short-term debt	6		818
Repayment of long-term debt	(705)		(4)
Debt financing costs	(1)		(1)
Dividends paid to noncontrolling interests	(59)		(59)
Other	(3)		(2)
Cash provided (used) by financing activities	(762)		752
Effect of exchange rate changes on cash and cash equivalents	12		(11)
Increase (decrease) in cash and cash equivalents, including cash classified within current assets held for sale	(705)		716
Change in cash classified within current assets held for sale	(3)		—
Increase (decrease) in cash and cash equivalents	(708)		716
Cash and cash equivalents at beginning of period	1,692		924
Cash and cash equivalents at end of period	$	984	$	1,640

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

Adient plc | Form 10-Q | 6

Adient plc

Notes to Consolidated Financial Statements

(unaudited)

1. Basis of Presentation and Summary of Significant Accounting Policies

Adient is a global leader in the automotive seating supplier industry. Adient has a leading market position in the Americas, Europe and China, and has longstanding relationships with the largest global original equipment manufacturers, or OEMs, in the automotive space. Adient's proprietary technologies extend into virtually every area of automotive seating solutions, including complete seating systems, frames, mechanisms, foam, head restraints, armrests and trim covers. Adient is an independent seat supplier with global scale and the capability to design, develop, engineer, manufacture, and deliver complete seat systems and components in every major automotive producing region in the world.

Basis of Presentation

The consolidated financial statements of Adient have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). During fiscal 2020, Adient faced an unprecedented situation with the coronavirus pandemic identified in late 2019 ("COVID-19") and the related significant interruption it had on Adient's operations. Adient's China facilities (including both consolidated and non-consolidated joint ventures) were effectively shut down during the lunar New Year festival (at the end of January 2020) and returned to operations by the end of March 2020. Beginning in late March 2020, Adient experienced the shutdown of effectively all of its facilities in the Americas and European regions coinciding with the shutdown of its customer facilities in those regions. Adient also experienced the shutdown of approximately 50% of its plants in Asia (outside China) during late March and early April 2020. During May and June 2020, production started to resume in the Americas, European and Asia (outside China) regions concurrent with Adient's customers resuming operations and production continued to ramp up throughout Adient’s fiscal fourth quarter of fiscal 2020 in all regions in line with customer production. Virtually all of Adient's plants had resumed production by the end of first quarter of fiscal 2021.

Principles of Consolidation

Adient consolidates its wholly-owned subsidiaries and those entities in which it has a controlling interest. Investments in partially-owned affiliates are accounted for by the equity method when Adient's interest exceeds 20% and does not have a controlling interest.

Consolidated VIEs

Based upon the criteria set forth in the Financial Accounting Standards Board (the FASB) Accounting Standards Codification (ASC) 810, "Consolidation," Adient has determined that it was the primary beneficiary in two variable interest entities (VIEs) for the reporting periods ended March 31, 2021, and September 30, 2020, respectively, as Adient absorbs significant economics of the entities and has the power to direct the activities that are considered most significant to the entities.

The 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.

The carrying amounts and classification of assets (none of which are restricted) and liabilities included in Adient's consolidated statements of financial position for the consolidated VIEs are as follows:

(in millions)	March 31, 2021		September 30, 2020
Current assets	$	260	$	217
Noncurrent assets	84		74
Total assets	$	344	$	291
Current liabilities	$	211	$	204
Noncurrent liabilities	9		10
Total liabilities	$	220	$	214

Adient plc | Form 10-Q | 7

Earnings Per Share

The following table shows the computation of basic and diluted earnings (loss) per share:

	Three Months Ended March 31,				Six Months Ended March 31,
(in millions, except per share data)	2021		2020		2021		2020
Numerator:
Net income (loss) attributable to Adient	$	69	$	(19)	$	219	$	(186)
Denominator:
Shares outstanding	94.2		93.8		94.1		93.8
Effect of dilutive securities	1.8		—		1.3		—
Diluted shares	96.0		93.8		95.4		93.8
Earnings (loss) per share:
Basic	$	0.73	$	(0.20)	$	2.33	$	(1.98)
Diluted	$	0.72	$	(0.20)	$	2.30	$	(1.98)

Potentially dilutive securities whose effect would have been antidilutive are excluded from the computation of diluted earnings

per share for the three and six months ended March 31, 2020, which is a result of all periods presented being in a loss position.

New Accounting Pronouncements

Standards Adopted During Fiscal 2021

On October 1, 2020, Adient adopted Accounting Standards Codification 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments. ASU 2016-13 changes the impairment model for financial assets measured at amortized cost, requiring presentation at the net amount expected to be collected. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts. Available-for-sale debt securities with unrealized losses will now be recorded through an allowance for credit losses. The adoption of this guidance on October 1, 2020 did not significantly impact Adient's consolidated financial statements for the six months ended March 31, 2021.

ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, eliminates, adds, and modifies certain disclosure requirements for fair value measurements. The amendments with respect to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty are to be applied prospectively. All other amendments are to be applied retrospectively to all periods presented. The adoption of this guidance on October 1, 2020 did not significantly impact Adient's consolidated financial statements for the six months ended March 31, 2021.

ASU 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities, affects reporting entities that are required to determine whether they should consolidate a legal entity under the guidance within the Variable Interest Entities Subsections of Subtopic 810-10, Consolidation - Overall. The adoption of this guidance on October 1, 2020 did not significantly impact Adient's consolidated financial statements for the six months ended March 31, 2021.

Adient plc | Form 10-Q | 8

Standards Effective After Fiscal 2021

Adient has considered the ASUs summarized below, effective after fiscal 2021, none of which is expected to significantly impact the consolidated financial statements:

Standard Adopted	Description	Date Effective
ASU 2018-14 Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)	ASU 20218-14 eliminates, adds, and modifies certain disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The guidance is to be applied on a retrospective basis.	October 1, 2021
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes	ASU 2019-12 modifies ASC 740, Income Taxes, by simplifying accounting for income taxes. As part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements, the FASB’s amendments may impact both interim and annual reporting periods.	October 1, 2021
ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)	ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity by reducing the number of accounting models for convertible debt and convertible preferred stock.	October 1, 2022

2. Revenue Recognition

Adient generates revenue through the sale of automotive seating solutions, including complete seating systems and the components of complete seating systems. Adient provides production and service parts to its customers under awarded multi-year programs. The duration of a program is generally consistent with the life cycle of a vehicle, however, the program can be canceled at any time without cause by the customer. Programs awarded to Adient to supply parts to its customers do not contain a firm commitment by the customer for volume or price and do not reach the level of a performance obligation until Adient receives either a purchase order and/or a materials release from the customer for a specific number of parts at a specified price, at which point an enforceable contract exists. Sales revenue is generally recognized at the point in time when parts are shipped and control has transferred to the customer, at which point an enforceable right to payment exists. Contracts may provide for annual price reductions over the production life of the awarded program, and prices are adjusted on an ongoing basis to reflect changes in product content/cost and other commercial factors. The amount of revenue recognized reflects the consideration that Adient expects to be entitled to in exchange for such products based on purchase orders, annual price reductions and ongoing price adjustments (some of which are accounted for as variable consideration and subject to being constrained), net of the impact, if any, of consideration paid to the customer.

In a typical arrangement with the customer, purchase orders are issued for pre-production activities which consist of engineering, design and development, tooling and prototypes for the manufacture and delivery of component parts. Adient has concluded that these activities are not in the scope of ASC 606 and for that reason, there have been no changes to how Adient accounts for reimbursable pre-production costs.

Adient has elected to continue to include shipping and handling fees billed to customers in revenue, while including costs of shipping and handling in cost of sales. Taxes collected from customers are excluded from revenue and credited directly to obligations to the appropriate government agencies. Payment terms with customers are established based on customary industry and regional practices. Adient has evaluated the terms of its arrangements and determined that they do not contain significant financing components.

Contract assets primarily relate to the right to consideration for work completed, but not billed at the reporting date on contracts with customers. The contracts assets are transferred to receivables when the rights become unconditional. Contract liabilities primarily relate to contracts where advance payments or deposits have been received, but performance obligations have not yet been satisfied and revenue has not been recognized. No significant contract assets or liabilities were identified at September 30, 2020 or at March 31, 2021. As described above, the issuance of a purchase order and/or a materials release by the customer represents the point at which an enforceable contract with the customer exists. Therefore, Adient has elected to apply the practical expedient in ASC 606, paragraph 606-10-50-14 and does not disclose information about the remaining performance obligations that have an original expected duration of one year or less. Refer to Note 15, "Segment Information," of the notes to

Adient plc | Form 10-Q | 9

consolidated financial statements for disaggregated revenue by geographical market.

3. Acquisitions and Divestitures

2021 Yanfeng Transaction

On March 12, 2021, Adient, Yanfeng Automotive Trim Systems Company Ltd. (“Yanfeng”), Yanfeng Adient Seating Co., Ltd. (“YFAS”), a joint venture owned, directly or indirectly, by Yanfeng (50.01%) and Adient (49.99%), and KEIPER Seating Mechanisms Co., Ltd. (f/k/a Adient Yanfeng Seating Mechanisms Co., Ltd. (“AYM” or "KEIPER"), a joint venture owned, directly or indirectly, by Yanfeng (50%) and Adient (50%), entered into a Master Agreement (the “2021 Agreement”), pursuant to which the parties have agreed to, among other things, the following transactions (collectively, the “2021 Yanfeng Transaction”) in each case, on the terms and subject to the conditions set forth in the 2021 Agreement and the relevant agreements to be entered into in connection therewith:

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

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

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

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

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

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

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

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

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

Adient plc | Form 10-Q | 10

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

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

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

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

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

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

SJA

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

Fabrics

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

2020 Yanfeng Transaction

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

Adient plc | Form 10-Q | 11

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

•Adient and Yanfeng would amend the YFAS Joint Venture Contract, dated as of October 22, 1997, as amended, and the Articles of Association of YFAS, dated as of October 22, 1997, as amended, in each case in order to extend the term of the YFAS joint venture until December 31, 2038. As described further above, in connection with 2021 Yanfeng Transaction, Adient and Yanfeng subsequently agreed to end the YFAS partnership. Upon consummation of the 2021 Yanfeng Transaction, Adient will sell all of the issued and outstanding equity interest in YFAS held by Adient to Yanfeng;

•Adient would transfer all patents, trademarks and copyrights, know-how, trade secrets and other intellectual property rights owned by Adient (or certain of its subsidiaries) and used exclusively in the conduct of Adient’s mechanism business as of the date of such transfer (the “Transferred IP”) to AYM for $20 million, and in connection with such transfer, (i) AYM would grant back to Adient a sole license with respect to the Transferred IP on a worldwide and royalty-free basis, (ii) Adient would grant AYM a worldwide and royalty-free license with respect to certain intellectual property rights owned by Adient (or certain of its subsidiaries) and used on a non-exclusive basis in the conduct of Adient’s mechanism business, and (iii) Adient and AYM would license to each other certain improvements to the Transferred IP, as well as certain other intellectual property rights developed or acquired by Adient, AYM or certain of their respective subsidiaries and relating to the mechanism business; and

•Adient and Yanfeng would amend the AYM Equity Joint Venture Contract, dated as of September 9, 2013, as amended, and the Articles of Association of AYM, dated as of September 9, 2013, as amended to, among other things, (i) make certain governance changes such that Yanfeng would control and consolidate the results of AYM for financial reporting and accounting purposes, and (ii) expand AYM’s business and customer scope such that it may carry out its seating mechanism business anywhere in and outside of the People’s Republic of China, in each case, on the terms and subject to the conditions set forth in the 2020 Agreement and the relevant definitive agreements to be entered into in connection therewith. Subsequent to this, Adient and Yanfeng further agreed to revise and amend the AYM Equity Joint Venture Contract and Articles of Association of AYM, as further described above.

The transactions agreed on January 31, 2020, as amended on June 24, 2020, were cross-conditioned on each other and closed in accordance with the terms above on August 21, 2020. Proceeds from the transactions of $329 million were received at closing, the majority of which was used by Adient to pay down a portion of Adient’s debt. The terms of the 2020 Agreement as described above are consistent with non-binding terms reached in December 2019.

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

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

RECARO

On December 31, 2019, Adient sold the RECARO automotive high performance seating systems business to a group of investors for de minimis proceeds. As a result of the sale, Adient recorded a loss of $21 million during the quarter ending December 31, 2019. For fiscal 2019, the RECARO business recorded $148 million of net sales and insignificant pre-tax income.

Adient Aerospace

Adient Aerospace, LLC ("Adient Aerospace") became operational on October 11, 2018 with Adient’s initial ownership position in Adient Aerospace being 50.01%. Initial contributions of $28 million were made during the first quarter of fiscal 2019 by each partner. On October 25, 2019, Adient reached an agreement with Boeing in which Adient's ownership position was reduced to 19.99%, resulting in the deconsolidation of Adient Aerospace on that date, including $37 million of cash. Adient recorded a $4 million loss as a result of the transaction in the Americas segment, including $21 million of allocated goodwill. Adient Aerospace develops, manufactures, and sells a portfolio of seating products to airlines and aircraft leasing companies for installation on Boeing and other OEM commercial airplanes, for both production line-fit and retrofit configurations.

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

Assets held for sale

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

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

4. Inventories

Inventories consisted of the following:

(in millions)	March 31, 2021		September 30, 2020
Raw materials and supplies	$	583	$	530
Work-in-process	25		22
Finished goods	148		133
Inventories	$	756	$	685

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5. Goodwill and Other Intangible Assets

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

(in millions)	Americas		EMEA		Asia		Total
Balance at September 30, 2020	$	606	$	368	$	1,083	$	2,057
Currency translation and other	(1)		1		2		2
Balance at March 31, 2021	$	605	$	369	$	1,085	$	2,059

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

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

	March 31, 2021						September 30, 2020
(in millions)	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Intangible assets
Patented technology	$	26	$	(18)	$	8	$	27	$	(19)	$	8
Customer relationships	469		(153)		316		424		(103)		321
Trademarks	41		(29)		12		41		(27)		14
Miscellaneous	109		(13)		96		110		(10)		100
Total intangible assets	$	645	$	(213)	$	432	$	602	$	(159)	$	443

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

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

6. Product Warranties

Adient offers warranties to its customers depending upon the specific product and terms of the customer purchase agreement. A typical warranty program requires that Adient replace defective products within a specified time period from the date of sale. Adient records an estimate for future warranty-related costs based on actual historical return rates and other known factors. Based on analysis of return rates and other factors, Adient's warranty provisions are adjusted as necessary. Adient monitors its warranty activity and adjusts its reserve estimates when it is probable that future warranty costs will be different than those estimates. Adient's product warranty liability is recorded in the consolidated statements of financial position in other current liabilities.

The changes in Adient's total product warranty liability are as follows:

	Six Months Ended March 31,
(in millions)	2021		2020
Balance at beginning of period	$	24	$	22
Accruals for warranties issued during the period	4		5
Changes in accruals related to pre-existing warranties (including changes in estimates)	(1)		(1)
Settlements made (in cash or in kind) during the period	(4)		(3)
Balance at end of period	$	23	$	23

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7. Leases

Adient's lease portfolio consists of operating leases for real estate including production facilities, warehouses and administrative offices, equipment such as forklifts and computer servers and laptops, and fleet vehicles.

The components of lease costs included in the consolidated statement of income (loss) for the three and six months ended March 31, 2021 and 2020 were as follows:

	Three Months Ended March 31,				Six Months Ended March 31,
(in millions)	2021		2020		2021		2020
Operating lease cost	32		31		62		64
Short-term lease cost	6		7		12		12
Total lease cost	$	38	$	38	$	74	$	76

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

(in millions)		March 31, 2021			September 30, 2020
Operating leases:
Operating lease right-of-use assets	Other noncurrent assets	$	341		$	334
Operating lease liabilities - current	Other current liabilities	$	89		$	95
Operating lease liabilities - noncurrent	Other noncurrent liabilities	257			244
		$	346		$	339
Weighted average remaining lease term:
Operating leases		7 years			5 years
Weighted average discount rate:
Operating leases		5.6		%	5.9		%

Maturities of operating lease liabilities and minimum payments for operating leases having initial or remaining non-cancelable terms in excess of one year as of March 31, 2021 were as follows:

	Operating leases
Fiscal years (in millions)	March 31, 2021
2021 (excluding the six months ended March 31, 2021)	$	57
2022	92
2023	72
2024	52
2025	40
Thereafter	107
Total lease payments	420
Less: imputed interest	(74)
Present value of lease liabilities	$	346

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Supplemental cash flow information related to leases was as follows:

	Six Months Ended March 31,
(in millions)	2021		2020
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (non-cash activity)	$	69	$	19
Operating cash flows:
Cash paid for amounts included in the measurement of lease liabilities	$	65	$	65

8. Debt and Financing Arrangements

Debt consisted of the following:

(in millions)	March 31, 2021		September 30, 2020
Long-term debt:
Term Loan B - LIBOR plus 4.25% due in 2024	$	786	$	790
4.875% Notes due in 2026	797		797
3.50% Notes due in 2024	1,173		1,173
7.00% Notes due in 2026	160		800
9.00% Notes due in 2025	600		600
European Investment Bank Loan - EURIBOR plus 1.58% due in 2022	178		—
Less: debt issuance costs	(40)		(55)
Gross long-term debt	3,654		4,105
Less: current portion	8		8
Net long-term debt	$	3,646	$	4,097
Short-term debt:
European Investment Bank Loan - EURIBOR plus 1.58% due in 2022	$	—	$	194
Other bank borrowings	14		8
Total short-term debt	$	14	$	202

Adient US LLC ("Adient US"), a wholly owned subsidiary of Adient, together with certain of Adient's other subsidiaries, maintains an asset-based revolving credit facility (the “ABL Credit Facility”), which provides for a revolving line of credit up to $1,250 million, including a North American subfacility of up to $950 million and a European subfacility of up to $300 million, subject to borrowing base capacity. The ABL Credit Facility will mature on May 6, 2024, subject to a springing maturity date 91 days earlier if certain amounts remain outstanding at that time under the Term Loan B Agreement (defined below). Interest is payable on the ABL Credit Facility at a fluctuating rate of interest determined by reference to the Eurodollar rate plus an applicable margin of 1.50% to 2.00%. Adient will pay a commitment fee of 0.25% to 0.375% on the unused portion of the commitments under the asset-based revolving credit facility based on average global availability. Letters of credit are limited to the lesser of (x) $150 million and (y) the aggregate unused amount of commitments under the ABL Credit Facility then in effect. Subject to certain conditions, the ABL Credit Facility may be expanded by up to $250 million in additional commitments. Loans under the ABL Credit Facility may be denominated, at the option of Adient, in U.S. dollars, Euros, Pounds Sterling or Swedish Kroner. The ABL Credit Agreement is secured on a first-priority lien on all accounts receivable, inventory and bank accounts (and funds on deposit therein) and a second-priority lien on all of the tangible and intangible assets of certain Adient subsidiaries. As of March 31, 2021, Adient had not drawn down on the ABL Credit Facility and had availability under this facility of $945 million (net of $69 million of letters of credit).

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In addition, Adient US and Adient Global Holdings S.à r.l., a wholly-owned subsidiary of Adient, maintain a term loan credit agreement (the “Term Loan B Agreement”) providing for a 5-year $800 million senior secured term loan facility that was fully drawn on closing. The Term Loan B Agreement amortizes in equal quarterly installments at a rate of 1.00% per annum of the original principal amount thereof, with the remaining balance due at final maturity on May 6, 2024. Interest on the Term Loan B Agreement accrues at the Eurodollar rate plus an applicable margin equal to 4.25% (with one 0.25% step down based on achievement of a specific secured net leverage level starting with the fiscal quarter ending December 31, 2019). The Term Loan B Agreement also permits Adient to incur incremental term loans in an aggregate amount not to exceed the greater of $750 million and an unlimited amount subject to a pro forma first lien secured net leverage ratio of not greater than 1.75 to 1.00 and certain other conditions. In April 2021, Adient amended the Term Loan B Agreement ("Amended Agreement") which, among other changes (i) extended the maturity date for loans outstanding to April 8, 2028, (ii) reduced the interest rate margin applicable thereunder by 0.75% to 3.50%, in the case of Eurodollar Rate loans, and 2.50% (in the case of Base Rate loans) (in each case, with one 0.25% step down based on achievement of a specified first lien secured net leverage level starting with the fiscal quarter ending December 31, 2021) and (iii) made certain other negative covenant and mandatory prepayment changes in connection therewith. The amendment also established incremental term loans in an aggregate principal amount of $214 million resulting in total loans outstanding under the Amended Agreement of $1.0 billion. Adient paid $6 million related to the Amended Agreement and expects to write off $9 million of previously deferred financing costs as a result of the debt extinguishment, which will be reflected in the third quarter of fiscal 2021.

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

The ABL Credit Facility, Term Loan B Agreement and the Senior First Lien Notes due 2026 contain covenants that are usual and customary for facilities and debt instruments of this type and that, among other things, restrict the ability of Adient and its restricted subsidiaries to: create certain liens and enter into sale and lease-back transactions; create, assume, incur or guarantee certain indebtedness; pay dividends or make other distributions on, or repurchase or redeem, Adient’s capital stock or certain other debt; make other restricted payments; and consolidate or merge with, or convey, transfer or lease all or substantially all of Adient’s and its restricted subsidiaries’ assets, to another person. These covenants are subject to a number of other limitations and exceptions set forth in the agreements. The agreements also provide for customary events of default, including, but not limited to, cross-default clauses with other debt arrangements, failure to pay principal and interest, failure to comply with covenants, agreements or conditions, and certain events of bankruptcy or insolvency involving Adient and its significant subsidiaries.

Adient Global Holdings Ltd. ("AGH"), a wholly-owned subsidiary of Adient, maintains $900 million aggregate principal amount of 4.875% USD-denominated unsecured notes due 2026. During the fourth quarter of fiscal 2020, Adient redeemed $103 million of face value of these notes, resulting in a remaining balance of $797 million as of September 30, 2020. AGH also maintains €1.0 billion aggregate principal amount of 3.50% unsecured notes due 2024.

Adient Germany Ltd. & Co. KG, a wholly owned subsidiary of Adient, maintains €152 million in an unsecured term loan from the European Investment Bank ("EIB") due in 2022. The loan bears interest at the 6-month EURIBOR rate plus 158 basis points. Adient is compliant with the net leverage ratio of 4.5x at March 31, 2021 and expects to be compliant for the foreseeable future. During the first quarter of fiscal 2021, Adient repaid $16 million of the EIB loan, triggered in part by the redemption of debt in the prior year.

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

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Net Financing Charges

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

	Three Months Ended March 31,				Six Months Ended March 31,
(in millions)	2021		2020		2021		2020
Interest expense, net of capitalized interest costs	$	57	$	48	$	116	$	96
Banking fees and debt issuance cost amortization	10		4		13		8
Interest income	(2)		(3)		(4)		(7)
Premium paid on repurchase of debt	45		—		45		—
Net foreign exchange	—