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 June 30, 2022

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 every Interactive Data File required to be submitted 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 such files). Yes  ☑  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. (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 June 30, 2022, 94,813,661 ordinary shares were outstanding.

Adient plc

Form 10-Q

For the Three Months Ended June 30, 2022

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	47
Item 4.	Controls and Procedures	47
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	50
	Signatures	51

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)	2022		2021		2022		2021
Net sales	$	3,485	$	3,242	$	10,471	$	10,909
Cost of sales	3,312		3,092		9,947		10,120
Gross profit	173		150		524		789
Selling, general and administrative expenses	142		136		439		433
Restructuring and impairment costs	12		8		20		20
Equity income (loss)	16		38		56		220
Earnings (loss) before interest and income taxes	35		44		121		556
Net financing charges	39		87		172		256
Other pension expense (income)	(4)		(4)		(6)		(8)
Income (loss) before income taxes	—		(39)		(45)		308
Income tax provision (benefit)	20		10		65		90
Net income (loss)	(20)		(49)		(110)		218
Income (loss) attributable to noncontrolling interests	10		22		55		70
Net income (loss) attributable to Adient	$	(30)	$	(71)	$	(165)	$	148
Earnings (loss) per share:
Basic	$	(0.32)	$	(0.75)	$	(1.74)	$	1.57
Diluted	$	(0.32)	$	(0.75)	$	(1.74)	$	1.55
Shares used in computing earnings per share:
Basic	94.8		94.2		94.7		94.1
Diluted	94.8		94.2		94.7		95.6

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)	2022		2021		2022		2021
Net income (loss)	$	(20)	$	(49)	$	(110)	$	218
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(155)		25		(122)		62
Realized and unrealized gains (losses) on derivatives	(7)		17		(5)		34
Other comprehensive income (loss)	(162)		42		(127)		96
Total comprehensive income (loss)	(182)		(7)		(237)		314
Comprehensive income (loss) attributable to noncontrolling interests	(10)		23		43		79
Comprehensive income (loss) attributable to Adient	$	(172)	$	(30)	$	(280)	$	235

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, 2022		September 30, 2021
Assets
Cash and cash equivalents	$	892	$	1,521
Accounts receivable - net	1,761		1,426
Inventories	953		976
Assets held for sale	—		49
Other current assets	456		1,114
Current assets	4,062		5,086
Property, plant and equipment - net	1,443		1,607
Goodwill	2,122		2,212
Other intangible assets - net	504		555
Investments in partially-owned affiliates	348		335
Assets held for sale	7		25
Other noncurrent assets	829		958
Total assets	$	9,315	$	10,778
Liabilities and Shareholders' Equity
Short-term debt	$	9	$	17
Current portion of long-term debt	11		167
Accounts payable	2,361		2,130
Accrued compensation and benefits	336		389
Liabilities held for sale	—		16
Restructuring reserve	70		115
Other current liabilities	600		677
Current liabilities	3,387		3,511
Long-term debt	2,707		3,512
Liabilities held for sale	—		—
Pension and postretirement benefits	110		128
Other noncurrent liabilities	613		669
Long-term liabilities	3,430		4,309
Commitments and Contingencies (Note 17)
Redeemable noncontrolling interests	45		240
Preferred shares issued, par value $0.001; 100,000,000 shares authorized, Zero shares issued and outstanding at June 30, 2022	—		—
Ordinary shares issued, par value $0.001; 500,000,000 shares authorized, 94,813,661 shares issued and outstanding at June 30, 2022	—		—
Additional paid-in capital	4,018		3,991
Accumulated deficit	(1,153)		(988)
Accumulated other comprehensive income (loss)	(742)		(627)
Shareholders' equity attributable to Adient	2,123		2,376
Noncontrolling interests	330		342
Total shareholders' equity	2,453		2,718
Total liabilities and shareholders' equity	$	9,315	$	10,778

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)	2022		2021
Operating Activities
Net income (loss) attributable to Adient	$	(165)	$	148
Income attributable to noncontrolling interests	55		70
Net income (loss)	(110)		218
Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:
Depreciation	223		210
Amortization of intangibles	40		29
Pension and postretirement expense (benefit)	(1)		(1)
Pension and postretirement contributions, net	(17)		(18)
Equity in earnings of partially-owned affiliates, net of dividends received (includes purchase accounting amortization of $1 and $3, respectively)	(38)		106
Impairment/(gain) on sale of nonconsolidated partially-owned affiliates	8		(33)
Premium and transaction costs paid on repurchase of debt	34		50
Retrospective recoveries of Brazil indirect tax credits	—		(38)
Derivative loss on the 2021 Yanfeng Transaction	3		24
Deferred income taxes	5		(5)
Non-cash impairment charges	12		11
Equity-based compensation	21		36
Other	14		16
Changes in assets and liabilities:
Receivables	(415)		195
Inventories	(26)		(158)
Other assets	62		(63)
Restructuring reserves	(49)		(118)
Accounts payable and accrued liabilities	283		(142)
Accrued income taxes	(11)		43
Cash provided (used) by operating activities	38		362
Investing Activities
Capital expenditures	(170)		(186)
Sale of property, plant and equipment	18		23
Settlement of derivatives	(30)		—
Advance payment for business acquisitions	(19)		(271)
Proceeds from business divestitures	740		72
Loans to affiliates	—		15
Cash provided (used) by investing activities	539		(347)
Financing Activities
Increase (decrease) in short-term debt	(8)		36
Increase (decrease) in long-term debt	—		214
Repayment of long-term debt	(888)		(890)
Debt financing costs	(1)		(8)
Cash paid to acquire a noncontrolling interest	(153)		—
Dividends paid to noncontrolling interests	(102)		(66)
Other	(12)		(4)
Cash provided (used) by financing activities	(1,164)		(718)
Effect of exchange rate changes on cash and cash equivalents	(42)		12
Increase (decrease) in cash and cash equivalents, including cash classified within current assets held for sale	(629)		(691)
Change in cash classified within current assets held for sale	—		(1)
Increase (decrease) in cash and cash equivalents	(629)		(692)
Cash and cash equivalents at beginning of period	1,521		1,692
Cash and cash equivalents at end of period	$	892	$	1,000

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 the second half of fiscal 2021 and continuing into the first nine months of fiscal 2022, Adient faced, along with the entire global automotive industry, widespread supply chain disruptions primarily related to semiconductor chip shortages. Although Adient’s seating products are not highly dependent directly on semiconductor chips, Adient is directly impacted by the lower production levels at OEM’s as a direct result of these supply chain disruptions. These disruptions have led to unplanned down time at Adient’s production facilities, often with very little warning, which creates operating inefficiencies and limits Adient’s ability to adequately mitigate such inefficiencies. Further, the Russia/Ukraine conflict has created additional risks to the macroeconomic environment of the global automotive industry by restricting availabilities of certain key raw material components. Refer to Note 3, "Acquisitions and Divestitures," of the notes to the consolidated financial statements for additional information on the impacts from the Russia/Ukraine conflict.

The automotive industry has also experienced price increases for commodities, utilities and shipping costs throughout fiscal 2022 which have negatively impacted Adient's results. These cost increases may continue into the future as demand increases and supply may remain constrained, which has resulted in, and may continue to result in, increased costs for Adient that may not be, or may only be partially, offset. Adient has also experienced wage inflationary pressures as a result of constrained labor availability in fiscal 2022.

Additionally, the impact of COVID-19, and related variants and sub-variants, continues to be present throughout the world, including in all global and regional markets served by Adient. The elevated COVID-19 rates in China led to widespread lockdowns during the second and third quarters of fiscal 2022, negatively impacting the automotive production levels in that region, along with creating further supply chain disruptions. Although vaccines have been introduced that are expected to have the result of reducing the effect of COVID-19 and COVID-19 has waned in certain geographic areas, governmental authorities continue to implement numerous measures attempting to contain and mitigate the effects of COVID-19, including travel bans and restrictions, quarantines, social distancing orders, shelter in place orders and shutdowns of non-essential activities. Adient's manufacturing facilities are located in areas that continue to be affected by the pandemic.

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 June 30, 2022, and September 30, 2021, 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 is restricted) and liabilities included in Adient's consolidated statements of financial position for the consolidated VIEs are as follows:

Adient plc | Form 10-Q | 7

(in millions)	June 30, 2022		September 30, 2021
Current assets	$	223	$	158
Noncurrent assets	105		88
Total assets	$	328	$	246
Current liabilities	$	193	$	143
Noncurrent liabilities	13		8
Total liabilities	$	206	$	151

Earnings Per Share

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

	Three Months Ended June 30,				Nine Months Ended June 30,
(in millions, except per share data)	2022		2021		2022		2021
Numerator:
Net income (loss) attributable to Adient	$	(30)	$	(71)	$	(165)	$	148
Denominator:
Shares outstanding	94.8		94.2		94.7		94.1
Effect of dilutive securities	—		—		—		1.5
Diluted shares	94.8		94.2		94.7		95.6
Earnings (loss) per share:
Basic	$	(0.32)	$	(0.75)	$	(1.74)	$	1.57
Diluted	$	(0.32)	$	(0.75)	$	(1.74)	$	1.55

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

New Accounting Pronouncements

Standards Adopted During Fiscal 2022

On October 1, 2021, Adient adopted Accounting Standards Codification (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. The adoption of this guidance on October 1, 2021 did not significantly impact Adient's consolidated financial statements for the nine months ended June 30, 2022.

On October 1, 2021, Adient adopted 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. The adoption of this guidance on October 1, 2021 did not significantly impact Adient's consolidated financial statements for the nine months ended June 30, 2022.

Standards Effective After Fiscal 2022

Adient plc | Form 10-Q | 8

Adient has considered the ASUs summarized below, effective after fiscal 2022, none of which are expected to significantly impact the consolidated financial statements:

Standard Adopted	Description	Date Effective
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
ASU 2021-10, Government Assistance (Topic 832) - Disclosures by Business Entities about Government Assistance	The ASU requires annual disclosures of: i) information about the nature of government assistance transactions and the related accounting policy used to account for the transactions, ii) the balance sheet and income statement line items affected by the transactions, and the amounts for each financial statement line item, and iii) significant transaction terms and conditions.	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.

Adient has elected 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, 2021 or at June 30, 2022. As described above, the issuance of a purchase order and/or a materials release by the customer represents the point at which an enforceable contract with the customer exists. Therefore, Adient has elected to apply the practical expedient in ASC 606, paragraph 606-10-50-14 and does not disclose information about the remaining performance obligations that have an original expected duration of one year or less. Refer to Note 15, "Segment Information," of the notes to consolidated financial statements for disaggregated revenue by geographical market.

Adient plc | Form 10-Q | 9

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 agreed to, among other things, the following transactions (collectively, the “2021 Yanfeng Transaction”). The 2021 Yanfeng Transaction closed on September 30, 2021 (“Closing Date”).

a.Adient transferred 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 ($1,210 million), of which ¥3,446 million ($519 million) was paid by Yanfeng to Adient on the Closing Date, and ¥4,618 million ($691 million) was paid by Yanfeng to Adient in December 2021, and;

b.YFAS transferred all of the issued and outstanding equity interests in Yanfeng Adient Automotive Components Co., Ltd. ("CQADNT") and Adient (Langfang) Seating Co., Ltd. ("LFADNT") held directly or indirectly by YFAS to Adient for a price of ¥1,754 million ($271 million) (the “YFAS JVs Acquisition”). The YFAS JVs Acquisition was funded, in part, by annual cash dividends from YFAS and KEIPER, paid to shareholders of YFAS and KEIPER;

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

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

e.Adient granted 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 granted to Adient a royalty-free, non-exclusive and perpetual intellectual property license of the Yanfeng/YFAS intellectual property; and

f.YFAS declared and distributed 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) of approximately ¥4,168 million ($635 million) in the aggregate. YFAS paid an aggregate dividend of ¥2,809 million ($436 million) during the third quarter of fiscal 2021, and ¥1,359 million ($199 million) was distributed on the Closing Date.

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”). The Ancillary Transactions were also completed on the Closing Date.

a.Adient and Yanfeng amended 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 would 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, 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 each entered into a long-term supply agreement.

In conjunction with the 2021 Yanfeng Transaction, Adient 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 provided Boxun with the right to sell and, if exercised, Adient agreed to purchase, all of the issued and outstanding equity interest in CQADNT held by Boxun, which represents 25% of CQADNT’s total issued and outstanding equity interest (the “Boxun Equity Purchase”). On October 29, 2021, Boxun exercised its right to sell its equity interest to

Adient plc | Form 10-Q | 10

Adient. In January 2022, Boxun and Adient closed the transaction. The total payment to Boxun from Adient was approximately $200 million, of which $15 million of historical dividends were paid in December 2021, and $185 million, including $32 million of historical dividends, was paid in the second quarter of fiscal 2022. At September 30, 2021, $194 million had been reflected as redeemable noncontrolling interest. With the acquisitions of Boxun’s 25% and YFAS’s 50% interest of CQADNT, Adient owns 100% of CQADNT effective January 2022.

In addition, in conjunction with the 2021 Yanfeng Transaction, Adient entered into agreements, whereby, Adient would: (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 Additional Equity Sales were completed on the Closing Date.

As a result of the 2021 Agreement, Adient received $41 million in November 2021 representing 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 in Form 10-K for the fiscal year ended September 30, 2021).

Upon completion of the 2021 Yanfeng Transaction on September 30, 2021, Adient started consolidating CQADNT and LFADNT. The net purchase consideration of $271 million consisted of net cash consideration of $211 million, net of $60 million acquired. The acquisition was accounted for using the acquisition method, and the operating results and cash flows of CQADNT and LFADNT will be included in Adient's consolidated financial statements starting from October 1, 2021. The acquisitions are expected to provide substantial synergies through vertical integration, purchasing and logistics improvements. The acquisitions also provide for an immediate manufacturing presence in strategic locations in China.

Adient recorded a purchase price allocation for the assets acquired and liabilities assumed based on their estimated fair values as of the September 30, 2021 acquisition date. The preliminary purchase price adjustments and allocation is as follows:

	Fair value allocation
(in millions)	CQADNT		LFADNT
Cash	$	55	$	5
Accounts receivable	296		2
Inventory	37		5
Property, plant and equipment	86		8
Other assets	46		2
Goodwill	180		8
Intangible assets	234		6
Accounts payable	(252)		(19)
Other liabilities	(127)		(4)
Subtotal	555		13
Less: Interest already owned	103		—
Less: Redeemable noncontrolling interest	194		—
Total purchase consideration	258		13
Less: cash acquired	55		5
Net cash paid	$	203	$	8

The values allocated to CQADNT and LFADNT’s intangible assets of $234 million and $6 million, respectively, primarily consisted of customer relationships and patented technologies which are being amortized on a straight line basis over estimated useful lives of 3 to 12 years. The assets were valued using a combination of an income approach and a relief from royalty

Adient plc | Form 10-Q | 11

approach. These values were considered level 3 measurements under the U.S. GAAP fair value hierarchy. Key assumptions used in the valuation of customer relationships included a rate of return of 13.5% and the life of the relationship of approximately 12 years. Key assumptions used in the valuation of patented technologies included a rate of return of 13.5% and the life of the technologies of approximately 10 years.

The allocation of the purchase price was based on the valuations performed to determine the fair value of the net assets as of the acquisition date. The amounts allocated to goodwill and intangible assets along with fair value adjustments on property, plant and equipment and inventory reflected preliminary valuations.

In April 2022, Adient entered into an agreement whereby Adient would purchase all of the issued and outstanding equity interest in YFAT held by KEIPER for ¥150 million ($24 million). Adient made an initial deposit of ¥37 million ($6 million) (reflected within other current assets as of June 30, 2022), and a second deposit of ¥37 million ($6 million) in April 2022, which represents 50% of the estimated purchase price. The transaction is subject to a public bidding process and other customary regulatory approvals, and is expected to be completed in the second half of calendar year 2022. The remaining 50% of the estimated purchase price will be paid at the time of completion of the transaction.

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

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 gain recognized 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.

Russia/Ukraine conflict

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

Assets held for sale

During the first quarter of fiscal 2022, Adient committed to sell certain assets in EMEA. 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 $7 million. 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 the third quarter of fiscal 2022, the impairment charge was reduced by $1 million as the finalized sale agreement indicated a higher sale price than the originally estimated fair value.

During the second quarter of fiscal 2022, Adient collected the final portion of proceeds from the sale of certain assets in Turkey, which had been classified as assets held for sale during fiscal 2021. The finalization of the transaction resulted in a loss on sale of $2 million, recorded within selling, general and administrative costs on the consolidated statement of income (loss) in the second quarter of fiscal 2022.

During fiscal 2021, Adient committed to sell certain assets in France and Turkey. As a result, these assets were classified as assets held for sale (including an allocation of $11 million of goodwill) and were required to be adjusted to the lower of fair value less cost to sell or carrying value. This resulted in Adient recording an impairment charge of $9 million within restructuring and impairment costs on the consolidated statement of income (loss) related to the assets in France. 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." The

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sale of the assets in France was completed during the third quarter of fiscal 2021 for minimal proceeds while the sale of the assets in Turkey was completed in October 2021 for total proceeds of $46 million, of which $36 million was collected at closing, and $10 million was collected in the second quarter of fiscal 2022.

4. Inventories

Inventories consisted of the following:

(in millions)	June 30, 2022		September 30, 2021
Raw materials and supplies	$	765	$	750
Work-in-process	24		29
Finished goods	164		197
Inventories	$	953	$	976

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, 2021	$	607	$	354	$	1,251	$	2,212
Currency translation and other	1		(38)		(53)		(90)
Balance at June 30, 2022	$	608	$	316	$	1,198	$	2,122

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:

	June 30, 2022						September 30, 2021
(in millions)	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Intangible assets
Patented technology	$	86	$	(24)	$	62	$	86	$	(19)	$	67
Customer relationships	627		(201)		426		649		(178)		471
Trademarks	18		(16)		2		26		(21)		5
Miscellaneous	26		(12)		14		24		(12)		12
Total intangible assets	$	757	$	(253)	$	504	$	785	$	(230)	$	555

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

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

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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:

	Nine Months Ended June 30,
(in millions)	2022		2021
Balance at beginning of period	$	23	$	24
Accruals for warranties issued during the period	7		7
Changes in accruals related to pre-existing warranties (including changes in estimates)	—		(1)
Settlements made (in cash or in kind) during the period	(7)		(6)
Currency translation	(1)		—
Balance at end of period	$	22	$	24

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 nine months ended June 30, 2022 and 2021 were as follows:

	Three Months Ended June 30,				Nine Months Ended June 30,
(in millions)	2022		2021		2022		2021
Operating lease cost	$	32	$	32	$	90	$	94
Short-term lease cost	2		4		14		16
Total lease cost	$	34	$	36	$	104	$	110

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

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(in millions)		June 30, 2022			September 30, 2021
Operating leases:
Operating lease right-of-use assets	Other noncurrent assets	$	293		$	335
Operating lease liabilities - current	Other current liabilities	$	85		$	89
Operating lease liabilities - noncurrent	Other noncurrent liabilities	209			246
		$	294		$	335
Weighted average remaining lease term:
Operating leases		6 years			6 years
Weighted average discount rate:
Operating leases		5.4		%	5.2		%

Maturities of operating lease liabilities and minimum payments for operating leases having initial or remaining non-cancelable terms in excess of one year as of June 30, 2022 are as follows:

	Operating leases
Fiscal years (in millions)	June 30, 2022
2022 (excluding the nine months ended June 30, 2022)	$	26
2023	89
2024	66
2025	47
2026	31
Thereafter	81
Total lease payments	340
Less: imputed interest	(46)
Present value of lease liabilities	$	294

Supplemental cash flow information related to leases is as follows:

	Nine Months Ended June 30,
(in millions)	2022		2021
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (non-cash activity)	$	38	$	102
Operating cash flows:
Cash paid for amounts included in the measurement of lease liabilities	$	89	$	96

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8. Debt and Financing Arrangements

Debt consisted of the following:

(in millions)	June 30, 2022		September 30, 2021
Long-term debt:
Term Loan B - LIBOR plus 3.25% due in 2028	$	990	$	998
4.875% Notes due in 2026	795		795
3.50% Notes due in 2024	860		1,161
9.00% Notes due in 2025	92		600
European Investment Bank Loan - EURIBOR plus 1.58% due in 2022	—		156
Finance lease obligations	1		1
Less: debt issuance costs	(20)		(32)
Gross long-term debt	2,718		3,679
Less: current portion	11		167
Net long-term debt	$	2,707	$	3,512
Short-term debt:
Other bank borrowings	$	9	$	17
Total short-term debt	$	9	$	17

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 and certain other restrictions, including a minimum fixed charge coverage ratio. 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). 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. On November 24, 2021, Adient entered into an amendment to its ABL Credit Facility (the “ABL Amendment”) to amend certain terms and provisions, including to (i) change the interest rate benchmark rates applicable under the ABL Credit Facility for borrowings denominated in euro, Swedish krona and pounds sterling to EURIBOR, STIBOR, and SONIA, in each case subject to certain adjustments, and (ii) update the provisions in our ABL Credit Facility by which U.S. dollar LIBOR will eventually be replaced with SOFR or another interest rate benchmark, in each case, to reflect the most recent standards and practices used in the industry. Interest is payable on the ABL Credit Facility at a fluctuating rate of interest determined by reference to LIBOR, in the case of amounts outstanding in dollars, EURIBOR, in the case of amounts outstanding in euros, STIBOR, in the case of amounts outstanding in Swedish krona and SONIA, in the case of amounts outstanding in pounds sterling, in each case, plus an applicable margin of 1.50% to 2.00%. As of June 30, 2022, Adient had not drawn down on the ABL Credit Facility and had availability under this facility of $780 million (net of $42 million of letters of credit).

In addition, Adient US and Adient Global Holdings S.à r.l., a wholly-owned subsidiary of Adient, maintain a term loan credit agreement (the “Term Loan B Agreement”) that initially provided for a 5-year $800 million senior secured term loan facility 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 originally due at final maturity on May 6, 2024. Interest on the Term Loan B Agreement accrues at the Eurodollar rate plus an applicable margin originally equal to 4.25% (with one 0.25% step down based on achievement of a specific secured net leverage level starting with the fiscal quarter ending December 31, 2019). 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

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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 $7 million related to the Amended Agreement and wrote off $8 million of previously deferred financing costs as a result of the debt extinguishment during the third quarter of fiscal 2021.

Adient US was also a party to an indenture relating to the issuance of $800 million aggregate principal amount of Senior First Lien Notes. The notes originally mature on May 15, 2026 and bore interest at a rate of 7.00% per annum. Interest on these notes was 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. During the third quarter of fiscal 2021, Adient redeemed the $160 million of remaining balance of the Senior First Lien Notes at a price of 103% of the principal plus $4 million of accrued and unpaid interest, and wrote off $3 million of previously deferred financing costs as a result of the debt extinguishment.

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, previously maintained $900 million aggregate principal amount of 4.875% USD-denominated unsecured notes due 2026. During the fourth quarter of fiscal 2020, Adient redeemed $103 million of face value of these notes, resulting in a remaining balance of $797 million as of September 30, 2020. Adient further redeemed $2 million of the notes during fiscal 2021, resulting in a remaining balance of $795 million as of June 30, 2022 and September 30, 2021. AGH also previously maintained €1.0 billion aggregate principal amount of 3.50% unsecured notes due 2024. In February 2022, Adient repurchased €177 million ($198 million) of the 3.50% unsecured notes due 2024 at a price of 102% of the principal plus €17 million ($19