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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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
adnt-20221231_g1.jpg
Adient plc
(exact name of Registrant as specified in its charter)
Ireland98-1328821
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
 3 Dublin Landings, North Wall Quay, 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 classTrading symbolName of exchange on which registered
Ordinary Shares, par value $0.001ADNTNew 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 filerAccelerated filer
Non-accelerated filerSmaller 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 December 31, 2022, 95,385,075 ordinary shares were outstanding.



Adient plc
Form 10-Q
For the Three Months Ended December 31, 2022

TABLE OF CONTENTS

Adient plc | Form 10-Q | 2


PART I - FINANCIAL INFORMATION

Item 1.Unaudited Financial Statements

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

Three Months Ended
December 31,
(in millions, except per share data)20222021
Net sales$3,699 $3,480 
Cost of sales3,468 3,307 
Gross profit231 173 
Selling, general and administrative expenses138 162 
Restructuring and impairment costs7 4 
Equity income (loss)28 33 
Earnings (loss) before interest and income taxes114 40 
Net financing charges41 50 
Other pension expense (income)9 (1)
Income (loss) before income taxes64 (9)
Income tax provision (benefit)31 21 
Net income (loss)33 (30)
Income (loss) attributable to noncontrolling interests21 24 
Net income (loss) attributable to Adient$12 $(54)
Earnings (loss) per share:
Basic$0.13 $(0.57)
Diluted$0.13 $(0.57)
Shares used in computing earnings per share:
Basic95.1 94.6 
Diluted95.9 94.6 

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
December 31,
(in millions)20222021
Net income (loss)$33 $(30)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments106 24 
Realized and unrealized gains (losses) on derivatives25 (2)
Other comprehensive income (loss)131 22 
Total comprehensive income (loss)164 (8)
Comprehensive income (loss) attributable to noncontrolling interests37 31 
Comprehensive income (loss) attributable to Adient $127 $(39)

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)December 31, 2022September 30, 2022
Assets
Cash and cash equivalents$901 $947 
Accounts receivable - net
1,755 1,852 
Inventories972 953 
Other current assets459 411 
Current assets4,087 4,163 
Property, plant and equipment - net1,419 1,377 
Goodwill2,128 2,057 
Other intangible assets - net463 467 
Investments in partially-owned affiliates306 286 
Assets held for sale5 11 
Other noncurrent assets865 797 
Total assets$9,273 $9,158 
Liabilities and Shareholders' Equity
Short-term debt$2 $3 
Current portion of long-term debt11 11 
Accounts payable2,422 2,478 
Accrued compensation and benefits314 340 
Restructuring reserve45 60 
Other current liabilities624 609 
Current liabilities3,418 3,501 
Long-term debt2,627 2,564 
Pension and postretirement benefits90 88 
Other noncurrent liabilities584 585 
Long-term liabilities3,301 3,237 
Commitments and Contingencies (Note 17)
Redeemable noncontrolling interests45 45 
Preferred shares issued, par value $0.001; 100,000,000 shares authorized,
Zero shares issued and outstanding at December 31, 2022
  
Ordinary shares issued, par value $0.001; 500,000,000 shares authorized,
95,385,075 shares issued and outstanding at December 31, 2022
  
Additional paid-in capital4,018 4,026 
Accumulated deficit(1,096)(1,108)
Accumulated other comprehensive income (loss)(730)(845)
Shareholders' equity attributable to Adient2,192 2,073 
Noncontrolling interests317 302 
Total shareholders' equity2,509 2,375 
Total liabilities and shareholders' equity$9,273 $9,158 

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)
Three Months Ended
December 31,
(in millions)20222021
Operating Activities
Net income (loss) attributable to Adient$12 $(54)
Income attributable to noncontrolling interests21 24 
Net income (loss)33 (30)
Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:
Depreciation69 75 
Amortization of intangibles12 13 
Pension and postretirement expense (benefit)9 1 
Pension and postretirement contributions, net(3)(5)
Equity in earnings of partially-owned affiliates, net of dividends received (includes purchase accounting amortization of $ and $1, respectively)
(16)(32)
Derivative loss on the 2021 Yanfeng Transaction 3 
Deferred income taxes(1)(3)
Non-cash impairment charges 7 
Equity-based compensation8 10 
Other(3)2 
Changes in assets and liabilities:
Receivables167 (175)
Inventories22 26 
Other assets(47) 
Restructuring reserves(27)(24)
Accounts payable and accrued liabilities(191)104 
Accrued income taxes12 14 
Cash provided (used) by operating activities44 (14)
Investing Activities
Capital expenditures(61)(60)
Sale of property, plant and equipment15 11 
Settlement of derivatives (30)
Advance payment for business acquisitions(6) 
Proceeds from business divestitures3 731 
Other(1) 
Cash provided (used) by investing activities(50)652 
Financing Activities
Increase (decrease) in short-term debt (6)
Increase (decrease) in long-term debt2  
Repayment of long-term debt(2)(2)
Debt financing costs(7) 
Dividends paid to noncontrolling interests(50)(59)
Share based compensation and other(12)(12)
Cash provided (used) by financing activities(69)(79)
Effect of exchange rate changes on cash and cash equivalents29  
Increase (decrease) in cash and cash equivalents(46)559 
Cash and cash equivalents at beginning of period947 1,521 
Cash and cash equivalents at end of period$901 $2,080 

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 unaudited consolidated financial statements of Adient have been prepared in accordance with the rules and regulations of the US Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). These interim consolidated financial statements include all adjustments (consisting of normal recurring adjustments) that management believes are necessary for a fair statement of the results of operations, financial position and cash flows of Adient for the interim periods presented. Interim results are not necessarily indicative of full-year results particularly as Adient, along with the automotive industry, continues to recover from supply chain disruptions, reacts to inflationary pressures on input costs (particularly labor, freight and utility costs), manages changing COVID-19 regulations in China, and as it addresses the impacts of higher interest rates and softening consumer demand.

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 December 31, 2022, and September 30, 2022, 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:

(in millions)December 31, 2022September 30, 2022
Current assets$205 $262 
Noncurrent assets157 113 
Total assets$362 $375 
Current liabilities$193 $233 
Noncurrent liabilities14 14 
Total liabilities$207 $247 

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
December 31,
(in millions, except per share data)20222021
Numerator:
Net income (loss) attributable to Adient$12 $(54)
Denominator:
Shares outstanding95.1 94.6 
Effect of dilutive securities0.8  
Diluted shares95.9 94.6 
Earnings (loss) per share:
Basic$0.13 $(0.57)
Diluted$0.13 $(0.57)
The effect of common stock equivalents that would have been anti-dilutive was excluded from the calculation of diluted earnings per share for the three months ended December 31, 2022 and was immaterial. Potentially dilutive securities whose effect would have been anti-dilutive are excluded from the computation of diluted earnings per share for the three months ended December 31, 2021 as a result of being in a loss position.

New Accounting Pronouncements

Standards Adopted During Fiscal 2023

On October 1, 2022, Adient adopted Accounting Standards Codification (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. The adoption of this guidance on October 1, 2022 did not significantly impact Adient's consolidated financial statements for the three months ended December 31, 2022.

On October 1, 2022, Adient adopted 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. The adoption of this guidance on October 1, 2022 did not significantly impact Adient's consolidated financial statements for the three months ended December 31, 2022.

Standards Effective After Fiscal 2023

Adient has considered the ASU summarized below, effective after fiscal 2023, which is not expected to significantly impact the consolidated financial statements:
Standard AdoptedDescriptionDate Effective
ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program ObligationsThe ASU requires buyers of goods and services to disclose information about supplier finance programs if such arrangements are used to manage their payables. The disclosures should include both qualitative and quantitative information including key terms and the amount of outstanding obligations.October 1, 2023

Adient plc | Form 10-Q | 8


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 includes 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 exist at September 30, 2022 or at December 31, 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.


3. Acquisitions and Divestitures

In fiscal 2022, Adient entered into an agreement whereby Adient would purchase all of the issued and outstanding equity interest in Nantong Yanfeng Adient Seating Trim Co., Ltd. ("YFAT") held by KEIPER Seating Mechanisms Co., Ltd. ("KEIPER") for ¥150 million ($24 million). Adient made an initial deposit of ¥75 million ($12 million) in fiscal 2022, which represents 50% of the estimated purchase price (reflected within other current assets as of September 30, 2022). During the first quarter of fiscal 2023, Adient made an additional deposit of ¥38 million ($6 million) in conjunction with the public bidding process. The transaction is subject to customary regulatory approvals in China, and is expected to be completed during the first half of fiscal 2023. The remaining balance of the estimated purchase price will be paid at the time of completion of the transaction.

Also in fiscal 2022, Adient 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 sale of one of the joint ventures was completed during the first quarter of fiscal 2023, wherein Adient received $3 million of sale proceeds. The sale of the other joint venture closed in January 2023 for minimal proceeds.

During the first quarter of fiscal 2022, Adient received final cash proceeds of $652 million for the sale of its 49.99% interest in Yanfeng Adient Seating Co., Ltd.("YFAS"), a joint venture previously owned by Yanfeng Automotive Trim Systems Company
Adient plc | Form 10-Q | 9


Ltd. ("Yanfeng") (50.01%) and Adient (49.99%), which closed in fiscal 2021, and $41 million 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 by Yanfeng (70%) and Adient (30%) which closed in fiscal 2020. Also during the first quarter of fiscal 2022, Adient collected cash proceeds of $36 million for sale of certain assets in Turkey.

During the first quarter of fiscal 2022, Chongqing Boxun Industrial Co., Ltd. (“Boxun”) exercised its right to sell its 25% equity interest in Chongqing Adient Automotive Components Co., Ltd. (“CQADNT”) to Adient. As a result, Adient reclassified the redeemable noncontrolling interests balance of $186 million to other current liabilities on December 31, 2021 as the obligation was determined to be unconditional. The acquisition of Boxun's 25% interest closed in January 2022 which resulted in Adient owning 100% of CQADNT.


4. Inventories

Inventories consisted of the following:

(in millions)December 31, 2022September 30, 2022
Raw materials and supplies$756 $755 
Work-in-process31 26 
Finished goods185 172 
Inventories$972 $953 


5. Goodwill and Other Intangible Assets

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

(in millions)AmericasEMEAAsiaTotal
Balance at September 30, 2022$607 $295 $1,155 $2,057 
Currency translation and other1 26 44 71 
Balance at December 31, 2022
$608 $321 $1,199 $2,128 

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

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

 December 31, 2022September 30, 2022
(in millions)Gross
Carrying
Amount
Accumulated
Amortization
NetGross
Carrying
Amount
Accumulated
Amortization
Net
Intangible assets
Patented technology$82 $(28)$54 $80 $(25)$55 
Customer relationships570 (176)394 560 (163)397 
Trademarks20 (19)1 19 (17)2 
Miscellaneous26 (12)14 25 (12)13 
Total intangible assets$698 $(235)$463 $684 $(217)$467 

Amortization of intangible assets for the three months ended December 31, 2022 and 2021 was $12 million and $13 million, respectively.

Adient plc | Form 10-Q | 10



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:
Three Months Ended
December 31,
(in millions)20222021
Balance at beginning of period$21 $23 
Accruals for warranties issued during the period2 2 
Changes in accruals related to pre-existing warranties (including changes in estimates) 1 
Settlements made (in cash or in kind) during the period(4)(3)
Currency translation1  
Balance at end of period$20 $23 


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 months ended December 31, 2022 and 2021 were as follows:

Three Months Ended
December 31,
(in millions)20222021
Operating lease cost$26 $30 
Short-term lease cost8 5 
Total lease cost$34 $35 

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

Adient plc | Form 10-Q | 11


(in millions)December 31, 2022September 30, 2022
Operating leases:
Operating lease right-of-use assetsOther noncurrent assets$268$266
Operating lease liabilities - currentOther current liabilities$83$81
Operating lease liabilities - noncurrentOther noncurrent liabilities186186
$269$267
Weighted average remaining lease term:
Operating leases6 years6 years
Weighted average discount rate:
Operating leases5.5 %5.6 %

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 December 31, 2022 are as follows:

Operating leases
Fiscal years (in millions)December 31, 2022
2023 (excluding the three months ended December 31, 2022)
$70 
202473 
202551 
202633 
202725 
Thereafter58 
Total lease payments310 
Less: imputed interest(41)
Present value of lease liabilities$269 

Supplemental cash flow information related to leases is as follows:

Three Months Ended
December 31,
(in millions)20222021
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (non-cash activity)$8 $10 
Operating cash flows:
Cash paid for amounts included in the measurement of lease liabilities$26 $29 


Adient plc | Form 10-Q | 12


8. Debt and Financing Arrangements

Debt consisted of the following:

(in millions)December 31, 2022September 30, 2022
Long-term debt:
Term Loan B - LIBOR plus 3.25% due in 2028
$985 $988 
4.875% Notes due in 2026
795 795 
3.50% Notes due in 2024
878 809 
Other bank borrowings and finance lease obligations3 1 
Less: debt issuance costs(23)(18)
Gross long-term debt2,638 2,575 
Less: current portion11 11 
Net long-term debt$2,627 $2,564 
Short-term debt:
Other bank borrowings$2 $3 
Total short-term debt$2 $3 

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, as amended in November 2022, is set to mature on November 2, 2027, subject to certain springing maturity provisions. 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. It also provides flexibility for future amendments to the ABL Facility to incorporate certain sustainability-based pricing provisions. 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. Interest is payable on the ABL Credit Facility at a fluctuating rate of interest determined by reference to SOFR, 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 December 31, 2022, Adient had not drawn down on the ABL Credit Facility and had availability under this facility of $971 million (net of $13 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, as amended in fiscal 2021, (the “Term Loan B Agreement”) that provides for a $985 million senior secured term loan facility. 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 April 8, 2028. Interest on the Term Loan B Agreement accrues at the Eurodollar rate plus an applicable margin equal to 3.25%. 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.

The ABL Credit Facility and Term Loan B Agreement 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
Adient plc | Form 10-Q | 13


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. Adient redeemed $103 million and $2 million during fiscal 2020 and 2021, respectively, resulting in a remaining balance of $795 million as of December 31, 2022 and September 30, 2022. AGH also previously maintained €1.0 billion aggregate principal amount of 3.50% unsecured notes due 2024. During fiscal 2022, Adient repurchased €177 million ($198 million) of the 3.50% unsecured notes due 2024 at a premium of €3 million ($4 million) plus €3 million ($3 million) of accrued and unpaid interest, and expensed €1 million ($1 million) of previously deferred financing costs to net financing charges. As of December 31, 2022, the remaining balance of this debt was €823 million ($878 million).

Net Financing Charges

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

Three Months Ended
December 31,
(in millions)20222021
Interest expense, net of capitalized interest costs$41 $46 
Banking fees and debt issuance cost amortization4 3 
Interest income(4)(2)
Derivative loss on Yanfeng transaction 3 
Net financing charges$41 $50 

Total interest paid on both short and long-term debt for the three months ended December 31, 2022 and 2021 was $20 million and $41 million, respectively.

Adient enters into supply chain financing programs in certain domestic and foreign jurisdictions to either sell or discount accounts receivable without recourse to third-party institutions. Sales or discounts of accounts receivable are reflected as a reduction of accounts receivable on the consolidated statements of financial position and the proceeds are included in cash flows from operating activities in the consolidated statements of cash flows. As of December 31, 2022, $181 million was funded under these programs compared to $269 million as of September 30, 2022.


9. Derivative Instruments and Hedging Activities

Adient selectively uses derivative instruments to reduce Adient's market risk associated with changes in foreign currency. Under Adient's policy, the use of derivatives is restricted to those intended for hedging purposes; the use of any derivative instrument for speculative purposes is strictly prohibited. A description of each type of derivative utilized to manage Adient's risk is included in the following paragraphs. In addition, refer to Note 10, "Fair Value Measurements," of the notes to consolidated financial statements for information related to the fair value measurements and valuation methods utilized by Adient for each derivative type.
Adient has global operations and participates in the foreign exchange markets to minimize its risk of loss from fluctuations in foreign currency exchange rates. Adient primarily uses foreign currency exchange contracts to hedge certain foreign exchange rate exposures. Adient hedges 70% to 90% of the nominal amount of each of its known foreign exchange transactional exposures. Gains and losses on derivative contracts offset gains and losses on underlying foreign currency exposures. These contracts have been designated as cash flow hedges under ASC 815, "Derivatives and Hedging," and the hedge gains or losses due to changes in fair value are initially recorded as a component of accumulated other comprehensive income (AOCI) and are subsequently reclassified into earnings when the hedged transactions occur and affect earnings. All contracts were highly effective in hedging the variability in future cash flows attributable to changes in currency exchange rates at December 31, 2022 and September 30, 2022, respectively.
Adient plc | Form 10-Q | 14


As of December 31, 2022, the €823 million ($878 million) aggregate principal amount of 3.50% euro-denominated unsecured notes due 2024 was designated as a net investment hedge to selectively hedge portions of Adient's net investment in Europe. The currency effects of Adient's euro-denominated bonds are reflected in the AOCI account within shareholders' equity attributable to Adient where they offset gains and losses recorded on Adient's net investment in Europe.

Adient entered into a ¥150 million ($23 million) foreign exchange forward contract during fiscal 2022 to selectively hedge portions of its net investment in China. The currency effects of the forward contract were reflected in the AOCI account within shareholder’s equity attributable to Adient, where they offset gains and losses recorded on Adient’s net investment in China. The forward contract matured during the first quarter of fiscal 2023.

The following table presents the location and fair values of derivative instruments and other amounts used in hedging activities included in Adient's consolidated statements of financial position:

 Derivatives and Hedging
Activities Designated as
Hedging Instruments
under ASC 815
Derivatives and Hedging
Activities Not Designated as
Hedging Instruments
under ASC 815
(in millions)December 31, 2022September 30, 2022December 31, 2022September 30, 2022
Other current assets
Foreign currency exchange derivatives$26 $17 $3 $3 
Other noncurrent assets
Foreign currency exchange derivatives2    
Total assets$28 $17 $3 $3 
Other current liabilities
Foreign currency exchange derivatives$8 $20 $ $ 
Other noncurrent liabilities
Foreign currency exchange derivatives 2  1 
Long-term debt
Foreign currency denominated debt878 809   
Total liabilities$886 $831 $ $1 

Adient enters into International Swaps and Derivatives Associations (ISDA) master netting agreements with counterparties that permit the net settlement of amounts owed under the derivative contracts. The master netting agreements generally provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event. Adient has not elected to offset the fair value positions of the derivative contracts recorded in the consolidated statements of financial position. Collateral is generally not required of Adient or the counterparties under the master netting agreements. As of December 31, 2022 and September 30, 2022, no cash collateral was received or pledged under the master netting agreements.

The gross and net amounts of derivative instruments and other amounts used in hedging activities are as follows:

AssetsLiabilities
(in millions)December 31, 2022September 30, 2022December 31, 2022September 30, 2022
Gross amount recognized$31 $20 $886 $832 
Gross amount eligible for offsetting(5)(19)(5)(19)
Net amount$26 $1 $881 $813 

The following table presents the effective portion of pretax gains (losses) recorded in other comprehensive income related to cash flow hedges:

Adient plc | Form 10-Q | 15


Three Months Ended
December 31,
(in millions)20222021
Foreign currency exchange derivatives$32 $(2)

The following table presents the location and amount of the effective portion of pretax gains (losses) on cash flow hedges reclassified from AOCI into Adient's consolidated statements of income:
(in millions)Three Months Ended
December 31,
20222021
Foreign currency exchange derivativesCost of sales$7 $1 
The following table presents the location and amount of pretax gains (losses) on derivatives not designated as hedging instruments recognized in Adient's consolidated statements of income (loss):

(in millions)Three Months Ended
December 31,
20222021
Foreign currency exchange derivativesCost of sales$3 $1 
Foreign currency exchange derivativesNet financing charges9 (15)
Total$12 $(14)

The effective portion of pretax gains (losses) recorded in currency translation adjustment (CTA) within other comprehensive income (loss) related to net investment hedges was $(69) million and $29 million for the three months ended December 31, 2022 and 2021, respectively. For the three months ended December 31, 2022 and 2021, no gains or losses were reclassified from CTA into income for Adient's outstanding net investment hedges. For the three months ended December 31, 2022 and 2021, no ineffectiveness was recognized in the consolidated statements of income (loss) resulting from cash flow hedges.


10. Fair Value Measurements

ASC 820, "Fair Value Measurement," defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a three-level fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.
ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
Adient plc | Form 10-Q | 16


Recurring Fair Value Measurements
The following tables present Adient's fair value hierarchy for those assets and liabilities measured at fair value:
 Fair Value Measurements Using:
(in millions)
Total as of
December 31, 2022
Quoted Prices
in Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Other current assets
Foreign currency exchange derivatives$29 $ $29 $ 
Other noncurrent assets
Foreign currency exchange derivatives2  2  
Total assets$31 $ $31 $ 
Other current liabilities
Foreign currency exchange derivatives8  8  
Total liabilities$8 $ $8 $ 

Fair Value Measurements Using:
(in millions)
Total as of
September 30, 2022
Quoted Prices
in Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Other current assets
Foreign currency exchange derivatives$20 $ $20 $ 
Other noncurrent assets
Interest rate cap    
Total assets$20 $ $20 $ 
Other current liabilities
Foreign currency exchange derivatives$20 $ $20 $ 
Other noncurrent liabilities
Foreign currency exchange derivatives3  3  
Total liabilities$23 $ $23 $ 

Valuation Methods
Foreign currency exchange derivatives Adient selectively hedges anticipated transactions and net investments that are subject to foreign exchange rate risk primarily using foreign currency exchange hedge contracts. The foreign currency exchange derivatives are valued under a market approach using publicized spot and forward prices. Changes in fair value on foreign exchange derivatives accounted for as hedging instruments under ASC 815 are initially recorded as a component of AOCI and are subsequently reclassified into earnings when the hedged transactions occur and affect earnings. These contracts were highly effective in hedging the variability in future cash flows attributable to changes in currency exchange rates at December 31, 2022 and September 30, 2022, respectively. The changes in fair value of foreign currency exchange derivatives not designated as hedging instruments under ASC 815 are recorded in the consolidated statements of income.

Cross-currency interest rate swaps Adient determines the fair value of a cross-currency interest rate swap contract using a market approach which is based on quoted market price for similar instruments in markets. All significant inputs are corroborated by observable market data for the term of such a contract. Adient selectively uses cross-currency interest rate swaps to hedge portions of its net investments.

Adient plc | Form 10-Q | 17


Interest rate caps Adient determines the fair value of an interest rate cap contract using a market approach which is based on quoted market price for identical or similar instruments in markets. All significant inputs are corroborated by observable market data for the term of such a contract. As of December 31, 2022, Adient had no interest rate caps outstanding.
The fair value of cash and cash equivalents, accounts receivable, short-term debt and accounts payable approximate their carrying values. The fair value of long-term debt, which was $2.5 billion and $2.4 billion at December 31, 2022 and September 30, 2022, respectively, was determined primarily using market quotes classified as Level 1 inputs within the ASC 820 fair value hierarchy.


11. Equity and Noncontrolling Interests

For the three months ended December 31, 2022:

(in millions)Ordinary SharesAdditional Paid-in CapitalRetained Earnings
(Accumulated Deficit)
Accumulated Other Comprehensive Income (Loss)Shareholders' Equity Attributable
 to Adient
Shareholders' Equity Attributable to Noncontrolling InterestsTotal Equity
Balance at September 30, 2022
$ $4,026 $(1,108)$(845)$2,073 $302 $2,375 
Net income (loss)— — 12 — 12 14 26 
Foreign currency translation adjustments— — — 90 90 5 95 
Realized and unrealized gains (losses) on derivatives— — — 25 25 — 25 
Dividends attributable to noncontrolling interests— — — —  (4)(4)
Share based compensation and other— (8)— — (8) (8)
Balance at December 31, 2022
$ $4,018 $(1,096)$(730)$2,192 $317 $2,509 



For the three months ended December 31, 2021:

(in millions)Ordinary SharesAdditional Paid-in CapitalRetained Earnings
(Accumulated Deficit)
Accumulated Other Comprehensive Income (Loss)Shareholders' Equity Attributable
 to Adient
Shareholders' Equity Attributable to Noncontrolling InterestsTotal Equity
Balance at September 30, 2021
$ $3,991 $(988)$(627)$2,376 $342 $2,718 
Net income (loss)— — (54)— (54)11 (43)
Foreign currency translation adjustments— — —