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

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2018
or
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 001-37757
 
 
ADIENTA20.JPG
 
 
 
Adient plc
 
 
(exact name of Registrant as specified in its charter)
 
 
Ireland
 
98-1328821
 
 
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer
 Identification No.)
 
 
25-28 North Wall Quay, IFSC, Dublin 1, Ireland
 
 
(Address of principal executive offices)
 
 
Registrant's telephone number, including area code: 414-220-8900
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
 
(Title of class)
 
(Name of exchange on which registered)
 
 
Ordinary Shares, par value $0.001
 
New York Stock Exchange
 
 
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x
No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x
No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
 
Accelerated filer ¨
 
Non-accelerated filer ¨
Smaller reporting company ¨
 
Emerging growth company ¨
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ¨
No x
At March 31, 2018 , 93,370,292 ordinary shares were outstanding.


Adient plc | Form 10-Q | 1


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

TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Adient plc | Form 10-Q | 2


PART I - FINANCIAL INFORMATION
 
 
Item 1.
Unaudited Financial Statements


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

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

 
$
4,201

 
$
8,800

 
$
8,227

Cost of sales
 
4,312

 
3,822

 
8,314

 
7,498

Gross profit
 
284

 
379

 
486

 
729

Selling, general and administrative expenses
 
188

 
178

 
384

 
395

Restructuring and impairment costs
 
315

 
6

 
315

 
6

Equity income
 
85

 
89

 
181

 
183

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

 
(32
)
 
511

Net financing charges
 
37

 
33

 
70

 
68

Income (loss) before income taxes
 
(171
)
 
251

 
(102
)
 
443

Income tax provision (benefit)
 
(28
)
 
37

 
237

 
65

Net income (loss)
 
(143
)
 
214

 
(339
)
 
378

Income (loss) attributable to noncontrolling interests
 
25

 
24

 
45

 
46

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

 
$
(384
)
 
$
332

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
(1.80
)
 
$
2.03

 
$
(4.12
)
 
$
3.54

Diluted
 
$
(1.80
)
 
$
2.02

 
$
(4.12
)
 
$
3.53

 
 
 
 
 
 
 
 
 
Cash dividends declared per share
 
$
0.275

 
$
—

 
$
0.550

 
$
0.275

 
 
 
 
 
 
 
 
 
Shares used in computing earnings per share:
 
 
 
 
 
 
 
 
Basic
 
93.4

 
93.7

 
93.3

 
93.7

Diluted
 
93.4

 
94.1

 
93.3

 
94.0


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


Adient plc | Form 10-Q | 3

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



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

 
$
(339
)
 
$
378

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

 
92

 
218

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

 
11

 
—

 
9

Other comprehensive income (loss)
 
152

 
103

 
218

 
(348
)
Total comprehensive income (loss)
 
9

 
317

 
(121
)
 
30

Comprehensive income (loss) attributable to noncontrolling interests
 
35

 
28

 
60

 
48

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

 
$
(181
)
 
$
(18
)

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


Adient plc | Form 10-Q | 4

Adient plc
Consolidated Statements of Financial Position
(unaudited)



(in millions, except share and per share data)
 
March 31, 2018
 
September 30, 2017
Assets
 
 
 
 
Cash and cash equivalents
 
$
353

 
$
709

Accounts receivable - net
 
2,580

 
2,224

Inventories
 
781

 
735

Other current assets
 
882

 
831

Current assets
 
4,596

 
4,499

Property, plant and equipment - net
 
2,611

 
2,502

Goodwill
 
2,293

 
2,515

Other intangible assets - net
 
534

 
543

Investments in partially-owned affiliates
 
2,012

 
1,793

Other noncurrent assets
 
1,043

 
1,318

Total assets
 
$
13,089

 
$
13,170

Liabilities and Shareholders' Equity
 
 
 
 
Short-term debt
 
$
173

 
$
36

Current portion of long-term debt
 
2

 
2

Accounts payable
 
3,106

 
2,958

Accrued compensation and benefits
 
365

 
444

Restructuring reserve
 
174

 
236

Other current liabilities
 
615

 
652

Current liabilities
 
4,435

 
4,328

Long-term debt
 
3,503

 
3,440

Pension and postretirement benefits
 
142

 
129

Other noncurrent liabilities
 
575

 
653

Long-term liabilities
 
4,220

 
4,222

Commitments and Contingencies (Note 14)
 


 


Redeemable noncontrolling interests
 
39

 
28

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

 
—

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

 
—

Additional paid-in capital
 
3,955

 
3,942

Retained earnings
 
299

 
734

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

 
4,279

Noncontrolling interests
 
326

 
313

Total shareholders' equity
 
4,395

 
4,592

Total liabilities and shareholders' equity
 
$
13,089

 
$
13,170


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


Adient plc | Form 10-Q | 5
Adient plc
Consolidated Statements of Cash Flows
(unaudited)

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

Income attributable to noncontrolling interests
 
45

 
46

Net income (loss)
 
(339
)
 
378

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

 
164

Amortization of intangibles
 
24

 
9

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

Pension and postretirement contributions, net
 
11

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

 
(4
)
Non-cash impairment charges
 
299

 
—

Equity-based compensation
 
30

 
22

Other
 
6

 
1

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

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

 
(51
)
Accrued income taxes
 
(83
)
 
3

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

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

 
17

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

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


606

Cash transferred from former Parent post separation
 
—


315

Increase (decrease) in short-term debt
 
135


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

(100
)
Cash dividends
 
(51
)

—

Dividends paid to noncontrolling interests
 
(34
)

(17
)
Other
 
(4
)

3

Cash provided (used) by financing activities
 
45

 
782

Effect of exchange rate changes on cash and cash equivalents
 
18

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

Cash and cash equivalents at beginning of period
 
709

 
105

Cash and cash equivalents at end of period
 
$
353

 
$
729


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

Adient plc | Form 10-Q | 6

Adient plc
Notes to Consolidated Financial Statements
(unaudited)




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

Adient plc | Form 10-Q | 7


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

 
$
232

Noncurrent assets
 
62

 
56

Total assets
 
$
315

 
$
288

 
 
 
 
 
Current liabilities
 
$
203

 
$
169

Total liabilities
 
$
203

 
$
169

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

 
$
(11
)
 
$
4,201

 
$
8,250

 
$
(23
)
 
$
8,227

Cost of sales
 
3,833

 
(11
)
 
3,822

 
7,521

 
(23
)
 
7,498

Gross profit
 
379

 
—

 
379

 
729

 
—

 
729

Equity income
 
91

 
(2
)
 
89

 
192

 
(9
)
 
183

Earnings before interest and income taxes
 
286

 
(2
)
 
284

 
520

 
(9
)
 
511

Income before income taxes
 
253

 
(2
)
 
251

 
452

 
(9
)
 
443

Net income (loss)
 
216

 
(2
)
 
214

 
387

 
(9
)
 
378

Net income (loss) attributable to Adient
 
192

 
(2
)
 
190

 
341

 
(9
)
 
332

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
2.05

 
$
(0.02
)
 
$
2.03

 
$
3.64

 
$
(0.10
)
 
$
3.54

Diluted
 
$
2.04

 
$
(0.02
)
 
$
2.02

 
$
3.63

 
$
(0.10
)
 
$
3.53


Adient plc | Form 10-Q | 8


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

 
$
(2
)
 
$
317

 
$
39

 
$
(9
)
 
$
30

Comprehensive income (loss) attributable to Adient
 
291

 
(2
)
 
289

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

 
$
(9
)
 
$
378

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

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

 
—

 
143

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

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

 
$
(384
)
 
$
332

 
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
 
Shares outstanding
 
93.4

 
93.7

 
93.3

 
93.7

Effect of dilutive securities
 
—

 
0.4

 
—

 
0.3

Diluted shares
 
93.4

 
94.1

 
93.3

 
94.0

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
(1.80
)
 
$
2.03

 
$
(4.12
)
 
$
3.54

Diluted
 
$
(1.80
)
 
$
2.02

 
$
(4.12
)
 
$
3.53

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

Adient plc | Form 10-Q | 9


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

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

Adient plc | Form 10-Q | 10


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

On January 16, 2018, Adient announced its joint venture with The Boeing Company ("Boeing") called Adient Aerospace, LLC ("Adient Aerospace"). Adient's ownership position in Adient Aerospace will be 50.01% . Adient Aerospace will develop, manufacture, and sell a portfolio of seating products to airlines and aircraft leasing companies for installation on Boeing and other OEM commercial airplanes, for both production line-fit and retrofit configurations. Adient Aerospace's results will be included within the Seating segment.

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

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

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

3. Inventories

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

 
$
552

Work-in-process
 
38

 
37

Finished goods
 
160

 
146

Inventories
 
$
781

 
$
735



Adient plc | Form 10-Q | 11


4. Goodwill and Other Intangible Assets

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

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

 
$
—

 
$
2,515

Business acquisitions
 
6

 
—

 
6

Realignment of goodwill
 
(299
)
 
299

 
—

Impairment
 
—

 
(299
)
 
(299
)
Currency translation and other
 
71

 
—

 
71

Balance at March 31, 2018
 
$
2,293

 
$
—

 
$
2,293


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

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

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

 
$
(17
)
 
$
14

 
$
30

 
$
(15
)
 
$
15

Customer relationships
 
560

 
(87
)
 
473

 
545

 
(64
)
 
481

Trademarks
 
62

 
(29
)
 
33

 
59

 
(26
)
 
33

Miscellaneous
 
23

 
(9
)
 
14

 
22

 
(8
)
 
14

Total intangible assets
 
$
676

 
$
(142
)
 
$
534

 
$
656

 
$
(113
)
 
$
543


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


Adient plc | Form 10-Q | 12


5. Product Warranties

Adient offers warranties to its customers depending upon the specific product and terms of the customer purchase agreement. A typical warranty program requires that Adient replace defective products within a specified time period from the date of sale. Adient records an estimate for future warranty-related costs based on actual historical return rates and other known factors. Based on analysis of return rates and other factors, Adient's warranty provisions are adjusted as necessary. Adient monitors its warranty activity and adjusts its reserve estimates when it is probable that future warranty costs will be different than those estimates. Adient's product warranty liability is recorded in the consolidated statements of financial position in other current liabilities.
The changes in Adient's total product warranty liability are as follows:
 
 
Six Months Ended
March 31,
(in millions)
 
2018
 
2017
Balance at beginning of period
 
$
19

 
$
13

Accruals for warranties issued during the period
 
2

 
2

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

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

 
$
14



Adient plc | Form 10-Q | 13


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

 
$
1,200

4.875% Notes due in 2026
 
900

 
900

3.50% Notes due in 2024
 
1,232

 
1,180

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

 
195

Capital lease obligations
 
4

 
4

Other
 
1

 
1

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

 
3,442

Less: current portion
 
2

 
2

Net long-term debt
 
$
3,503

 
$
3,440

 
 
 
 
 
Short-term debt:
 
 
 
 
Revolving credit facility
 
$
150

 
$
—

Other bank borrowings
 
23

 
36

Total short-term debt
 
$
173

 
$
36

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

 
$
32

 
$
70

 
$
65

Banking fees and debt issuance cost amortization
 
2

 
2

 
4

 
4

Interest income
 
(1
)
 
—

 
(2
)
 
(1
)
Net foreign exchange
 
—

 
(1
)
 
(2
)
 
—

Net financing charges
 
$
37

 
$
33

 
$
70

 
$
68

7. Derivative Instruments and Hedging Activities
Adient selectively uses derivative instruments to reduce Adient's market risk associated with changes in foreign currency. Under Adient's policy, the use of derivatives is restricted to those intended for hedging purposes; the use of any derivative instrument for speculative purposes is strictly prohibited. A description of each type of derivative utilized to manage Adient's risk is included in the following paragraphs. In addition, refer to Note 8 , " Fair Value Measurements ," of the notes to consolidated financial statements for information related to the fair value measurements and valuation methods utilized by Adient for each derivative type.
Adient has global operations and participates in the foreign exchange markets to minimize its risk of loss from fluctuations in foreign currency exchange rates. Adient primarily uses foreign currency exchange contracts to hedge certain foreign exchange rate exposures. Adient hedges 70% to 90% of the nominal amount of each of its known foreign exchange transactional exposures. Gains and losses on derivative contracts offset gains and losses on underlying foreign currency exposures. These contracts have been designated as cash flow hedges under ASC 815, "Derivatives and Hedging," and the effective portion of the hedge gains or losses due to changes in fair value are initially recorded as a component of accumulated other comprehensive income (AOCI) and are subsequently reclassified into earnings when the hedged transactions occur and affect earnings. Any ineffective portion of the

Adient plc | Form 10-Q | 14


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

The following table presents the location and fair values of derivative instruments and other amounts used in hedging activities included in Adient's consolidated statements of financial position:
 
 
Derivatives and Hedging
Activities Designated as
Hedging Instruments
under ASC 815
 
Derivatives and Hedging
Activities Not Designated as
Hedging Instruments
under ASC 815
(in millions)
 
March 31,
2018
 
September 30,
2017
 
March 31,
2018
 
September 30,
2017
Other current assets
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
$
12

 
$
4

 
$
—

 
$
—

Other noncurrent assets
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
—

 
1

 
—

 
—

Equity swaps
 
—

 
—

 
—

 
3

Cross-currency interest rate swaps
 
2

 
—

 
—

 
—

Total assets
 
$
14

 
$
5

 
$
—

 
$
3

 
 
 
 
 
 
 
 
 
Other current liabilities
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
$
6

 
$
6

 
$
1

 
$
2

Other noncurrent liabilities
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
1

 
3

 
—

 
—

Equity swaps
 
—

 
—

 
4

 
—

Long-term debt
 
 
 
 
 
 
 
 
Foreign currency denominated debt
 
1,232

 
1,180

 
—

 
—

Total liabilities
 
$
1,239

 
$
1,189

 
$
5

 
$
2


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

Adient plc | Form 10-Q | 15


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

 
$
8

 
$
1,244

 
$
1,191

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

 
$
6

 
$
1,238

 
$
1,189

The following table presents the effective portion of pretax gains (losses) recorded in other comprehensive income related to cash flow hedges:
(in millions)
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
2018
 
2017
 
2018
 
2017
Foreign currency exchange derivatives
 
$
15

 
$
8

 
$
8

 
$
1

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

 
$
(7
)
 
$
2

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

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

 
(2
)
 
35

Equity swap
 
Selling, general and administrative
 
(12
)
 
—

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

 
$
(18
)
 
$
18

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

Adient plc | Form 10-Q | 16


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

 
$
—

 
$
12

 
$
—

Other noncurrent assets
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
—

 
—

 
—

 
—

Cross-currency interest rate swaps
 
2

 
—

 
2

 
—

Total assets
 
$
14

 
$
—

 
$
14

 
$
—

Other current liabilities
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
$
7

 
$
—

 
$
7

 
$
—

Other noncurrent liabilities
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
1

 
—

 
1

 
—

Equity swaps
 
4

 
—

 
4

 
—

Total liabilities
 
$
12

 
$
—

 
$
12

 
$
—


Adient plc | Form 10-Q | 17


 
 
Fair Value Measurements Using:
(in millions)
 
Total as of
September 30,
2017
 
Quoted Prices
in Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Other current assets
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
$
4

 
$
—

 
$
4

 
$
—

Other noncurrent assets
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
1

 
—

 
1

 
—

Equity swaps
 
3

 
—

 
3

 
—

Total assets
 
$
8

 
$
—

 
$
8

 
$
—

Other current liabilities
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
$
8

 
$
—

 
$
8

 
$
—

Other noncurrent liabilities
 
 
 
 
 
 
 
 
Foreign currency exchange derivatives
 
3

 
—

 
3

 
—

Total liabilities
 
$
11

 
$
—

 
$
11

 
$
—

Valuation Methods
Foreign currency exchange derivatives Adient selectively hedges anticipated transactions that are subject to foreign exchange rate risk primarily using foreign currency exchange hedge contracts. The foreign currency exchange derivatives are valued under a market approach using publicized spot and forward prices. Changes in fair value on foreign exchange derivatives accounted for as hedging instruments under ASC 815 are initially recorded as a component of AOCI and are subsequently reclassified into earnings when the hedged transactions occur and affect earnings. These contracts were highly effective in hedging the variability in future cash flows attributable to changes in currency exchange rates at March 31, 2018 and September 30, 2017. The changes in fair value of foreign currency exchange derivatives not designated as hedging instruments under ASC 815 are recorded in the consolidated statements of income.
Equity swaps Adient selectively uses equity swaps to reduce market risk associated with certain of its stock-based compensation plans, such as its deferred compensation plans. The equity swaps are recorded at fair value. Changes in fair value of the equity swaps are reflected in the consolidated statements of income within selling, general and administrative expenses.
Cross-currency interest rate swaps Adient selectively uses cross-currency interest rate swaps to hedge portions of its net investment in Europe. In March 2018, Adient entered into two floating to floating cross-currency interest rate swaps totaling approximately €160 million designated as net investment hedges in Adient's net investment in Europe.


Adient plc | Form 10-Q | 18


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

 
$
—

 
$
—

 
$
4,452

 
$
(276
)
 
$
4,176

 
$
131

 
$
4,307

Net income (loss)
 
—

 
—

 
267

 
65

 
—

 
332

 
34

 
366

Change in Parent's net investment
 
—

 
—

 
—

 
(880
)
 
—

 
(880
)
 
—

 
(880
)
Transfers from former Parent
 
—

 
332

 
—

 
—

 
—

 
332

 
—

 
332

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

 
3,637

 
—

 
(3,637
)
 
—

 
—

 
—

 
—

Foreign currency translation adjustments
 
—

 
—

 
—

 
—

 
(359
)
 
(359
)
 
2

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

 
—

 
—

 
—

 
9

 
9

 
—

 
9

Repurchase and retirement of ordinary shares
 
—

 
—

 
(26
)
 
—

 
—

 
(26
)
 
—

 
(26
)
Dividends attributable to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
—

 
(21
)
 
(21
)
Change in noncontrolling interest share
 
—

 
—

 
—

 
—

 
—

 
—

 
5

 
5

Share based compensation
 
—

 
5

 
—

 
—

 
—

 
5

 
—

 
5

Balance at March 31, 2017
 
$
—

 
$
3,974

 
$
241

 
$
—

 
$
(626
)
 
$
3,589

 
$
151

 
$
3,740

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at September 30, 2017
 
$
—

 
$
3,942

 
$
734

 
$
—

 
$
(397
)
 
$
4,279

 
$
313

 
$
4,592

Net income (loss)
 
—

 
—

 
(384
)
 
—

 
—

 
(384
)
 
29

 
(355
)
Foreign currency translation adjustments
 
—

 
—

 
—

 
—

 
203

 
203

 
13

 
216

Employee retirement plans
 
—

 
—

 
—

 
—

 
9

 
9

 
—

 
9

Dividends declared ($0.55 per share)
 
—

 
—

 
(51
)
 
—

 
—

 
(51
)
 
—

 
(51
)
Dividends attributable to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
—

 
(30
)
 
(30
)
Change in noncontrolling interest share
 
—

 
—

 
—

 
—

 
—

 
—

 
1

 
1

Share based compensation
 
—

 
10

 
—

 
—

 
—

 
10

 
—

 
10

Other
 
—

 
3

 
—

 
—

 
—

 
3

 
—

 
3

Balance at March 31, 2018
 
$
—

 
$
3,955

 
$
299

 
$
—

 
$
(185
)
 
$
4,069

 
$
326

 
$
4,395


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

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


Adient plc | Form 10-Q | 19


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

 
88

 
203

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

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

 
6

 
1

 
2

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

 
(1
)
 
7

Balance at end of period
 
3

 
(5
)
 
3

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

 
—

 
9

 
—

Balance at end of period
 
7

 
(2
)
 
7

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

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

 
$
38

 
$
28

 
$
34

Net income
 
9

 
7

 
16

 
12

Foreign currency translation adjustments
 
1

 
1

 
2

 
—

Dividends
 
—

 
—

 
(8
)
 
—

Change in noncontrolling interest share
 
—

 
—

 
1

 
—

Ending balance
 
$
39

 
$
46

 
$
39

 
$
46




Adient plc | Form 10-Q | 20


10. Restructuring and Impairment Costs

To better align its resources with its growth strategies and reduce the cost structure of its global operations to address the softness in certain underlying markets, Adient commits to restructuring plans as necessary.

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

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

 
$
38

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

 
$
35


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

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

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

 
$
4

 
$
—

 
$
46

Utilized—cash
 
(4
)
 
(4
)
 
—

 
(8
)
Balance at September 30, 2017
 
38

 
—

 
—

 
38

Utilized—cash
 
(9
)
 
—

 
—

 
(9
)
Utilized—noncash
 
—

 
—

 
1

 
1

Balance at March 31, 2018
 
$
29

 
$
—

 
$
1

 
$
30


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

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

Adient plc | Form 10-Q | 21


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

 
$
87

 
$
22

 
$
—

 
$
332

Utilized—cash
 
(29
)
 
—

 
(1
)
 
—

 
(30
)
Utilized—noncash
 
—

 
(87
)
 
—

 
(2
)
 
(89
)
Balance at September 30, 2016
 
194

 
—

 
21

 
(2
)
 
213

Utilized—cash
 
(48
)
 
—

 
(12
)
 
—

 
(60
)
Utilized—noncash
 
—

 
—

 
—

 
7

 
7

Balance at September 30, 2017
 
146

 
—

 
9

 
5

 
160

Noncash adjustment—underspend
 
(17
)
 
—

 
—

 
—

 
(17
)
Utilized—cash
 
(49
)
 
—

 
—

 
—

 
(49
)
Utilized—noncash
 
—

 
—

 
—

 
4

 
4

Balance at March 31, 2018
 
$
80

 
$
—

 
$
9

 
$
9

 
$
98


Adient's fiscal 2018, 2017 and 2016 restructuring plans included workforce reductions of approximately 4,700 . Restructuring charges associated with employee severance and termination benefits are paid over the severance period granted to each employee or on a lump sum basis in accordance with individual severance agreements. As of March 31, 2018, approximately 2,700 of the employees have been separated from Adient pursuant to the restructuring plans. In addition, the restructuring plans included eighteen plant closures. As of March 31, 2018, twelve of the eighteen plants have been closed.

Adient's management closely monitors its overall cost structure and continually analyzes each of its businesses for opportunities to consolidate current operations, improve operating efficiencies and locate facilities in low cost countries in close proximity to customers. This ongoing analysis includes a review of its manufacturing, engineering, purchasing and administrative functions, as well as the overall global footprint for all its businesses. Because of the importance of new vehicle sales by major automotive manufacturers to operations, Adient is affected by the general business conditions in the automotive industry. Future adverse developments in the automotive industry could impact Adient's liquidity position, lead to impairment charges and/or require additional restructuring of its operations.

11. Income Taxes
In calculating the provision for income taxes, Adient uses an estimate of the annual effective tax rate based upon the facts and circumstances known at each interim period. On a quarterly basis, the actual effective tax rate is adjusted, as appropriate, based on changes in facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and each interim period thereafter. For the three and six months ended March 31, 2018, Adient’s income tax expense (benefit) was $(28) million equating to an effective tax rate of 16% and $237 million equating to an effective tax rate of negative 232% , respectively. The three month income tax benefit was higher than the statutory rate impact of 12.5% primarily due to the goodwill impairment charge and foreign exchange. The six month income tax expense was higher than the statutory rate impact primarily due to the charge to recognize the impact of the U.S. tax reform legislation. For the three and six months ended March 31, 2017, Adient’s effective tax rates were 15% . The effective rates were higher than the statutory rate primarily due to foreign tax rate differentials and a tax law change in Hungary, partially offset by benefits from global tax planning.

Valuation Allowances

Adient reviews the realizability of its deferred tax assets on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or combined group recording the net deferred tax asset are considered, along with any other positive or negative evidence. Since future financial results may differ from previous estimates, periodic adjustments to Adient's valuation allowances may be necessary. During the next twelve months, it is reasonably possible that a change to valuation allowances in certain jurisdictions may result in a material increase to income tax expense.

Adient plc | Form 10-Q | 22


Uncertain Tax Positions

At March 31, 2018, Adient had gross tax effected unrecognized tax benefits of $198 million , essentially all of which, if recognized, would impact the effective tax rate. Total net accrued interest at March 31, 2018 was approximately $4 million (net of tax benefit). The interest and penalties accrued during the three and six months ended March 31, 2018 was not material. Adient recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.

Impacts of Tax Legislation and Change in Statutory Tax Rates

On December 22, 2017, the Act was signed and enacted into law, and is effective for tax years beginning on or after January 1, 2018, with the exception of certain provisions. As a fiscal year taxpayer, Adient will not be subject to the majority of the provisions until fiscal year 2019, however the statutory tax rate reduction is effective January 1, 2018.

The Act reduces the U.S. corporate tax rate from 35% to 21% . Adient’s fiscal 2018 estimated annual effective tax rate reflects the benefit from the reduced rate of 24.5% resulting from the application of Internal Revenue Code, Section 15 which provides for a proration of the newly enacted rate during this fiscal year. This benefit is offset by a non-cash estimated tax expense of $150 million related to the remeasurement of Adient’s net deferred tax assets at the lower statutory rate, which could materially change, a non-cash estimated tax expense of $100 million related to recording a valuation allowance to reflect the reduced benefit Adient expects to realize as a result of being subject to the Base Erosion and Anti-avoidance Tax ("BEAT"), and an estimated cash tax expense of $8 million related to the transition tax imposed on previously untaxed earnings and profits. Adient is projecting that it will be subject to BEAT, a parallel tax system, for the foreseeable future.

In accordance with Staff Accounting Bulletin No. 118, Adient is disclosing the estimated income tax impact. Although the $258 million tax expense represents what Adient believes is a reasonable estimate of the impact of the income tax effects of the Act on its consolidated financial statements as of March 31, 2018, it is a provisional amount and will be impacted by Adient’s on-going analysis of the legislation and the full year fiscal 2018 financial results.

The Act makes broad and complex changes to the U.S. tax code, and in certain instances, lacks clarity and is subject to interpretation until additional Internal Revenue Service guidance is issued. The ultimate impact of the Act may differ from Adient's estimates due to changes in the interpretations and assumptions made as well as any forthcoming regulatory guidance. Adient will continue to assess the provisions of the Act and the anticipated impact to income tax expense and will disclose the anticipated impact on its consolidated financial statements in future financial filings. Any adjustments to these provisional amounts will be reported as a component of income tax expense (benefit) in the reporting period in which any such adjustments are determined, which will be no later than the first quarter of fiscal 2019.

Other tax legislation was adopted during the quarter in various jurisdictions, which did not have a material impact on Adient’s consolidated financial statements.

In the first quarter of fiscal 2017, Hungary passed the 2017 tax bill which reduced the corporate income tax rate to a flat 9% rate. As a result of the law change, Adient recorded income tax expense of $5 million related to the write down of deferred tax assets.

Other Tax Matters

During the second quarter of fiscal 2018, Adient recognized a pre-tax goodwill impairment charge of $299 million related to the SS&M reportable segment. Refer to Note 4, "Goodwill and Other Intangible Assets," of the notes to the consolidated financial statements for additional information. The tax benefit associated with the goodwill impairment charge was $20 million .



Adient plc | Form 10-Q | 23


12. Segment Information

During the second quarter of fiscal 2018, Adient restructured certain of its management organization in response to the challenges faced in the seat structures and mechanisms business, resulting in a realignment of its reportable segments. Adient also began using an adjusted EBITDA metric to assess the performance of its segments and ceased allocating certain corporate-related costs to its segments. Prior period segment information has been recast to align with this change in organizational structure, the use of a new performance metric and to reflect unallocated corporate-related costs. Pursuant to this change, Adient now operates in the following three reportable segments for financial reporting purposes:

•
Seating: This segment produces complete seat systems for automotive and other mobility applications, as well as certain components of complete seat systems, such as foam, trim and fabric.
 
 
•
Seat Structures & Mechanisms (SS&M): This segment produces seat structures and mechanisms for inclusion in complete seat systems that are produced by Adient or others.
 
 
•
Interiors: This segment, derived from Adient's global automotive interiors joint ventures, produces instrument panels, floor consoles, door panels, overhead consoles, cockpit systems, decorative trim and other products.

Adient evaluates the performance of its reportable segments using an adjusted EBITDA metric defined as income before income taxes and noncontrolling interests, excluding net financing charges, qualified restructuring and impairment costs, restructuring related-costs, incremental "Becoming Adient" costs, separation costs, net mark-to-market adjustments on pension and postretirement plans, transaction gains/losses, purchase accounting amortization, depreciation, stock-based compensation and other non-recurring items ("Adjusted EBITDA"). Also, certain corporate-related costs are not allocated to the segments. The reportable segments are consistent with how management views the markets served by Adient and reflect the financial information that is reviewed by its chief operating decision maker.


Financial information relating to Adient's reportable segments is as follows:

 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
2017 (1)
 
2018
 
2017 (1)
Net Sales
 
 
 
 
 
 
 
 
Seating
 
$
4,132

 
$
3,825

 
$
7,928


$
7,517

SS&M
 
797


756


1,515


1,427

Eliminations
 
(333
)

(380
)

(643
)

(717
)
Total net sales
 
$
4,596

 
$
4,201

 
$
8,800

 
$
8,227


Adient plc | Form 10-Q | 24


 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
2017 (1)
 
2018
 
2017 (1)
Adjusted EBITDA
 
 
 
 
 
 
 
 
Seating
 
$
411

 
$
398

 
$
766

 
$
762

SS&M
 
(34
)
 
40

 
(116
)
 
47

Interiors
 
12

 
22

 
37

 
52

Corporate-related costs (2)
 
(26
)

(39
)
 
(57
)
 
(70
)
Becoming Adient costs (3)
 
(19
)
 
(23
)
 
(38
)
 
(38
)
Separation costs (4)
 
—

 
—

 
—

 
(10
)
Restructuring and impairment costs
 
(315
)
 
(6
)
 
(315
)
 
(6
)
Purchase accounting amortization (5)
 
(18
)
 
(9
)
 
(35
)
 
(19
)
Restructuring related charges  (6)
 
(12
)
 
(10
)
 
(23
)
 
(18
)
Depreciation (7)
 
(99
)
 
(78
)
 
(193
)
 
(161
)
Stock based compensation (8)
 
(12
)
 
(11
)
 
(22
)
 
(15
)
Other items (9)
 
(22
)
 
—

 
(36
)
 
(13
)
Earnings before interest and income taxes
 
(134
)
 
284

 
(32
)
 
511

Net financing charges
 
(37
)
 
(33
)
 
(70
)
 
(68
)
Income before income taxes
 
$
(171
)
 
$
251

 
$
(102
)
 
$
443

(1)
 
Amounts presented have been revised from what was previously reported to correctly report net sales, equity income and total assets as discussed in Note 1, "Basis of Presentation and Summary of Significant Accounting Policies".
(2)
 
Corporate-related costs not allocated to the segments include executive office, communications, corporate development, legal, finance and marketing.
(3)
 
Reflects incremental expenses associated with becoming an independent company, including non-cash costs of $5 million and $11 million in the three and six months ended March 31, 2018, respectively, and non-cash costs of $6 million and $19 million in the three and six months ended March 31, 2017, respectively.
(4)
 
Reflects expenses associated with and incurred prior to the separation from the former Parent.
(5)
 
Reflects amortization of intangible assets including those related to partially owned affiliates recorded within equity income.
(6)
 
Reflects restructuring related charges for costs that are directly attributable to restructuring activities, but do not meet the definition of restructuring under ASC 420.
(7)
 
For the six months ended March 31, 2018, depreciation excludes $4 million, which is included in restructuring related charges discussed above. For the six months ended March 31, 2017, depreciation excludes $3 million which is included in Becoming Adient costs discussed above.
(8)
 
For the six months ended March 31, 2018 and 2017, stock based compensation excludes $8 million and $7 million, respectively. These amounts are included in Becoming Adient costs discussed above.
(9)
 
Reflects $8 million of out of period adjustments, $7 million of integration-related costs associated with Futuris and $7 million of non-recurring consulting fees related to SS&M for the three months ended March 31, 2018. In addition to these items, $8 million for the U.S. tax reform impact at YFAI and $6 million of integration-related costs associated with Futuris are included in the six months ended March 31, 2018. Reflects primarily $12 million of initial funding of the Adient foundation for the six months ended March 31, 2017.


Adient plc | Form 10-Q | 25


13. Nonconsolidated Partially-Owned Affiliates

Investments in the net assets of nonconsolidated partially-owned affiliates are stated in the "Investments in partially-owned affiliates" line in the consolidated statements of financial position as of March 31, 2018 and September 30, 2017. Equity in the net income of nonconsolidated partially-owned affiliates is stated in the "Equity income" line in the consolidated statements of income for the six months ended March 31, 2018 and 2017.

Adient maintains total investments in partially-owned affiliates of $2.0 billion and $1.8 billion at March 31, 2018 and September 30, 2017, respectively. Operating information for nonconsolidated partially-owned affiliates is as follows:

 
 
Six Months Ended
March 31,
(in millions)
 
2018
 
2017 (1)
Net sales
 
$
9,273

 
$
8,503

Gross profit
 
$
1,086

 
$
1,092

Operating income
 
$
530

 
$
597

Net income
 
$
436

 
$
529

Net income attributable to the entity
 
$
405

 
$
492

(1)
 
Amounts presented have been revised from what was previously reported, as discussed in Note 1, "Basis of Presentation and Summary of Significant Accounting Policies". The engineering recovery revisions decreased operating income, net income and net income attributable to the entity by $18 million for the six months ended March 31, 2017.

14. Commitments and Contingencies

Adient accrues for potential environmental liabilities when it is probable a liability has been incurred and the amount of the liability is reasonably estimable. Reserves for environmental liabilities totaled $9 million at both March 31, 2018 and September 30, 2017. Adient reviews the status of its environmental sites on a quarterly basis and adjusts its reserves accordingly. Such potential liabilities accrued by Adient do not take into consideration possible recoveries of future insurance proceeds. They do, however, take into account the likely share other parties will bear at remediation sites. It is difficult to estimate Adient's ultimate level of liability at many remediation sites due to the large number of other parties that may be involved, the complexity of determining the relative liability among those parties, the uncertainty as to the nature and scope of the investigations and remediation to be conducted, the uncertainty in the application of law and risk assessment, the various choices and costs associated with diverse technologies that may be used in corrective actions at the sites, and the often quite lengthy periods over which eventual remediation may occur. Nevertheless, Adient does not currently believe that any claims, penalties or costs in connection with known environmental matters will have a material adverse effect on Adient's financial position, results of operations or cash flows.

Adient is involved in various lawsuits, claims and proceedings incident to the operation of its businesses, including those pertaining to product liability, casualty environmental, safety and health, intellectual property, employment, commercial and contractual matters, and various other matters. Although the outcome of any such lawsuit, claim or proceeding cannot be predicted with certainty and some may be disposed of unfavorably to Adient, it is management's opinion that none of these will have a material adverse effect on Adient's financial position, results of operations or cash flows. Costs related to such matters were not material to the periods presented.


Adient plc | Form 10-Q | 26


15. Related Party Transactions

In the ordinary course of business, Adient enters into transactions with related parties, such as equity affiliates. Such transactions consist of facility management services, the sale or purchase of goods and other arrangements. Subsequent to the separation, transactions with the former Parent and its businesses represent third-party transactions.

The following table sets forth the net sales to and purchases from related parties included in the consolidated statements of income:
 
 
Six Months Ended
March 31,
(in millions)
 
2018
 
2017
Net sales
 
$
209

 
$
217

Cost of sales
 
310

 
251

The following table sets forth the amount of accounts receivable due from and payable to related parties in the consolidated statements of financial position:
(in millions)
 
March 31, 2018
 
September 30, 2017
Accounts receivable
 
$
122

 
$
129

Accounts payable
 
132

 
104


Average receivable and payable balances with related parties remained consistent with the period end balances shown above.

Allocations from Former Parent

During fiscal 2017, allocations from the former Parent were insignificant. During fiscal 2017, Adient and the former Parent finalized the reconciliation of working capital and other accounts and the net amount due from the former Parent of $87 million was settled during the quarter ended March 31, 2017 in accordance with the separation agreement. The impact of the settlement is reflected within additional paid-in capital.


Adient plc | Form 10-Q | 27


Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Presentation of Information
Unless the context requires otherwise, references to "Adient plc" or"Adient" refer to Adient plc and its consolidated subsidiaries for periods subsequent to its separation from Johnson Controls International plc ("the former Parent") on October 31, 2016. References in this Quarterly Report on Form 10-Q to the "separation" refer to the legal separation and transfer of the former Parent's automotive seating and interiors business to Adient on October 31, 2016.
Forward-Looking Statements
This section and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as "future," "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "will," "would," "could," "can," "may," or similar terms. Forward-looking statements are not guarantees of future performance and Adient's actual results may differ significantly from the results discussed in the forward-looking statements. Adient cautions that these statements are subject to numerous important risks, uncertainties, assumptions and other factors, some of which are beyond Adient's control, that could cause Adient’s actual results to differ materially from those expressed or implied by such forward-looking statements, including, among others, risks related to: the ability of Adient Aerospace to successfully implement its strategic initiatives or realize the expected benefits of the joint venture, the impact of tax reform legislation through the Tax Cuts and Jobs Act, uncertainties in U.S. administrative policy regarding trade agreements and international trade relations, the ability of Adient to meet debt service requirements, the availability and terms of financing, general economic and business conditions, the strength of the U.S. or other economies, automotive vehicle production levels, mix and schedules, energy and commodity prices, the availability of raw materials and component products, currency exchange rates, and cancellation of or changes to commercial arrangements. Additional information regarding these and other risks related to Adient’s business that could cause actual results to differ materially from what is contained in the forward-looking statements is included in the section entitled "Risk Factors," contained in Item Part I, Item 1A of the which are incorporated herein by reference. The following discussion should be read in conjunction with Adient's Annual Report on Form 10-K (the “Form 10-K”) for the year ended September 30, 2017 filed with the U.S. Securities and Exchange Commission (the "SEC"). The following discussion should be read in conjunction with the Form 10-K and the consolidated financial statements and notes thereto included elsewhere in this Form 10-Q. All information presented herein is based on the Adient's fiscal calendar. Unless otherwise stated, references to particular years, quarters, months or periods refer to Adient's fiscal years ended in September and the associated quarters, months and periods of those fiscal years. Adient assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Separation from the former Parent
On October 31, 2016, Adient became an independent company as a result of the separation of the automotive seating and interiors business from Johnson Controls. Adient was incorporated under the laws of Ireland in fiscal 2016 for the purpose of holding these businesses. Adient's ordinary shares began trading "regular-way" under the ticker symbol "ADNT" on the New York Stock Exchange on October 31, 2016. Upon becoming an independent company, the capital structure of Adient consisted of 500 million authorized ordinary shares and 100 million authorized preferred shares (par value of $0.001 per ordinary and preferred share). The number of Adient ordinary shares issued on October 31, 2016 was 93,671,810.
Overview
Adient is the world's largest automotive seating supplier* with relationships with the largest global auto manufacturers. Adient's technologies extend into virtually every area of automotive seating solutions, including complete seating systems, frames, mechanisms, foam, head restraints, armrests, trim covers and fabrics. Adient is an independent seat supplier with global scale and the capability to design, develop, engineer, manufacture and deliver complete seat systems and components in every major automotive producing region in the world. Adient also participates in the automotive interiors market primarily through its 30% equity interest in our global automotive interiors joint venture in China, Yanfeng Global Automotive Interior Systems Co., Ltd. (YFAI).
*
Based on production volumes. Source: IHS Automotive

Adient plc | Form 10-Q | 28


Adient designs, manufactures and markets a full range of seating systems and components for passenger cars, commercial vehicles and light trucks, including vans, pick-up trucks and sport/crossover utility vehicles. Adient also supplies high performance seating systems to the commercial trucking and international motorsports industry through its award winning RECARO brand of products. Adient operates approximately 238 wholly- and majority-owned manufacturing or assembly facilities, with operations in 34 countries. Additionally, Adient has partially-owned affiliates in China, Asia, Europe and North America.
During the second quarter of fiscal 2018, Adient changed its reportable segments to Seating, Seat Structures and Mechanisms ("SS&M"), and Interiors. As a result, the prior period presentation of reportable segments has been recast to conform to the current segment reporting structure. Refer to Note 12 , " Segment Information " for additional information on Adient's reportable segments.
Seating
The Seating segment produces complete seat systems for automotive and other mobility applications, as well as certain components of complete seat systems, such as foam, trim and fabric.
Seat Structures and Mechanism ("SS&M")
The SS&M segment produces seat structures and mechanisms for inclusion in complete seat systems that are produced by Adient or others.

Interiors

The Interiors segment, derived from Adient's global automotive interiors joint ventures, produces instrument panels, floor consoles, door panels, overhead consoles, cockpit systems, decorative trim and other products.

Global Automotive Industry

Adient conducts its business in the automotive industry, which is highly competitive and sensitive to economic conditions. In the second quarter of fiscal 2018, South America experienced growth while Europe and Asia remained flat and production in North America and China saw decreases due to varying economic, political and social factors. During the first six months of fiscal 2018, South America experienced growth while Europe remained flat and production in North America and Asia saw decreases due to varying economic, political and social factors.

Light vehicle production levels by geographic region are provided below:
 
 
Light Vehicle Production
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(units in millions)
 
2018
 
Change
 
2017
 
2018
 
Change
 
2017
Global
 
23.7
 
-0.8%
 
23.9
 
48.5
 
-0.6%
 
48.8
North America
 
4.4
 
-2.2%
 
4.5
 
8.5
 
-2.3%
 
8.7
South America
 
0.8
 
14.3%
 
0.7
 
1.7
 
6.3%
 
1.6
Europe
 
6.1
 
—%
 
6.1
 
12.1
 
—%
 
12.1
China
 
6.7
 
-2.9%
 
6.9
 
15.1
 
-0.7%
 
15.2
Asia, excluding China, and Other
 
5.7
 
—%
 
5.7
 
11.1
 
-0.9%
 
11.2
 
 
 
 
 
 
 
 
 
 
 
 
 
Source: IHS Automotive, March 2018
 
 
 
 
 
 
 
 
 
 
 
 

Financial Results Summary
Significant aspects of Adient's financial results for the second quarter of fiscal 2018 include the following:
•
Adient recorded net sales of $4,596 million for the second quarter of fiscal 2018, representing an increase of $395 million when compared to the second quarter of fiscal 2017. Adient recorded net sales of $8,800 million for the first six months of fiscal 2018, representing an increase of $573 million when compared to the first six months of fiscal 2017. The increase in net sales for all periods is primarily due to the impact of the Futuris acquisition, the consolidation of a China affiliate and the favorable impact of foreign currency, partially offset by lower volumes in North America.

Adient plc | Form 10-Q | 29


•
Gross profit was $284 million , or 6% of net sales, for the second quarter of fiscal 2018 compared to $379 million , or 9% of net sales, for the second quarter of fiscal 2017. Gross profit was $486 million , or 6% of net sales, for the first six months of fiscal 2018 compared to $729 million , or 9% of net sales, for the first six months of fiscal 2017. Profitability, including gross profit as a percentage of net sales, was lower primarily due to continued launch inefficiencies, premium freight, higher commodity prices, steel supply constraints and cost of customer interruptions related to SS&M along with lower volumes in North America, partially offset by the impact of the Futuris acquisition and the consolidation of a China affiliate.
•
Equity income was $85 million for the second quarter of fiscal 2018, which is $4 million  lower compared to the second quarter of fiscal 2017. Equity income was $181 million for the first six months of fiscal 2018, which is $2 million  lower compared to the first six months of fiscal 2017. The decreases during fiscal 2018 were primarily due to lower results from YFAI due to the first quarter impact of U.S tax reform of $8 million and lower operating margins, partially offset by higher profits at Seating affiliates.
•
Net loss attributable to Adient was $168 million for the second quarter of fiscal 2018, compared to $190 million of net income attributable to Adient for the second quarter of fiscal 2017. The net loss in the second quarter of fiscal 2018 is primarily attributable to the net-of-tax goodwill impairment charge of $279 million related to SS&M and overall lower levels of profitability as discussed above. Net loss attributable to Adient was $384 million for the first six months of fiscal 2018, compared to $332 million of net income attributable to Adient for the first six months of fiscal 2017. The net loss for the first six months of fiscal 2018 is primarily attributable to the net-of-tax goodwill impairment charge of $279 million related to SS&M, lower levels of profitability as discussed above and to a current year tax charge of $258 million related to the impact of U.S. tax reform legislation.

Adient plc | Form 10-Q | 30


Consolidated Results of Operations
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
Change
 
2017 (1)
 
2018
 
Change
 
2017 (1)
Net sales
 
$
4,596

 
9%
 
$
4,201

 
$
8,800

 
7%
 
$
8,227

Cost of sales
 
4,312

 
13%
 
3,822

 
8,314

 
11%
 
7,498

Gross profit
 
284

 
-25%
 
379

 
486

 
-33%
 
729

Selling, general and administrative expenses
 
188

 
6%
 
178

 
384

 
-3%
 
395

Restructuring and impairment costs
 
315

 
*
 
6

 
315

 
*
 
6

Equity income
 
85

 
-4%
 
89

 
181

 
-1%
 
183

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

 
(32
)
 
*
 
511

Net financing charges
 
37

 
12%
 
33

 
70

 
3%
 
68

Income (loss) before income taxes
 
(171
)
 
*
 
251

 
(102
)
 
*
 
443

Income tax provision (benefit)
 
(28
)
 
*
 
37

 
237

 
*
 
65

Net income (loss)
 
(143
)
 
*
 
214

 
(339
)
 
*
 
378

Income (loss) attributable to noncontrolling interests
 
25

 
4%
 
24

 
45

 
-2%
 
46

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

 
$
(384
)
 
*
 
$
332

 
 
 
 
 
(1) As disclosed in the fiscal 2017 Annual Report on Form 10-K, prior year amounts have been revised to correct for misstatements as described in Note 1 , " Basis of Presentation and Summary of Significant Accounting Policies " in the accompanying notes to the consolidated financial statements.

* Measure not meaningful
Net Sales
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
Change
 
2017
 
2018
 
Change
 
2017
Net sales
 
$
4,596

 
9%
 
$
4,201

 
$
8,800

 
7%
 
$
8,227

Net sales increased by $395 million , or 9% , in the second quarter of fiscal 2018 as compared to the second quarter of fiscal 2017 primarily due to the impact of acquisitions including Futuris and the consolidation of a China affiliate of $234 million and the favorable foreign currency impact of $285 million, partially offset by lower volumes in North America resulting from capital constraints prior to 2016 and the winddown of certain plants and related expiring programs along with other economic factors. Refer to the segment analysis below for a discussion of segment net sales.
Net sales increased by $573 million , or 7% , in the first six months of fiscal 2018 as compared to the first six months of fiscal 2017 primarily due to the impact of acquisitions including Futuris and the consolidation of a China affiliate of $469 million and the favorable foreign currency impact of $412 million, partially offset by lower volumes in North America resulting from capital constraints prior to 2016 and the winddown of certain plants and related expiring programs along with other economic factors. Refer to the segment analysis below for a discussion of segment net sales.

Adient plc | Form 10-Q | 31


Cost of Sales / Gross Profit
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
Change
 
2017
 
2018
 
Change
 
2017
Cost of sales
 
4,312

 
13%
 
3,822

 
8,314

 
11%
 
7,498

Gross profit
 
284

 
-25%
 
379

 
486

 
-33%
 
729

% of sales
 
6.2
%
 
 
 
9.0
%
 
5.5
%
 
 
 
8.9
%
Cost of sales increased by $490 million , or 13% , in the second quarter of fiscal 2018 as compared to the second quarter of fiscal 2017 primarily as a result of the impact of acquisitions including Futuris and the consolidation of a China affiliate of $212 million and the unfavorable foreign currency impact of $255 million . Gross profit decreased by $95 million , or 25% in the second quarter of fiscal 2018 as compared to the second quarter of fiscal 2017 primarily due to continued inefficiencies within the SS&M segment, partially offset by the impact of acquisitions including Futuris and the consolidation of a China affiliate. Refer to the segment analysis below for a discussion of segment profitability.
Cost of sales increased by $816 million , or 11% , in the first six months of fiscal 2018 as compared to the first six months of fiscal 2017 primarily as a result of the impact of acquisitions including Futuris and the consolidation of a China affiliate of $418 million and the unfavorable foreign currency impact of $375 million . Gross profit decreased by $243 million , or 33% in the first six months of fiscal 2018 as compared to the first six months of fiscal 2017 primarily due to continued inefficiencies within the SS&M segment, partially offset by the impact of acquisitions including Futuris and the consolidation of a China affiliate. Refer to the segment analysis below for a discussion of segment profitability.
Selling, General and Administrative Expenses
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
Change
 
2017
 
2018
 
Change
 
2017
Selling, general and administrative expenses
 
188

 
6%
 
178

 
384

 
-3%
 
395

% of sales
 
4.1
%
 
 
 
4.2
%
 
4.4
%
 
 
 
4.8
%
Selling, general and administrative expenses (SG&A) increased by $10 million , or 6% , in the second quarter of fiscal 2018 compared to the second quarter of fiscal 2017. SG&A for the second quarter of fiscal 2018 was unfavorably impacted by $27 million of growth investments to support new business wins, the impact of acquisitions including Futuris and the consolidation of a China affiliate of $12 million and the unfavorable impact of foreign currency of $12 million, partially offset by $38 million of lower overall administrative expenses. Certain of the lower administrative expenses in the second quarter of fiscal 2018 related to reduced discretionary spending and lower incentive compensation levels are not anticipated to recur as part of the annual run rate of SG&A. Refer to the segment analysis below for a discussion of segment profitability.
SG&A decreased by $11 million , or 3% , in the first six months of fiscal 2018 compared to the first six months of fiscal 2017. SG&A for the first six months of fiscal 2018 was favorably impacted by $82 million of lower overall administrative expenses, prior year separation costs of $10 million and prior year initial funding of the Adient foundation of $12 million, partially offset by $55 million of growth investments to support new business wins, the impact of acquisitions including Futuris and the consolidation of a China affiliate of $25 million and the unfavorable impact of foreign currency of $19 million. Certain of the lower administrative expenses in the first six months of fiscal 2018 related to reduced discretionary spending and lower incentive compensation levels are not anticipated to recur as part of the annual run rate of SG&A. Refer to the segment analysis below for a discussion of segment profitability.

Adient plc | Form 10-Q | 32


Restructuring and Impairment Costs
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
Change
 
2017
 
2018
 
Change
 
2017
Restructuring and impairment costs
 
315

 
*
 
6

 
315

 
*
 
6

 
 
 
 
 
* Measure not meaningful
The increase in restructuring and impairment costs in both the second quarter and the first six months of fiscal 2018 as compared to the same periods in the previous year is primarily due to the $299 million goodwill impairment charge associated with the SS&M segment. Refer to Note 4 , " Goodwill and Other Intangible Assets ," of the notes to the consolidated financial statements for information related to the goodwill impairment charge during the second quarter of fiscal 2018. Refer to Note 10 , " Restructuring and Impairment Costs ," of the notes to the consolidated financial statements for information related to Adient's restructuring plans.
Equity Income
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
Change
 
2017
 
2018
 
Change
 
2017
Equity income
 
$
85

 
-4%
 
$
89

 
$
181

 
-1%
 
$
183

Equity income decreased in both the second quarter and the first six months of fiscal 2018 as compared to the same periods in the prior year primarily due to lower income at YFAI as a result of the first quarter impact of U.S. tax reform of $8 million along with unfavorable product mix, pricing pressures and certain operational issues, partially offset by higher volumes and improved performance at certain non-consolidated Seating affiliates in China along with the favorable impact of foreign currency. Refer to Note 13 , " Nonconsolidated Partially-Owned Affiliates ," of the notes to consolidated financial statements for further disclosure related to Adient's nonconsolidated partially-owned affiliates.
Net Financing Charge
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
Change
 
2017
 
2018
 
Change
 
2017
Net financing charges
 
$
37

 
12%
 
$
33

 
$
70

 
3%
 
$
68

The increase in net financing charges for both the second quarter and the first six months of fiscal 2018 as compared to the same periods in the prior year is primarily due to the increased use of Adient's revolving credit facility during fiscal 2018.
Income Tax Provision
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
Change
 
2017
 
2018
 
Change
 
2017
Income tax provision
 
$
(28
)
 
*
 
$
37

 
$
237

 
*
 
$
65

 
 
 
 
 
* Measure not meaningful
For the three and six months ended March 31, 2018, Adient’s income tax expense (benefit) was $(28) million equating to an effective tax rate of 16% and $237 million equating to an effective tax rate of negative 232% , respectively. The three month income tax benefit was higher than the statutory rate impact of 12.5% primarily due to the goodwill impairment charge and foreign exchange. The six month income tax expense was higher than the statutory rate impact primarily due to the charge to recognize the impact of the U.S. tax reform legislation. For the three and six months ended March 31, 2017, Adient’s effective tax rates were 15% . The effective rates were higher than the statutory rate primarily due to foreign tax rate differentials and a tax law change in Hungary, partially offset by benefits from global tax planning.


Adient plc | Form 10-Q | 33


On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed and enacted into law, and is effective for tax years beginning on or after January 1, 2018, with the exception of certain provisions. As a fiscal year taxpayer, Adient will not be subject to the majority of the provisions until fiscal year 2019, however the statutory tax rate reduction is effective January 1, 2018.

The Act reduces the U.S. corporate tax rate from 35% to 21% . Adient’s fiscal 2018 estimated annual effective tax rate reflects the benefit from the reduced rate of 24.5% resulting from the application of Internal Revenue Code, Section 15 which provides for a proration of the newly enacted rate during this fiscal year. This benefit is offset by a non-cash estimated tax expense of $150 million related to the remeasurement of Adient’s net deferred tax assets at the lower statutory rate, which could materially change, a non-cash estimated tax expense of $100 million related to recording a valuation allowance to reflect the reduced benefit Adient expects to realize as a result of being subject to the Base Erosion and Anti-avoidance Tax ("BEAT"), and an estimated cash tax expense of $8 million related to the transition tax imposed on previously untaxed earnings and profits. Adient is projecting that it will be subject to BEAT, a parallel tax system, for the foreseeable future.

In accordance with Staff Accounting Bulletin No. 118, Adient is disclosing the estimated income tax impact. Although the $258 million tax expense represents what Adient believes is a reasonable estimate of the impact of the income tax effects of the Act on its consolidated financial statements as of March 31, 2018, it is a provisional amount and will be impacted by Adient’s on-going analysis of the legislation and the full year fiscal 2018 financial results.

The Act makes broad and complex changes to the U.S. tax code, and in certain instances, lacks clarity and is subject to interpretation until additional Internal Revenue Service guidance is issued. The ultimate impact of the Act may differ from Adient's estimates due to changes in the interpretations and assumptions made as well as any forthcoming regulatory guidance. Adient will continue to assess the provisions of the Act and the anticipated impact to income tax expense and will disclose the anticipated impact on its consolidated financial statements in future financial filings. Any adjustments to these provisional amounts will be reported as a component of income tax expense (benefit) in the reporting period in which any such adjustments are determined, which will be no later than the first quarter of fiscal 2019.

Income Attributable to Noncontrolling Interests
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
Change
 
2017
 
2018
 
Change
 
2017
Income attributable to noncontrolling interests
 
$
25

 
4%
 
$
24

 
$
45

 
-2%
 
$
46


The increase in income attributable to noncontrolling interests for the second quarter of fiscal 2018 when compared to the same period in the prior year was primarily attributable to the consolidation of a Seating affiliate in China. The decrease in income attributable to noncontrolling interests for the first six months of fiscal 2018 when compared to the same period in the prior year was primarily attributable to the impact of the U.S. tax reform at one of Adient's consolidated affiliates, partially offset by the consolidation of a Seating affiliate in China.
Net Income (Loss) Attributable to Adient
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
Change
 
2017
 
2018
 
Change
 
2017
Net income (loss) attributable to Adient
 
$
(168
)
 
*
 
$
190

 
$
(384
)
 
*
 
$
332

 
 
 
 
 
* Measure not meaningful
Net loss attributable to Adient was $168 million for the second quarter of fiscal 2018 compared to $190 million of net income attributable to Adient for the second quarter of fiscal 2017. The net loss in the second quarter of fiscal 2018 is primarily attributable to the net-of-tax goodwill impairment charge of $279 million related to SS&M and lower levels of profitability.
Net loss attributable to Adient was $384 million for the first six months of fiscal 2018 compared to $332 million of net income attributable to Adient for the first six months of fiscal 2017. The net loss for the first six months of fiscal 2018 is primarily attributable to the net-of-tax goodwill impairment charge of $279 million related to SS&M, lower levels of profitability and a current year tax charge of $258 million related to the impact of U.S. tax reform legislation.

Adient plc | Form 10-Q | 34


Comprehensive Income Attributable to Adient
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
Change
 
2017
 
2018
 
Change
 
2017
Comprehensive income (loss) attributable to Adient
 
$
(26
)
 
*
 
$
289

 
$
(181
)
 
*
 
$
(18
)
 
 
 
 
 
* Measure not meaningful
Comprehensive loss attributable to Adient was $26 million for the second quarter of fiscal 2018 compared to $289 million of comprehensive income attributable to Adient for the second quarter of fiscal 2017. The comprehensive loss attributable to Adient in the second quarter of fiscal 2018 was primarily due to lower net income attributable to Adient ( $358 million ), partially offset by the favorable impact of foreign currency ( $44 million ). The year-over-year favorable foreign currency impact was primarily driven by the strengthening of the Euro and Chinese yuan against the U.S. dollar.
The increase in comprehensive loss attributable to Adient for the first six months of fiscal 2018 as compared to the first six months of fiscal 2017 was primarily due to lower net income attributable to Adient ( $716 million ), partially offset by the favorable impact of foreign currency ( $562 million ). The year-over-year favorable foreign currency impact was primarily driven by the strengthening of the Euro and Chinese yuan against the U.S. dollar.
Segment Analysis
During the second quarter of fiscal 2018, Adient restructured certain of its management organization in response to the challenges faced in the seat structures and mechanisms business, resulting in a realignment of its reportable segments. Adient also began using an adjusted EBITDA metric to assess the performance of its segments and ceased allocating certain corporate-related costs to its segments. Prior period segment information has been recast to align with this change in organizational structure, the use of a new performance metric and to reflect unallocated corporate-related costs. Pursuant to this change, Adient now operates in the following three reportable segments for financial reporting purposes:

•
Seating: This segment produces complete seat systems for automotive and other mobility applications, as well as certain components of complete seat systems, such as foam, trim and fabric.
 
 
•
Seat Structures & Mechanisms (SS&M): This segment produces seat structures and mechanisms for inclusion in complete seat systems that are produced by Adient or others.
 
 
•
Interiors: This segment, derived from Adient's global automotive interiors joint ventures, produces instrument panels, floor consoles, door panels, overhead consoles, cockpit systems, decorative trim and other products.
Adient evaluates the performance of its reportable segments using an adjusted EBITDA metric defined as income before income taxes and noncontrolling interests, excluding net financing charges, qualified restructuring and impairment costs, restructuring related-costs, incremental "Becoming Adient" costs, separation costs, net mark-to-market adjustments on pension and postretirement plans, transaction gains/losses, purchase accounting amortization, depreciation, stock-based compensation and other non-recurring items ("Adjusted EBITDA"). Also, certain corporate-related costs are not allocated to the segments. The reportable segments are consistent with how management views the markets served by Adient and reflect the financial information that is reviewed by its chief operating decision maker.


Adient plc | Form 10-Q | 35


Financial information relating to Adient's reportable segments is as follows:
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
Change
 
2017 (1)
 
2018
 
Change
 
2017 (1)
Net Sales
 
 
 
 
 
 
 
 
 
 
 
 
Seating
 
$
4,132

 
8%
 
$
3,825

 
$
7,928

 
5%
 
$
7,517

SS&M
 
797

 
5%
 
756

 
1,515

 
6%
 
1,427

Eliminations
 
(333
)
 

 
(380
)
 
(643
)
 

 
(717
)
Total net sales
 
$
4,596

 
 
 
$
4,201

 
$
8,800

 
 
 
$
8,227

 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
Change
 
2017 (1)
 
2018
 
Change
 
2017 (1)
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
Seating
 
$
411

 
3%
 
$
398

 
$
766

 
1%
 
$
762

SS&M
 
(34
)
 
*
 
40

 
(116
)
 
*
 
47

Interiors
 
12

 
-45%
 
22

 
37

 
-29%
 
52

Corporate-related costs (2)
 
(26
)
 

 
(39
)
 
(57
)
 

 
(70
)
Becoming Adient costs (3)
 
(19
)
 
 
 
(23
)
 
(38
)
 
 
 
(38
)
Separation costs (4)
 
—

 
 
 
—

 
—

 
 
 
(10
)
Restructuring and impairment costs
 
(315
)
 
 
 
(6
)
 
(315
)
 
 
 
(6
)
Purchase accounting amortization (5)
 
(18
)
 
 
 
(9
)
 
(35
)
 
 
 
(19
)
Restructuring related charges  (6)
 
(12
)
 
 
 
(10
)
 
(23
)
 
 
 
(18
)
Depreciation (7)
 
(99
)
 
 
 
(78
)
 
(193
)
 
 
 
(161
)
Stock based compensation (8)
 
(12
)
 
 
 
(11
)
 
(22
)
 
 
 
(15
)
Other items (9)
 
(22
)
 
 
 
—

 
(36
)
 
 
 
(13
)
Earnings before interest and income taxes
 
(134
)
 
 
 
284

 
(32
)
 
 
 
511

Net financing charges
 
(37
)
 
 
 
(33
)
 
(70
)
 
 
 
(68
)
Income before income taxes
 
$
(171
)
 
 
 
$
251

 
$
(102
)
 
 
 
$
443

 
 
 
 
 
* Measure not meaningful

Adient plc | Form 10-Q | 36


(1)
 
Amounts presented have been revised from what was previously reported to correctly report net sales, equity income and total assets as discussed in Note 1, "Basis of Presentation and Summary of Significant Accounting Policies".
(2)
 
Corporate-related costs not allocated to the segments include executive office, communications, corporate development, legal, finance and marketing. The lower levels of corporate-related costs in fiscal 2018 compared to fiscal 2017 primarily relate to reduced discretionary spending and lower levels of incentive compensation. These lower levels of expenses are not anticipated to recur as part of the annual run rate of SG&A.
(3)
 
Reflects incremental expenses associated with becoming an independent company, including non-cash costs of $5 million and $11 million in the three and six months ended March 31, 2018, respectively, and non-cash costs of $6 million and $19 million in the three and six months ended March 31, 2017, respectively.
(4)
 
Reflects expenses associated with and incurred prior to the separation from the former Parent.
(5)
 
Reflects amortization of intangible assets including those related to partially owned affiliates recorded within equity income.
(6)
 
Reflects restructuring related charges for costs that are directly attributable to restructuring activities, but do not meet the definition of restructuring under ASC 420.
(7)
 
For the six months ended March 31, 2018, depreciation excludes $4 million, which is included in restructuring related charges discussed above. For the six months ended March 31, 2017, depreciation excludes $3 million which is included in Becoming Adient costs discussed above.
(8)
 
For the six months ended March 31, 2018 and 2017, stock based compensation excludes $8 million and $7 million, respectively. These amounts are included in Becoming Adient costs discussed above.
(9)
 
Reflects $8 million of out of period adjustments, $7 million of integration-related costs associated with Futuris and $7 million of non-recurring consulting fees related to SS&M for the three months ended March 31, 2018. In addition to these items, $8 million for the U.S. tax reform impact at YFAI and $6 million of integration-related costs associated with Futuris are included in the six months ended March 31, 2018. Reflects primarily $12 million of initial funding of the Adient foundation for the six months ended March 31, 2017.
Seating
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
Change
 
2017
 
2018
 
Change
 
2017
Net sales
 
$
4,132

 
8%
 
$
3,825

 
$
7,928

 
5%
 
$
7,517

Adjusted EBITDA
 
$
411

 
3%
 
$
398

 
$
766

 
1%
 
$
762

Net sales increased during the second quarter of fiscal 2018 by $307 million due to the favorable impact of foreign currency ( $239 million ), the impact of acquisitions including Futuris and the consolidation of a China affiliate ( $234 million ), partially offset by lower volumes ( $150 million ) and net pricing reductions ( $16 million ). The decrease in volumes is primarily attributable to North America resulting from capital constraints prior to 2016 and the winddown of certain plants and related expiring programs along with other economic factors.
Adjusted EBITDA increased for the second quarter of fiscal 2018 by $13 million due to the impact of acquisitions including Futuris and the consolidation of a China affiliate ( $29 million ), the favorable impact of foreign currency ( $26 million ), lower administrative expenses ( $22 million ) and higher equity income ( $6 million ), partially offset by growth investments to support new business wins ( $36 million ), lower volumes in certain regions ( $20 million ), unfavorable net material economics ( $10 million ) and an increase in other operating costs ( $4 million ).
Net sales increased during the first six months of fiscal 2018 by $411 million primarily due to the impact of acquisitions including Futuris and the consolidation of a China affiliate ( $469 million ), the favorable impact of foreign currency ( $346 million ), partially offset by lower volumes ( $394 million ) and net pricing reductions ( $10 million ). The decrease in volumes is primarily attributable to North America resulting from capital constraints prior to 2016 and the winddown of certain plants and related expiring programs along with other economic factors.
Adjusted EBITDA increased for the first six months of fiscal 2018 by $4 million due to lower administrative expenses ($76 million), the impact of acquisitions including Futuris and the consolidation of a China affiliate ($55 million), the favorable impact of foreign currency ($32 million) and higher equity income ($15 million), partially offset by growth investments to support new business wins ($67 million), lower volumes in certain regions ($56 million), an increase in other operating costs ($39 million) and unfavorable net material economics ($12 million).

Adient plc | Form 10-Q | 37


SS&M
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
Change
 
2017
 
2018
 
Change
 
2017
Net sales
 
$
797

 
5%
 
$
756

 
$
1,515

 
6%
 
$
1,427

Adjusted EBITDA
 
(34
)
 
*
 
40

 
(116
)
 
*
 
47

 
 
 
 
 
* Measure not meaningful
Net sales increased during the second quarter of fiscal 2018 by $41 million primarily due to the favorable impact of foreign currency ( $46 million ) and certain material economic recoveries ( $9 million ), partially offset by net pricing reductions ( $10 million ) and lower volumes ( $4 million ).
Adjusted EBITDA decreased for the second quarter of fiscal 2018 by $74 million due to continued higher operating costs related to launch inefficiencies, premium freight, steel supply constraints and cost of customer interruptions ($58 million), the impact of net pricing reductions ($14 million), unfavorable net material economics ($9 million), growth investments to support new business wins ($5 million) and lower equity income ($3 million), partially offset by lower administrative expenses ($8 million), the favorable impact of foreign currency ($4 million) and favorable product mix ($3 million).
Net sales increased during the first six months of fiscal 2018 by $88 million primarily due to the favorable impact of foreign currency ( $66 million ) and certain material economic recoveries ( $19 million ) and higher volumes ( $13 million ), partially offset by net pricing reductions ( $10 million ).
Adjusted EBITDA decreased for the first six months of fiscal 2018 by $163 million due to higher operating costs related to launch inefficiencies, premium freight, steel supply constraints and cost of customer interruptions ($149 million), the impact of net pricing reductions ($16 million), unfavorable net material economics ($11 million) and growth investments to support new business wins ($9 million), partially offset by lower administrative expenses ($14 million), the favorable impact of foreign currency ($5 million) and favorable product mix ($3 million).
Interiors
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
(in millions)
 
2018
 
Change
 
2017
 
2018
 
Change
 
2017
Adjusted EBITDA
 
12

 
-45%
 
22

 
37

 
-29%
 
52

Adjusted EBITDA decreased for the second quarter of fiscal 2018 by $10 million , primarily attributable to unfavorable product mix, pricing pressures and certain operational issues within the YFAI business ( $12 million ), partially offset by the favorable impact of foreign currency ( $2 million ).
Adjusted EBITDA decreased for the first six months of fiscal 2018 by $15 million , primarily attributable to unfavorable product mix, pricing pressures and certain operational issues within the YFAI business ( $18 million ), partially offset by the favorable impact of foreign currency ( $3 million ).
Liquidity and Capital Resources

Adient's primary liquidity needs are to fund general business requirements, including working capital, capital expenditures, restructuring costs, share repurchases, dividends and debt service requirements. Adient's principal sources of liquidity are cash flows from operating activities, the revolving credit facility and other debt issuances, and existing cash balances. Funding also previously came from the former Parent through October 31, 2016 and as part of the separation agreement. Adient actively manages its working capital and associated cash requirements and continually seeks more effective uses of cash. Working capital is highly influenced by the timing of cash flows associated with sales and purchases, and therefore can be difficult to manage at times. See below and refer to Note 6 , " Debt and Financing Arrangements ," of the notes to consolidated financial statements for discussion of financing arrangements.

Adient plc | Form 10-Q | 38


Sources of Cash Flows
 
 
Six Months Ended
March 31,
(in millions)
 
2018
 
2017
Cash provided (used) by operating activities
 
$
(150
)
 
$
143

Cash provided (used) by investing activities
 
(269
)
 
(293
)
Cash provided (used) by financing activities
 
45

 
782

Capital expenditures
 
(266
)
 
(302
)

Operating Cash Flows

The decrease in operating cash flows is primarily attributable to overall lower levels of profitability and unfavorable changes in working capital, specifically higher levels of accounts receivable and elevated levels of restructuring and income tax spend. See also the working capital section below for further information on changes in working capital.

Investing Cash Flows

The decrease in cash used by investing activities is primarily attributable to lower levels of capital expenditures due to prior year capital investments for higher levels of program spending on product launches and other capital costs associated with becoming an independent company. See supplemental segment information below for capital expenditures by segment.

Financing Cash Flows

The decrease in cash provided by financing activities is primarily due to prior year funding by the former Parent related to working capital, capital expenditures and to establish opening cash balances for Adient at October 31, 2016.


Working capital
(in millions)
 
March 31, 2018
 
September 30, 2017
Current assets
 
$
4,596

 
$
4,499

Current liabilities
 
4,435

 
4,328

Working capital
 
$
161

 
$
171


The decrease in working capital of $10 million is primarily due to cash outlays during the first and second quarters of fiscal 2018 associated with the timing of accounts payable outflows, compensation related payouts, established restructuring plan payouts and income tax payments, offset by increases in accounts receivable as a result of higher levels of net sales.

Adient plc | Form 10-Q | 39


Supplemental Segment Information

Fiscal 2018
 
 
Three Months Ended
December 31, 2017
(in millions)
 
Seating
 
SS&M
 
Interiors
 
Reconciling Items (1)
 
Consolidated
Net sales
 
$
3,796

 
$
718

 
$
—

 
$
(310
)
 
$
4,204

Adjusted EBITDA
 
$
355

 
$
(82
)
 
$
25

 
$
(31
)
 
n/a

Equity income
 
$
72

 
$
12

 
$
25

 
$
(13
)
 
$
96

Depreciation
 
$
52

 
$
41

 
$
—

 
$
3

 
$
96

Capital expenditures
 
$
72

 
$
71

 
$
—

 
$
—

 
$
143

 
 
Three Months Ended
March 31, 2018
(in millions)
 
Seating
 
SS&M
 
Interiors
 
Reconciling Items (1)
 
Consolidated
Net sales
 
$
4,132

 
$
797

 
$
—

 
$
(333
)
 
$
4,596

Adjusted EBITDA
 
$
411

 
$
(34
)
 
$
12

 
$
(26
)
 
n/a

Equity income
 
$
72

 
$
9

 
$
12

 
$
(8
)
 
$
85

Depreciation
 
$
53

 
$
45

 
$
—

 
$
3

 
$
101

Capital expenditures
 
$
58

 
$
65

 
$
—

 
$
—

 
$
123

 
 
Six Months Ended
March 31, 2018
(in millions)
 
Seating
 
SS&M
 
Interiors
 
Reconciling Items (1)
 
Consolidated
Net sales
 
$
7,928

 
$
1,515

 
$
—

 
$
(643
)
 
$
8,800

Adjusted EBITDA
 
$
766

 
$
(116
)
 
$
37

 
$
(57
)
 
n/a

Equity income
 
$
144

 
$
21

 
$
37

 
$
(21
)
 
$
181

Depreciation
 
$
105

 
$
86

 
$
—

 
$
6

 
$
197

Capital expenditures
 
$
130

 
$
136

 
$
—

 
$
—

 
$
266


Fiscal 2017
 
 
Three Months Ended
December 31, 2016
(in millions)
 
Seating
 
SS&M
 
Interiors
 
Reconciling Items (1)
 
Consolidated
Net sales
 
$
3,692

 
$
671

 
$
—

 
$
(337
)
 
$
4,026

Adjusted EBITDA
 
$
364

 
$
7

 
$
30

 
$
(31
)
 
n/a

Equity income
 
$
60

 
$
9

 
$
30

 
$
(5
)
 
$
94

Depreciation
 
$
49

 
$
34

 
$
—

 
$
—

 
$
83

Capital expenditures
 
$
111

 
$
71

 
$
—

 
$
25

 
$
207


Adient plc | Form 10-Q | 40


 
 
Three Months Ended
March 31, 2017
(in millions)
 
Seating
 
SS&M
 
Interiors
 
Reconciling Items (1)
 
Consolidated
Net sales
 
$
3,825

 
$
756

 
$
—

 
$
(380
)
 
$
4,201

Adjusted EBITDA
 
$
398

 
$
40

 
$
22

 
$
(39
)
 
n/a

Equity income
 
$
62

 
$
10

 
$
22

 
$
(5
)
 
$
89

Depreciation
 
$
42

 
$
34

 
$
—

 
$
5

 
$
81

Capital expenditures
 
$
40

 
$
53

 
$
—

 
$
2

 
$
95

 
 
Three Months Ended
June 30, 2017
(in millions)
 
Seating
 
SS&M
 
Interiors
 
Reconciling Items (1)
 
Consolidated
Net sales
 
$
3,620

 
$
713

 
$
—

 
$
(326
)
 
$
4,007

Adjusted EBITDA
 
$
413

 
$
31

 
$
19

 
$
(39
)
 
n/a

Equity income
 
$
70

 
$
9

 
$
19

 
$
(7
)
 
$
91

Depreciation
 
$
45

 
$
37

 
$
—

 
$
2

 
$
84

Capital expenditures
 
$
59

 
$
56

 
$
—

 
$
—

 
$
115

 
 
Three Months Ended
September 30, 2017
(in millions)
 
Seating
 
SS&M
 
Interiors
 
Reconciling Items (1)
 
Consolidated
Net sales
 
$
3,605

 
$
670

 
$
—

 
$
(296
)
 
$
3,979

Adjusted EBITDA
 
$
403

 
$
4

 
$
22

 
$
(39
)
 
n/a

Equity income
 
$
72

 
$
9

 
$
22

 
$
145

 
$
248

Depreciation
 
$
47

 
$
40

 
$
—

 
$
2

 
$
89

Capital expenditures
 
$
81

 
$
79

 
$
—

 
$
—

 
$
160

 
 
Twelve Months Ended
September 30, 2017
(in millions)
 
Seating
 
SS&M
 
Interiors
 
Reconciling Items (1)
 
Consolidated
Net sales
 
$
14,742

 
$
2,810

 
$
—

 
$
(1,339
)
 
$
16,213

Adjusted EBITDA
 
$
1,578

 
$
82

 
$
93

 
$
(148
)
 
n/a

Equity income
 
$
264

 
$
37

 
$
93

 
$
128

 
$
522

Depreciation
 
$
183

 
$
145

 
$
—

 
$
9

 
$
337

Capital expenditures
 
$
291

 
$
259

 
$
—

 
$
27

 
$
577

(1) Reconciling items consist of eliminations, corporate-related costs and other reconciling items to arrive at consolidated totals.

Restructuring and Impairment Costs
Adient committed to a restructuring plan in fiscal 2018 to drive cost efficiencies and to balance our global production against demand and recorded $38 million of restructuring costs in the consolidated statement of income that was offset by underspend in prior years by $22 million. The restructuring actions related to cost reduction initiatives in the Seating and SS&M segments. The costs consist primarily of workforce reductions and plant closures. The restructuring actions are expected to be substantially complete in fiscal 2019. The restructuring plan reserve balance of $35 million at March 31, 2018 is expected to be paid in cash.

Adient committed to a restructuring plan in fiscal 2017 to drive cost efficiencies and to balance our global production against demand and recorded $46 million of restructuring and impairment costs in the consolidated statement of income. The restructuring actions related to cost reduction initiatives in the Seating segment. The costs consist primarily of workforce reductions and plant

Adient plc | Form 10-Q | 41


closures. Adient currently estimates that upon completion of the restructuring actions, the fiscal 2017 restructuring plan will reduce annual operating costs by approximately $20 million, which is primarily the result of lower cost of sales and selling, general and administrative expenses due to reduced employee-related costs, of which approximately 60%-65% will result in net savings. Adient expects that savings, net of execution costs, will partially be achieved in fiscal year 2018 and the full annual benefit of these actions is expected in fiscal 2019. The restructuring actions are expected to be substantially complete in fiscal 2020. The restructuring plan reserve balance of $30 million at March 31, 2018 is expected to be paid in cash.

Adient committed to a restructuring plan in fiscal 2016 (the "2016 Plan) to drive cost efficiencies and to balance our global production against demand and recorded $332 million of restructuring and impairment costs in the consolidated statement of income. The restructuring actions related to cost reduction initiatives primarily in the Seating and SS&M segments. The costs consist primarily of workforce reductions, plant closures and asset impairments. Adient currently estimates that upon completion of the restructuring actions, the fiscal 2016 restructuring plan will reduce annual operating costs by approximately $150 million, which is primarily the result of lower cost of sales and selling, general and administrative expenses due to reduced employee-related costs and depreciation expense, of which approximately 70%-75% will result in net savings. For fiscal 2017, the savings, net of execution costs, were approximately 30% of the expected annual operating cost reduction. Adient expects that savings, net of execution costs, will partially be achieved in fiscal years 2018-2019 and the full annual benefit of these actions is expected in fiscal 2020. The restructuring actions are expected to be substantially complete in fiscal 2020. The restructuring plan reserve balance of $98 million at March 31, 2018 is expected to be paid in cash.

Since the announcement of the 2016 Plan in fiscal 2016, Adient has experienced lower employee severance and termination benefit cash payouts than previously calculated of approximately $17 million , due to changes in cost reduction actions. The planned workforce reductions disclosed for the 2016 Plan have been updated for Adient's revised actions.
Off-Balance Sheet Arrangements and Contractual Obligations
There have been no material changes to the off-balance sheet arrangements and contractual obligations disclosed in Adient's Annual Report on Form 10-K for the year ended September 30, 2017.

Effects of Inflation and Changing Prices
The effects of inflation have not been significant to Adient's results of operations in recent years. Generally, Adient has been able to implement operating efficiencies to sufficiently offset cost increases, which have been moderate.
Critical Accounting Estimates and Policies
See "Critical Accounting Estimates and Policies" under the heading "Item 7" of Adient's Annual Report on Form 10-K for the year ended September 30, 2017, for a discussion of critical accounting estimates and policies. There have been no material changes to Adient's critical accounting estimates and policies during the three and six months ended March 31, 2018.

New Accounting Pronouncements
See Note 1 , " Basis of Presentation and Summary of Significant Accounting Policies ," of the notes to consolidated financial statements for a discussion of new accounting pronouncements.
Other Information
 
 
Not applicable.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
As of March 31, 2018, Adient had not experienced any adverse changes in market risk exposures that materially affected the quantitative and qualitative disclosures presented in Adient's Annual Report on Form 10-K for the year ended September 30, 2017.

Adient plc | Form 10-Q | 42


Item 4.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, Adient's principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act")), which are designed to provide reasonable assurance that we are able to record, process, summarize and report the information required to be disclosed in our reports under the Exchange Act within the time periods specified in SEC rules and forms. Based on their evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to management, and made known to our principal executive officer and principal financial officer, on a timely basis to ensure that it is recorded, processed, summarized and reported within the time period specified in the SEC's rules and forms.
Changes in Internal Control over Financial Reporting
There were no changes in internal control over financial reporting during the three and six months ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Adient plc | Form 10-Q | 43


PART II - OTHER INFORMATION
Item 1.
Legal Proceedings
 
 
 

Adient is involved in various lawsuits, claims and proceedings incident to the operation of its businesses, including those pertaining to product liability, product safety, environmental, safety and health, intellectual property, employment, commercial and contractual matters and various other matters. Although the outcome of any such lawsuit, claim or proceeding cannot be predicted with certainty and some may be disposed of unfavorably to Adient, it is management's opinion that none of these will have a material adverse effect on Adient's financial position, results of operations or cash flows. Adient accrues for potential liabilities in a manner consistent with accounting principles generally accepted in the United States, that is, when it is probable a liability has been incurred and the amount of the liability is reasonably estimable.

Information with respect to this item may be found in Note 14 " Commitments and Contingencies " to the consolidated financial statements in this Quarterly Report on Form 10-Q, which information is incorporated herein by reference.

Additional information on Adient's commitments and contingencies can be found in Adient's Annual Report on Form 10-K for its fiscal year ended September 30, 2017.

Item 1A.
Risk Factors
 
 
 
There are no material changes from the risk factors as previously disclosed in Adient's Annual Report on Form 10-K for the fiscal year ended September 30, 2017, except that Adient has updated the below risk factor to reflect recent developments. The following risk factor update supersedes the corresponding risk factor previously reported in Adient's Annual Report on Form 10-K for the fiscal year ended September 30, 2017.

Changes in U.S. administrative policy, including changes to existing trade agreements and any resulting changes in international trade relations, may have a material adverse effect on Adient.

As a result of changes to U.S. administrative policy, there may be changes to existing trade agreements, like the North American Free Trade Agreement (NAFTA), greater restrictions on free trade generally, and significant increases in tariffs on goods imported into the U.S., particularly tariffs on products manufactured in Mexico, among other possible changes. It remains unclear what the U.S. administration or foreign governments, including China, will or will not do with respect to tariffs, NAFTA or other international trade agreements and policies. A trade war, other governmental action related to tariffs or international trade agreements, changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where Adient currently manufactures and sells products, and any resulting negative sentiments towards the U.S. as a result of such changes, could have a material adverse effect on Adient's business, financial condition or results of operations.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
(a) Unregistered Sale of Equity Securities
None.
(b) Use of Proceeds
Not applicable.
(c) Repurchases of Equity Securities
There has been no share repurchase activity during the three months ended March 31, 2018.


Adient plc | Form 10-Q | 44


Item 3.
Defaults Upon Senior Securities
 
 
 
None.
Item 4.
Mine Safety Disclosures
 
 
 
Not applicable.
Item 5.
Other Information
 
 
 

None.


Adient plc | Form 10-Q | 45


Item 6.
Exhibit Index
 
 
 


EXHIBIT INDEX
Exhibit No.
 
Exhibit Title
4.1
 
 
 
 
4.2
 
 
 
 
4.3
 
 
 
 
4.4
 
 
 
 
4.5
 
 
 
 
4.6
 
 
 
 
10.1
 
 
 
 
31.1
 
 
 
 
31.2
 
 
 
 
32.1
 
 
 
 
101.INS
 
XBRL Instance Document
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document


Adient plc | Form 10-Q | 46


SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Adient plc
 
By:
/s/ R. Bruce McDonald
 
 
R. Bruce McDonald
 
 
Chairman and Chief Executive Officer
 
Date:
May 7, 2018
 
 
 
 
By:
/s/ Jeffrey M. Stafeil
 
 
Jeffrey M. Stafeil
 
 
Executive Vice President and Chief Financial Officer
 
Date:
May 7, 2018


Adient plc | Form 10-Q | 47

Exhibit 4.1



GUARANTOR SUPPLEMENTAL INDENTURE
THIRD SUPPLEMENTAL INDENTURE (this “ Supplemental Indenture ”), dated as of June 19, 2017, among Adient Global Holdings Ltd, a public company incorporated under the Companies (Jersey) Law 1991 under company number 121385, having its registered office at 3rd floor, 37 Esplanade, St Helier, Jersey, JE2 3QA (together with any successors thereto, the “ Issuer ”), Adient Global Holdings S.à r.l., a private limited company ( société à responsabilité limitée ) incorporated under the laws of Luxembourg , having its registered office at 6, rue Eugène Ruppert, L-2453 Luxembourg, Grand Duchy of Luxembourg and registered with the Luxembourg Trade and Companies Register under number B 214.737 (“ Adient Holdings ”), Adient Global Holdings Luxembourg S.à r.l., a private limited company ( société à responsabilité limitée ) incorporated under the laws of Luxembourg , having its registered office at 6, rue Eugène Ruppert, L-2453 Luxembourg, Grand Duchy of Luxembourg and registered with the Luxembourg Trade and Companies Register under number B 214.747 (“ Adient Luxembourg Holdings ”), Adient Holding Ireland Limited (“ Adient Ireland ” and, together with Adient Holdings and Adient Luxembourg Holdings, the “ New Guarantors ”) and U.S. Bank National Association, as trustee under the Indenture referred to below (the “ Trustee ”).
W I T N E S S E T H :
WHEREAS, the Issuer, the Trustee, Elavon Financial Services DAC, UK Branch, as Paying Agent, and Elavon Financial Services DAC, as Transfer Agent and Registrar, have heretofore executed an indenture, dated as of August 19, 2016 (as amended, supplemented or otherwise modified, the “ Indenture ”; capitalized terms used herein shall have the meanings assigned to them in the Indenture unless otherwise indicated), providing for the issuance of the Issuer’s 3.50% Senior Unsecured Notes due 2024 (the “ Securities ”), initially in the aggregate principal amount of €1,000,000,000;
WHEREAS, Section 5.01 of the Indenture provides that under certain circumstances the Issuer is required to cause Adient Holdings and Adient Luxembourg Holdings to execute and deliver to the Trustee a supplemental indenture pursuant to which such New Guarantors shall guarantee the Guaranteed Obligations;
WHEREAS, the Issuer desires to cause Adient Ireland to execute a supplemental indenture pursuant to which Adient Ireland will guarantee the Guaranteed Obligations; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee, the New Guarantors and the Issuer are authorized to execute and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantors, the Issuer and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Securities as follows:
1. Defined Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. The words “herein,” “hereof” and “hereby” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular Section hereof.

2. Agreement to Guarantee . Each of the New Guarantors hereby agrees, jointly and severally with all existing Guarantors (if any), to guarantee the Guaranteed Obligations on the terms and subject to the conditions set forth in Article 11 of the Indenture and to be bound by all other applicable provisions of the Indenture and the Securities and to perform all of the obligations and agreements of a Guarantor under the Indenture.

3. Notices . All notices or other communications to any of the New Guarantors shall be given as provided in Section 12.02 of the Indenture.

4. Ratification of Indenture; Supplemental Indentures Part of Indenture . Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby.

5. Governing Law . THIS SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.


1

Exhibit 4.1


6. Trustee Makes No Representation . The Trustee accepts the amendments of the Indenture effected by this Supplemental Indenture on the terms and conditions set forth in the Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee. Without limiting the generality of the foregoing, the Trustee shall not be responsible in any manner whatsoever for or with respect to any of the recitals or statements contained herein, all of which recitals or statements are made solely by the Issuer, or for or with respect to (i) the validity or sufficiency of this Supplemental Indenture or any of the terms or provisions hereof, (ii) the proper authorization hereof by the Issuer and the New Guarantors, in each case, by action or otherwise, (iii) the due execution hereof by the Issuer and the New Guarantors or (iv) the consequences of any amendment herein provided for, and the Trustee makes no representation with respect to any such matters.

7. Counterparts . The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Supplemental Indenture. Notwithstanding the foregoing, the exchange of copies of this Supplemental Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and may be used in lieu of the original Supplemental Indenture and signature pages for all purposes.

8. Effect of Headings . The Section headings of this Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a part of this Supplemental Indenture and shall in no way modify or restrict any of the terms or provisions hereof.

[Remainder of page intentionally left blank.]


2

Exhibit 4.1


IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to be duly executed as of the date first written above.
 
ADIENT GLOBAL HOLDINGS LTD
 
 
 
 
 
 
 
 
 
By:
 
/s/ Chris E. Schmidt
 
 
 
Name: Chris E. Schmidt
 
 
 
Title: Authorized Representative

SIGNED AND DELIVERED  as a DEED
 
for and on behalf of
 
 
 
 
 
ADIENT HOLDING IRELAND LIMITED
 
 
 
 
 
as a Guarantor
 
by its lawfully appointed attorney
 
 
 
 
 
 
 
 
/s/ Chris E. Schmidt
 
 
 
Name:  Chris E. Schmidt
 
 
 
Title:   Attorney
in the presence of:
 
 
 
 
 
 
 
/s/ David Knaff
 
 
 
Signature of witness
 
 
 
 
 
 
 
David Knaff
 
 
 
Name of witness
 
 
 
 
 
 
 
Attorney
 
 
 
Occupation of witness
 
 
 
 
 
 
 
833 E. Michigan, Milwaukee WI, USA
 
 
 
Address of witness
 
 
 


[Signature Page to EUR Supplemental Indenture]


3

Exhibit 4.1



 
ADIENT GLOBAL HOLDINGS LUXEMBOURG
S.À R.L., as a Guarantor
 
 
 
 
 
 
 
 
 
By:
 
/s/ Chris E. Schmidt
 
 
 
Name: Chris E. Schmidt
 
 
 
Title: Authroized Signatory
 
 
 
 
 
 
 
 
 
ADIENT GLOBAL HOLDINGS S.À R.L., as a Guarantor
 
 
 
 
 
 
 
 
 
By:
 
/s/ Chris E. Schmidt
 
 
 
Name: Chris E. Schmidt
 
 
 
Title: Authroized Signatory


































[Signature Page to EUR Supplemental Indenture]



4

Exhibit 4.1


 
U.S. BANK NATIONAL ASSOCIATION, as Trustee
 
 
 
 
 
 
 
 
 
By:
 
/s/ Peter M. Brennan
 
 
 
Name: Peter M. Brennan
 
 
 
Title: Vice President















































[Signature Page to EUR Supplemental Indenture]



5

Exhibit 4.2




GUARANTOR SUPPLEMENTAL INDENTURE
THIRD SUPPLEMENTAL INDENTURE (this “ Supplemental Indenture ”), dated as of June 19, 2017, among Adient Global Holdings Ltd, a public company incorporated under the Companies (Jersey) Law 1991 under company number 121385, having its registered office at 3rd floor, 37 Esplanade, St Helier, Jersey, JE2 3QA (together with any successors thereto, the “ Issuer ”), Adient Global Holdings S.à r.l., a private limited company ( société à responsabilité limitée ) incorporated under the laws of Luxembourg , having its registered office at 6, rue Eugène Ruppert, L-2453 Luxembourg, Grand Duchy of Luxembourg and registered with the Luxembourg Trade and Companies Register under number B 214.737 (“ Adient Holdings ”), Adient Global Holdings Luxembourg S.à r.l., a private limited company ( société à responsabilité limitée ) incorporated under the laws of Luxembourg , having its registered office at 6, rue Eugène Ruppert, L-2453 Luxembourg, Grand Duchy of Luxembourg and registered with the Luxembourg Trade and Companies Register under number B 214.747 (“ Adient Luxembourg Holdings ”), Adient Holding Ireland Limited (“ Adient Ireland ” and, together with Adient Holdings and Adient Luxembourg Holdings, the “ New Guarantors ”) and U.S. Bank National Association, as trustee under the Indenture referred to below (the “ Trustee ”).
W I T N E S S E T H :
WHEREAS, the Issuer and the Trustee have heretofore executed an indenture, dated as of August 19, 2016 (as amended, supplemented or otherwise modified, the “ Indenture ”; capitalized terms used herein shall have the meanings assigned to them in the Indenture unless otherwise indicated), providing for the issuance of the Issuer’s 4.875% Senior Unsecured Notes due 2026 (the “ Securities ”), initially in the aggregate principal amount of $900,000,000;
WHEREAS, Section 5.01 of the Indenture provides that under certain circumstances the Issuer is required to cause Adient Holdings and Adient Luxembourg Holdings to execute and deliver to the Trustee a supplemental indenture pursuant to which such New Guarantors shall guarantee the Guaranteed Obligations;
WHEREAS, the Issuer desires to cause Adient Ireland to execute a supplemental indenture pursuant to which Adient Ireland will guarantee the Guaranteed Obligations; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee, the New Guarantors and the Issuer are authorized to execute and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantors, the Issuer and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Securities as follows:
1. Defined Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. The words “herein,” “hereof” and “hereby” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular Section hereof.

2. Agreement to Guarantee . Each of the New Guarantors hereby agrees, jointly and severally with all existing Guarantors (if any), to guarantee the Guaranteed Obligations on the terms and subject to the conditions set forth in Article 11 of the Indenture and to be bound by all other applicable provisions of the Indenture and the Securities and to perform all of the obligations and agreements of a Guarantor under the Indenture.

3. Notices . All notices or other communications to any of the New Guarantors shall be given as provided in Section 12.02 of the Indenture.

4. Ratification of Indenture; Supplemental Indentures Part of Indenture . Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby.

5. Governing Law . THIS SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.


1

Exhibit 4.2


6. Trustee Makes No Representation . The Trustee accepts the amendments of the Indenture effected by this Supplemental Indenture on the terms and conditions set forth in the Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee. Without limiting the generality of the foregoing, the Trustee shall not be responsible in any manner whatsoever for or with respect to any of the recitals or statements contained herein, all of which recitals or statements are made solely by the Issuer, or for or with respect to (i) the validity or sufficiency of this Supplemental Indenture or any of the terms or provisions hereof, (ii) the proper authorization hereof by the Issuer and the New Guarantors, in each case, by action or otherwise, (iii) the due execution hereof by the Issuer and the New Guarantors or (iv) the consequences of any amendment herein provided for, and the Trustee makes no representation with respect to any such matters.

7. Counterparts . The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Supplemental Indenture. Notwithstanding the foregoing, the exchange of copies of this Supplemental Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and may be used in lieu of the original Supplemental Indenture and signature pages for all purposes.

8. Effect of Headings . The Section headings of this Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a part of this Supplemental Indenture and shall in no way modify or restrict any of the terms or provisions hereof.

[Remainder of page intentionally left blank.]



2

Exhibit 4.2


IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to be duly executed as of the date first written above.
 
ADIENT GLOBAL HOLDINGS LTD
 
 
 
 
 
 
 
 
 
By:
 
/s/ Chris E. Schmidt
 
 
 
Name: Chris E. Schmidt
 
 
 
Title: Authorized Representative

SIGNED AND DELIVERED  as a DEED
 
for and on behalf of
 
 
 
 
 
ADIENT HOLDING IRELAND LIMITED
 
 
 
 
 
as a Guarantor
 
by its lawfully appointed attorney
 
 
 
 
 
 
 
 
/s/ Chris E. Schmidt
 
 
 
Name: Chris E. Schmidt
 
 
 
Title: Attorney
in the presence of:
 
 
 
 
 
 
 
/s/ David Knaff
 
 
 
Signature of witness
 
 
 
 
 
 
 
David Knaff
 
 
 
Name of witness
 
 
 
 
 
 
 
Attorney
 
 
 
Occupation of witness
 
 
 
 
 
 
 
833 E. Michigan, Milwaukee, WI, USA
 
 
 
Address of witness
 
 
 


[Signature Page to USD Supplemental Indenture]


3

Exhibit 4.2




 
ADIENT GLOBAL HOLDINGS LUXEMBOURG
S.À R.L., as a Guarantor
 
 
 
 
 
 
 
 
 
By:
 
/s/ Chris E. Schmidt
 
 
 
Name: Chris E. Schmidt
 
 
 
Title: Authroized Signatory
 
 
 
 
 
 
 
 
 
ADIENT GLOBAL HOLDINGS S.À R.L., as a Guarantor
 
 
 
 
 
 
 
 
 
By:
 
/s/ Chris E. Schmidt
 
 
 
Name: Chris E. Schmidt
 
 
 
Title: Authroized Signatory


































[Signature Page to USD Supplemental Indenture]


4

Exhibit 4.2



 
U.S. BANK NATIONAL ASSOCIATION, as Trustee
 
 
 
 
 
 
 
 
 
By:
 
/s/ Peter M. Brennan
 
 
 
Name: Peter M. Brennan
 
 
 
Title: Vice President















































[Signature Page to USD Supplemental Indenture]


5

Exhibit 4.3



FOURTH SUPPLEMENTAL INDENTURE
FOURTH SUPPLEMENTAL INDENTURE (this “ Supplemental Indenture ”), dated as of January 29, 2018, among each of the undersigned Guarantors (each, a “ New Guarantor ” and collectively, the “ New Guarantors ”) and U.S. Bank National Association, as trustee under the Indenture referred to below (the “ Trustee ”).
W I T N E S S E T H :
WHEREAS, Adient Global Holdings Ltd (together with any successors thereto, the “ Issuer ”), the Trustee, Elavon Financial Services DAC, UK Branch, as Paying Agent, and Elavon Financial Services DAC, as Transfer Agent and Registrar, have heretofore executed an indenture, dated as of August 19, 2016 (as amended, supplemented or otherwise modified, the “ Indenture ”; capitalized terms used herein shall have the meanings assigned to them in the Indenture unless otherwise indicated), providing for the issuance of the Issuer’s 3.50% Senior Unsecured Notes due 2024 (the “ Securities ”), initially in the aggregate principal amount of €1,000,000,000;
WHEREAS, Sections 4.12 and 11.07 of the Indenture provide that under certain circumstances the Issuer is required to cause each New Guarantor to execute and deliver to the Trustee a supplemental indenture pursuant to which each New Guarantor shall guarantee the Guaranteed Obligations; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee, the New Guarantors, and the Issuer are authorized to execute and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantors, the Issuer, and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Securities as follows:
1. Defined Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. The words “herein,” “hereof” and “hereby” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular Section hereof.

2. Agreement to Guarantee . Each New Guarantor hereby agrees, jointly and severally with all existing Guarantors, to guarantee the Guaranteed Obligations on the terms and subject to the conditions set forth in Article 11 of the Indenture and to be bound by all other applicable provisions of the Indenture and the Securities and to perform all of the obligations and agreements of a Guarantor under the Indenture.

3. Notices . All notices or other communications to any New Guarantor shall be given as provided in Section 12.02 of the Indenture.

4. Ratification of Indenture; Supplemental Indentures Part of Indenture . Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby.

5. Governing Law . THIS SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

6. Trustee Makes No Representation . The Trustee accepts the amendments of the Indenture effected by this Supplemental Indenture on the terms and conditions set forth in the Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee. Without limiting the generality of the foregoing, the Trustee shall not be responsible in any manner whatsoever for or with respect to any of the recitals or statements contained herein, all of which recitals or statements are made solely by the Issuer, or for or with respect to (i) the validity or sufficiency of this Supplemental Indenture or any of the terms or provisions hereof, (ii) the proper authorization hereof by the Issuer and the New Guarantors, in each case, by action or otherwise, (iii) the due execution hereof by the Issuer and the New Guarantors or (iv) the consequences of any amendment herein provided for, and the Trustee makes no representation with respect to any such matters.


1

Exhibit 4.3


7. Counterparts . The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Supplemental Indenture. Notwithstanding the foregoing, the exchange of copies of this Supplemental Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and may be used in lieu of the original Supplemental Indenture and signature pages for all purposes.

8. Effect of Headings . The Section headings of this Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a part of this Supplemental Indenture and shall in no way modify or restrict any of the terms or provisions hereof.

[Remainder of page intentionally left blank.]


2

Exhibit 4.3


IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to be duly executed as of the date first written above.
 
ADIENT GLOBAL HOLDINGS LTD
 
 
 
 
 
 
 
 
 
By:
 
/s/ Steven T. Mielke
 
 
 
Name: Steven T. Mielke
 
 
 
Title: Authorized Representative
 
 
 
 
 
 
 
 
 
ADIENT LTD, as a Guarantor
 
 
 
 
 
 
 
 
 
By:
 
/s/ Steven T. Mielke
 
 
 
Name: Steven T. Mielke
 
 
 
Title: Authorised Signatory
 
 
 
 
 
 
 
 
 
ADIENT UK GLOBAL FINANCING LTD, as a Guarantor
 
 
 
 
 
 
 
 
 
By:
 
/s/ Steven T. Mielke
 
 
 
Name: Steven T. Mielke
 
 
 
Title: Authorised Representative
 
 
 
 
 
 
 
 
 
U.S. BANK NATIONAL ASSOCIATION, as Trustee
 
 
 
 
 
 
 
 
 
By:
 
/s/ Yvonne Siira
 
 
 
Name: Yvonne Siira
 
 
 
Title: Vice President













Supplemental Indenture (Euro Notes Indenture)


3

Exhibit 4.4



FOURTH SUPPLEMENTAL INDENTURE
FOURTH SUPPLEMENTAL INDENTURE (this “ Supplemental Indenture ”), dated as of January 29, 2018, among each of the undersigned Guarantors (each, a “ New Guarantor ” and collectively, the “ New Guarantors ”) and U.S. Bank National Association, as trustee under the Indenture referred to below (the “ Trustee ”).
W I T N E S S E T H :
WHEREAS, Adient Global Holdings Ltd (together with any successors thereto, the “ Issuer ”) and the Trustee have heretofore executed an indenture, dated as of August 19, 2016 (as amended, supplemented or otherwise modified, the “ Indenture ”; capitalized terms used herein shall have the meanings assigned to them in the Indenture unless otherwise indicated), providing for the issuance of the Issuer’s 4.875% Senior Unsecured Notes due 2026 (the “ Securities ”), initially in the aggregate principal amount of $900,000,000;
WHEREAS, Sections 4.12 and 11.07 of the Indenture provide that under certain circumstances the Issuer is required to cause each New Guarantor to execute and deliver to the Trustee a supplemental indenture pursuant to which each New Guarantor shall guarantee the Guaranteed Obligations; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee, the New Guarantors, and the Issuer are authorized to execute and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantors, the Issuer, and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Securities as follows:
1. Defined Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. The words “herein,” “hereof” and “hereby” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular Section hereof.

2. Agreement to Guarantee . Each New Guarantor hereby agrees, jointly and severally with all existing Guarantors, to guarantee the Guaranteed Obligations on the terms and subject to the conditions set forth in Article 11 of the Indenture and to be bound by all other applicable provisions of the Indenture and the Securities and to perform all of the obligations and agreements of a Guarantor under the Indenture.

3. Notices . All notices or other communications to any New Guarantor shall be given as provided in Section 12.02 of the Indenture.

4. Ratification of Indenture; Supplemental Indentures Part of Indenture . Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby.

5. Governing Law . THIS SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

6. Trustee Makes No Representation . The Trustee accepts the amendments of the Indenture effected by this Supplemental Indenture on the terms and conditions set forth in the Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee. Without limiting the generality of the foregoing, the Trustee shall not be responsible in any manner whatsoever for or with respect to any of the recitals or statements contained herein, all of which recitals or statements are made solely by the Issuer, or for or with respect to (i) the validity or sufficiency of this Supplemental Indenture or any of the terms or provisions hereof, (ii) the proper authorization hereof by the Issuer and the New Guarantors, in each case, by action or otherwise, (iii) the due execution hereof by the Issuer and the New Guarantors or (iv) the consequences of any amendment herein provided for, and the Trustee makes no representation with respect to any such matters.



Exhibit 4.4


7. Counterparts . The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Supplemental Indenture. Notwithstanding the foregoing, the exchange of copies of this Supplemental Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and may be used in lieu of the original Supplemental Indenture and signature pages for all purposes.

8. Effect of Headings . The Section headings of this Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a part of this Supplemental Indenture and shall in no way modify or restrict any of the terms or provisions hereof.

[Remainder of page intentionally left blank.]


2

Exhibit 4.4




IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to be duly executed as of the date first written above.
 
ADIENT GLOBAL HOLDINGS LTD
 
 
 
 
 
 
 
 
 
By:
 
/s/ Steven T. Mielke
 
 
 
Name: Steven T. Mielke
 
 
 
Title: Authorized Representative
 
 
 
 
 
 
 
 
 
ADIENT LTD, as a Guarantor
 
 
 
 
 
 
 
 
 
By:
 
/s/ Steven T. Mielke
 
 
 
Name: Steven T. Mielke
 
 
 
Title: Authorised Signatory
 
 
 
 
 
 
 
 
 
ADIENT UK GLOBAL FINANCING LTD, as a Guarantor
 
 
 
 
 
 
 
 
 
By:
 
/s/ Steven T. Mielke
 
 
 
Name: Steven T. Mielke
 
 
 
Title: Authorised Representative
 
 
 
 
 
 
 
 
 
U.S. BANK NATIONAL ASSOCIATION, as Trustee
 
 
 
 
 
 
 
 
 
By:
 
/s/ Yvonne Siira
 
 
 
Name: Yvonne Siira
 
 
 
Title: Vice President










Supplemental Indenture (Dollar Notes Indenture)



3

Exhibit 4.5




GUARANTOR SUPPLEMENTAL INDENTURE
FIFTH SUPPLEMENTAL INDENTURE (this “ Supplemental Indenture ”), dated as of March 20, 2018, among Adient Global Holdings Ltd, a public company incorporated under the Companies (Jersey) Law 1991 under company number 121385, having its registered office at 3rd floor, 37 Esplanade, St Helier, Jersey, JE2 3QA (together with any successors thereto, the “ Issuer ”), each of the undersigned additional subsidiary guarantors (the “ New Guarantors ”) and U.S. Bank National Association, as trustee under the Indenture referred to below (the “ Trustee ”).
W I T N E S S E T H :
WHEREAS, the Issuer, the Trustee, Elavon Financial Services DAC, UK Branch, as Paying Agent, and Elavon Financial Services DAC, as Transfer Agent and Registrar, have heretofore executed an indenture, dated as of August 19, 2016 (as amended, supplemented or otherwise modified, the “ Indenture ”; capitalized terms used herein shall have the meanings assigned to them in the Indenture unless otherwise indicated), providing for the issuance of the Issuer’s 3.50% Senior Unsecured Notes due 2024 (the “ Securities ”), initially in the aggregate principal amount of €1,000,000,000;
WHEREAS, Sections 4.12 and 11.07 of the Indenture provide that under certain circumstances the Issuer is required to cause each of the New Guarantors to execute and deliver to the Trustee a supplemental indenture pursuant to which each New Guarantor shall guarantee the Guaranteed Obligations; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee, the New Guarantors and the Issuer are authorized to execute and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantors, the Issuer and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Securities as follows:
1. Defined Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. The words “herein,” “hereof” and “hereby” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular Section hereof.

2. Agreement to Guarantee . Each of the New Guarantors hereby agrees, jointly and severally with all existing Guarantors, to guarantee the Guaranteed Obligations on the terms and subject to the conditions set forth in Article 11 of the Indenture and to be bound by all other applicable provisions of the Indenture and the Securities and to perform all of the obligations and agreements of a Guarantor under the Indenture.

3. Notices . All notices or other communications to any of the New Guarantors shall be given as provided in Section 12.02 of the Indenture.

4. Ratification of Indenture; Supplemental Indentures Part of Indenture . Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby.

5. Governing Law . THIS SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

6. Trustee Makes No Representation . The Trustee accepts the amendments of the Indenture effected by this Supplemental Indenture on the terms and conditions set forth in the Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee. Without limiting the generality of the foregoing, the Trustee shall not be responsible in any manner whatsoever for or with respect to any of the recitals or statements contained herein, all of which recitals or statements are made solely by the Issuer, or for or with respect to (i) the validity or sufficiency of this Supplemental Indenture or any of the terms or provisions hereof, (ii) the proper authorization hereof by the Issuer and the New Guarantors, in


1

Exhibit 4.5


each case, by action or otherwise, (iii) the due execution hereof by the Issuer and the New Guarantors or (iv) the consequences of any amendment herein provided for, and the Trustee makes no representation with respect to any such matters.

7. Counterparts . The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Supplemental Indenture. Notwithstanding the foregoing, the exchange of copies of this Supplemental Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and may be used in lieu of the original Supplemental Indenture and signature pages for all purposes.

8. Effect of Headings . The Section headings of this Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a part of this Supplemental Indenture and shall in no way modify or restrict any of the terms or provisions hereof.

[Remainder of page intentionally left blank.]


2

Exhibit 4.5


IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to be duly executed as of the date first written above.
 
ADIENT GLOBAL HOLDINGS LTD
 
 
 
 
 
 
 
 
 
By:
 
/s/ Chris E. Schmidt
 
 
 
Name: Chris E. Schmidt
 
 
 
Title: Authorized Representative
 
 
 
 
 
Futuris Global Holdings, LLC
 
 
 
 
 
Futuris Automotive (NA) Holdings Inc.
 
 
 
 
 
Futuris Automotive (NA) Intermediate Holdings Inc.
 
 
 
 
 
Futuris Automotive (US) Inc.
 
 
 
 
 
Futuris Automotive (DE) LLC
 
 
 
 
 
Futuris Automotive (CA) LLC
 
 
 
 
 
CNI Holdings, LLC
 
 
 
 
 
NICA, Inc.
 
 
 
 
 
CNI-Owosso, LLC
 
 
 
 
 
CNI-Duluth, LLC
 
 
 
 
 
CNI Plastics, LLC
 
 
 
 
 
Universal Trim, Inc.
 
 
 
 
 
CNI Enterprises, Inc., each as a Guarantor
 
 
 
 
 
By:
 
/s/ Chris E. Schmidt
 
 
 
Name: Chris E. Schmidt
 
 
 
Title: Authorized Person






[Signature Page to EUR Supplemental Indenture]



3

Exhibit 4.5


 
U.S. BANK NATIONAL ASSOCIATION, as Trustee
 
 
 
 
 
 
 
 
 
By:
 
/s/ Yvonne Siira
 
 
 
Name: Yvonne Siira
 
 
 
Title: Vice President
















































[Signature Page to EUR Supplemental Indenture]


4

Exhibit 4.6



GUARANTOR SUPPLEMENTAL INDENTURE
FIFTH SUPPLEMENTAL INDENTURE (this “ Supplemental Indenture ”), dated as of March 20, 2018, among Adient Global Holdings Ltd, a public company incorporated under the Companies (Jersey) Law 1991 under company number 121385, having its registered office at 3rd floor, 37 Esplanade, St Helier, Jersey, JE2 3QA (together with any successors thereto, the “ Issuer ”), each of the undersigned additional subsidiary guarantors (the “ New Guarantors ”) and U.S. Bank National Association, as trustee under the Indenture referred to below (the “ Trustee ”).
W I T N E S S E T H :
WHEREAS, the Issuer and the Trustee have heretofore executed an indenture, dated as of August 19, 2016 (as amended, supplemented or otherwise modified, the “ Indenture ”; capitalized terms used herein shall have the meanings assigned to them in the Indenture unless otherwise indicated), providing for the issuance of the Issuer’s 4.875% Senior Unsecured Notes due 2026 (the “ Securities ”), initially in the aggregate principal amount of $900,000,000;
WHEREAS, Sections 4.12 and 11.07 of the Indenture provide that under certain circumstances the Issuer is required to cause each of the New Guarantors to execute and deliver to the Trustee a supplemental indenture pursuant to which each New Guarantor shall guarantee the Guaranteed Obligations; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee, the New Guarantors and the Issuer are authorized to execute and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantors, the Issuer and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Securities as follows:
1. Defined Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. The words “herein,” “hereof” and “hereby” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular Section hereof.

2. Agreement to Guarantee . Each of the New Guarantors hereby agrees, jointly and severally with all existing Guarantors, to guarantee the Guaranteed Obligations on the terms and subject to the conditions set forth in Article 11 of the Indenture and to be bound by all other applicable provisions of the Indenture and the Securities and to perform all of the obligations and agreements of a Guarantor under the Indenture.

3. Notices . All notices or other communications to any of the New Guarantors shall be given as provided in Section 12.02 of the Indenture.

4. Ratification of Indenture; Supplemental Indentures Part of Indenture . Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby.

5. Governing Law . THIS SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

6. Trustee Makes No Representation . The Trustee accepts the amendments of the Indenture effected by this Supplemental Indenture on the terms and conditions set forth in the Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee. Without limiting the generality of the foregoing, the Trustee shall not be responsible in any manner whatsoever for or with respect to any of the recitals or statements contained herein, all of which recitals or statements are made solely by the Issuer, or for or with respect to (i) the validity or sufficiency of this Supplemental Indenture or any of the terms or provisions hereof, (ii) the proper authorization hereof by the Issuer and the New Guarantors, in each case, by action or otherwise, (iii) the due execution hereof by the Issuer and the New Guarantors or (iv) the consequences of any amendment herein provided for, and the Trustee makes no representation with respect to any such matters.


1

Exhibit 4.6


7. Counterparts . The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Supplemental Indenture. Notwithstanding the foregoing, the exchange of copies of this Supplemental Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and may be used in lieu of the original Supplemental Indenture and signature pages for all purposes.

8. Effect of Headings . The Section headings of this Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a part of this Supplemental Indenture and shall in no way modify or restrict any of the terms or provisions hereof.

[Remainder of page intentionally left blank.]
    


2

Exhibit 4.6


IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to be duly executed as of the date first written above.
 
ADIENT GLOBAL HOLDINGS LTD
 
 
 
 
 
 
 
 
 
By:
 
/s/ Chris E. Schmidt
 
 
 
Name: Chris E. Schmidt
 
 
 
Title: Authorized Representative
 
 
 
 
 
Futuris Global Holdings, LLC
 
 
 
 
 
Futuris Automotive (NA) Holdings Inc.
 
 
 
 
 
Futuris Automotive (NA) Intermediate Holdings Inc.
 
 
 
 
 
Futuris Automotive (US) Inc.
 
 
 
 
 
Futuris Automotive (DE) LLC
 
 
 
 
 
Futuris Automotive (CA) LLC
 
 
 
 
 
CNI Holdings, LLC
 
 
 
 
 
NICA, Inc.
 
 
 
 
 
CNI-Owosso, LLC
 
 
 
 
 
CNI-Duluth, LLC
 
 
 
 
 
CNI Plastics, LLC
 
 
 
 
 
Universal Trim, Inc.
 
 
 
 
 
CNI Enterprises, Inc., each as a Guarantor
 
 
 
 
 
By:
 
/s/ Chris E. Schmidt
 
 
 
Name: Chris E. Schmidt
 
 
 
Title: Authorized Person






[Signature Page to USD Supplemental Indenture]



3

Exhibit 4.6


 
U.S. BANK NATIONAL ASSOCIATION, as Trustee
 
 
 
 
 
 
 
 
 
By:
 
/s/ Yvonne Siira
 
 
 
Name: Yvonne Siira
 
 
 
Title: Vice President
















































[Signature Page to USD Supplemental Indenture]


4

Exhibit 10.1

ADIENT US LLC
EXECUTIVE DEFERRED COMPENSATION PLAN
As Amended and Restated March 12, 2018


ARTICLE 1.
PURPOSE AND DURATION

Section 1.1. Purpose . The Adient US LLC Executive Deferred Compensation Plan (the “Plan”) permits certain employees of the Company and its Affiliates to defer amounts otherwise payable or shares deliverable under separate bonus or equity plans or programs maintained by the Company or an Affiliate.

Section 1.2. Duration . The Plan is effective on the Effective Date. The Plan shall remain in effect until terminated in accordance with Article 10.
ARTICLE 2.
DEFINITIONS AND CONSTRUCTION

Section 2.1. Definitions . Wherever used in the Plan, the following terms shall have the meanings set forth below and, where the meaning is intended, the initial letter of the word is capitalized:

(a) “Account” means the record keeping account or accounts maintained to record the interest of each Participant under the Plan. An Account is established for record keeping purposes only and not to reflect the physical segregation of assets on the Participant’s behalf, and may consist of such subaccounts or balances as the Administrator may determine to be necessary or appropriate. Effective on the Effective Date, each Participant shall have a beginning Account balance equal to the balance credited to a Participant under the Prior Plan, if any, as of immediately prior to the Effective Date.

(b) “Act” means the Securities Act of 1933, as interpreted by regulations and rules issued pursuant thereto, all as amended and in effect from time to time. Any reference to a specific provision of the Act shall be deemed to include reference to any successor provision thereto.

(c) “Administrator” means the Employee Benefits Policy Committee of Adient plc.

(d) “Affiliate” means each entity that is required to be included in the Company’s controlled group of corporations within the meaning of Code Section 414(b), or that is under common control with the Company within the meaning of Code Section 414(c); provided that for purposes of determining when a Participant has incurred a Separation from Service, the phrase “at least 50 percent” shall be used in place of the phrase “at least 80 percent” in each place that phrase appears in the regulations issued thereunder.

(e) “Beneficiary” means the person(s) or entity(ies) entitled to receive the vested balance of the Participant’s Account following the Participant’s death, as determined pursuant to Section 6.4 hereof.

(f) “Board” means the Board of Directors of Adient plc.

(g) “Code” means the Internal Revenue Code of 1986, as interpreted by regulations and rulings issued pursuant thereto, all as amended and in effect from time to time. Any reference to a specific provision of the Code shall be deemed to include reference to any successor provision thereto.

(h) “Committee” means the Compensation Committee of the Board.

(i) “Company” means Adient US LLC and its successors as provided in Article 15.

(j) “Deferrable Compensation” means the following types of compensation that may be deferred under the Plan but only to the extent the Committee (with respect to Section 16 Participants), or the Administrator (with respect to all other Participants), designates such compensation as being eligible for deferral hereunder:

(1) Annual Incentive Awards : All or a portion of a Participant’s performance cash award under the Adient plc Annual Incentive Performance Plan (or any successor plan thereto) or any other annual bonus plan maintained by Adient plc, the Company or any Affiliate. In addition, the term “Annual Incentive


Exhibit 10.1

Awards” shall include amounts payable under the Johnson Controls Annual Incentive Performance Plan for those Participants who made a deferral election with respect thereto under the Prior Plan.

(2) Long-Term Incentive Awards : All or a portion of a Participant’s performance cash award under any multi-year bonus plan maintained by Adient plc, the Company or an Affiliate. In addition, the term “Long-Term Incentive Awards” shall include amounts payable under the Johnson Controls Long-Term Incentive Performance Plan for those Participants who made a deferral election with respect thereto under the Prior Plan.

(3) Share Awards : The Shares that would have otherwise been issued to a Participant under any restricted stock or restricted stock unit (including performance share unit) award granted under an equity plan of Adient plc. In addition, the term “Shares Awards” shall include awards with respect to shares of Johnson Controls International plc for those Participants who made a deferral election with respect thereto under the Prior Plan.

(4) Other Incentive Compensation : Any other type of incentive award or compensation, including awards or compensation designated as Other Incentive Compensation under the terms of the Prior Plan as of immediately prior to the Effective Date.

(5) Base Salary : All or a portion of the Participant’s base salary.

(k) “Deferral” means the amount credited, in accordance with a Participant’s election or as required by the Plan, to the Participant’s Account in lieu of the payment in cash thereof, or the issuance of Shares with respect thereto. Deferrals include the following:

(1) Annual Incentive Deferrals : A deferral of all or a portion of a Participant’s Annual Incentive Award, as described in subsection (j)(1).

(2) Long-Term Incentive Deferrals : A deferral of all or a portion of a Participant’s long-term cash incentive award amounts, as described in subsection (j)(2).

(3) Share Deferrals : A deferral of Shares issuable under certain equity awards, as described in subsection (j)(3).

(4) Other Incentive Compensation : A deferral of any other type of Deferrable Compensation, as described in subsection (j)(4).

(5) Base Salary Deferrals : A deferral of all or a portion of the Participant’s base salary.

(l) “Effective Date” means October 31, 2016.

(m) “ERISA” means the Employee Retirement Income Security Act of 1974, as interpreted by regulations and rulings issued pursuant thereto, all as amended and in effect from time to time. Any reference to a specific provision of ERISA shall be deemed to include reference to any successor provision thereto.

(n) “Exchange Act” means the Securities Exchange Act of 1934, as interpreted by regulations and rules issued pursuant thereto, all as amended and in effect from time to time. Any reference to a specific provision of the Exchange Act shall be deemed to include reference to any successor provision thereto.

(o) “Fair Market Value” means with respect to a Share, except as otherwise provided herein, the closing sales price on the New York Stock Exchange (or such other national securities exchange that is the primary exchange on which the Shares are listed) as of 4:00 p.m. EST on the date in question (or the immediately preceding trading day if the date in question is not a trading day), and with respect to any other property, such value as is determined by the Administrator.

(p) “Investment Options” means the investment options offered under the Adient US LLC Savings and Investment (401k) Plan (excluding the Adient plc stock fund) or any successor plan thereto, the Share Unit Account, and any other alternatives made available by the Administrator, which shall be used for the purpose of measuring hypothetical investment experience attributable to a Participant’s Account.



2

Exhibit 10.1

(q) “Participant” means an employee of the Company or any Affiliate who is (i) employed in the United States and (ii) is either a Board-appointed officer or is designated for participation in the Plan by the Executive Vice President and Chief Human Resources Officer of Adient plc. Notwithstanding the foregoing, the Executive Vice President and Chief Human Resources Officer shall limit the foregoing group of eligible employees to a select group of management and highly compensated employees, as determined by him in accordance with ERISA. Where the context so requires, a Participant also means a former employee entitled to receive a benefit hereunder.

(r) “Plan Year” means the fiscal year of Adient plc.

(s) “Prior Plan” means the Johnson Controls International plc Executive Deferred Compensation Plan, as in effect immediately prior to the Effective Date.

(t) “Section 16 Participants” means Participants who are subject to the provisions of Section 16 of the Exchange Act.

(u) “Separation from Service” means a Participant’s cessation of service for the Company and all Affiliates within the meaning of Code Section 409A, including the following rules:

(1) If a Participant takes a leave of absence from the Company or an Affiliate for purposes of military leave, sick leave or other bona fide leave of absence, the Participant’s employment will be deemed to continue for the first six (6) months of the leave of absence, or if longer, for so long as the Participant’s right to reemployment is provided by either by statute or by contract; provided that if the leave of absence is due to the Participant’s medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of six (6) months or more, and such impairment causes the Participant to be unable to perform the duties of his or her position with the Company or an Affiliate or a substantially similar position of employment, then the leave period may be extended for up to a total of twenty-nine (29) months. If the period of the leave exceeds the time periods set forth above and the Participant’s right to reemployment is not provided by either statute or contract, the Participant will be considered to have incurred a Separation from Service on the first day following the end of the time periods set forth above.

(2) A Participant will be presumed to have incurred a Separation from Service when the level of bona fide services performed by the Participant for the Company and its Affiliates permanently decreases to a level equal to twenty percent (20%) or less of the average level of services performed by the Participant for the Company or its Affiliates during the immediately preceding thirty-six (36) month period (or such lesser period of service).

(3) The Participant will be presumed not to have incurred a Separation from Service while the Participant continues to provide bona fide services to the Company or an Affiliate in any capacity (whether as an employee or independent contractor) at a level that is at least fifty percent (50%) or more of the average level of services performed by the Participant for the Company or its Affiliates during the immediately preceding thirty-six (36) month period (or such lesser period of service).

(v) “Share” means an ordinary share of Adient plc, and where the context so requires, an ordinary share of Johnson Controls International plc.

(w) “Share Unit Account” means the account described in Article 5, which is deemed invested in Shares.

(x) “Share Units” means the hypothetical Shares that are credited to the Share Unit Account in accordance with Article 5.

(y) “Valuation Date” means each day when the United States financial markets are open for business, as of which the Administrator will determine the value of each Account and will make allocations to Accounts.

Section 2.2. Construction . Wherever any words are used in the masculine, they shall be construed as though they were used in the feminine in all cases where they would so apply; and wherever any words are use in the singular or the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. Titles of articles and sections are for general information only, and the Plan is not to be construed by reference to such items.


3

Exhibit 10.1


Section 2.3. Severability . In the event any provision of the Plan is held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

ARTICLE 3.
ADMINISTRATION

Section 3.1. General . The Committee shall have overall discretionary authority with respect to administration of the Plan, provided that the Administrator shall have discretionary authority and responsibility for the general operation and daily administration of the Plan and to decide claims and appeals as specified herein. If at any time the Committee shall not be in existence, then the administrative functions of the Committee shall be assumed by the Board (with the assistance of the Administrator), and any references herein to the Committee shall be deemed to include references to the Board.

Section 3.2. Authority and Responsibility . In addition to the authority specifically provided herein, the Committee and the Administrator shall have the discretionary authority to take any action or make any determination deemed necessary for the proper administration of the Plan with regard to the respective duties of each, including but not limited to the power and authority to: (a) prescribe rules and regulations for the administration of the Plan; (b) prescribe forms (including electronic forms) for use with respect to the Plan; (c) interpret and apply all of the Plan’s provisions, reconcile inconsistencies or supply omissions in the Plan’s terms; (d) make appropriate determinations, including factual determinations, and calculations; and (e) prepare all reports required by law. Any action taken by the Committee shall be controlling over any contrary action of the Administrator. The Committee and the Administrator may delegate their ministerial duties to third parties and to the extent of such delegation, references to the Committee or Administrator hereunder shall mean such delegates, if any.

Section 3.3. Decisions Binding . The Committee’s and the Administrator’s determinations shall be final and binding on all parties with an interest hereunder, unless determined by a court to be arbitrary and capricious.

Section 3.4. Procedures for Administration . The Committee’s determinations must be made by not less than a majority of its members present at the meeting (in person or otherwise) at which a quorum is present, or by written majority consent, which sets forth the action, is signed by the members of the Committee and filed with the minutes for proceedings of the Committee. A majority of the entire Committee shall constitute a quorum for the transaction of business. Service on the Committee shall constitute service as a director of the Company so that the Committee members shall be entitled to indemnification, limitation of liability and reimbursement of expenses with respect to their Committee services to the same extent that they are entitled under the Company’s limited liability agreement (or equivalent governing documents), the laws of the State of Michigan and any other applicable laws for their services as directors of the Company. The Administrator’s determinations shall be made in accordance with procedures it establishes.

Section 3.5. Restrictions to Comply with Applicable Law . All transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 under the Exchange Act. The Committee and the Administrator shall administer the Plan so that transactions under the Plan will be exempt from or comply with Section 16 of the Exchange Act, and shall have the right to restrict or rescind any transaction, or impose other rules and requirements, to the extent it deems necessary or desirable for such exemption or compliance to be met.

Section 3.6. Administrative Expenses . Costs of establishing and administering the Plan will be paid by the Company and its participating Affiliates.

ARTICLE 4.
PARTICIPATION AND DEFERRALS

Section 4.1. Effective Date . Each employee who either had an account or had a deferral election in effect under the Prior Plan as of immediately prior to the Effective Date and who is employed by the Company or one of its Affiliates on the Effective Date shall automatically be a Participant hereunder on the Effective Date.

Section 4.2. New Participants . Each employee of the Company or an Affiliate who is not described in Section 4.1 shall automatically become a Participant on the date he or she makes a deferral election under Section 4.3.

Section 4.3. Deferral Elections . A Participant may elect to defer all or part of his or her Deferrable Compensation pursuant to one or more of the following provisions, as applicable to such compensation, subject to any limitations imposed by the Committee (with respect to Participants who are Section 16 Participants) or the Administrator (with respect to all other


4

Exhibit 10.1

Participants). A Participant’s election to defer an award shall be effective only for the award to which the election relates and shall not carry over from award to award. All deferral elections shall be for a minimum of ten percent (10%) of the Deferrable Compensation to which such election applies, unless otherwise determined by the Committee (with respect to Section 16 Participants) or the Administrator (with respect to all other Participants). As of the end of the applicable election period, the Participant’s deferral election shall be irrevocable.

(a)     Calendar Year . A Participant may make a deferral election during the calendar year preceding the calendar year for which an award is made or in which base salary is paid.

(b)     Fiscal Year . A Participant may make a deferral election during the Plan Year preceding the Plan Year for which an award is made.

(c)     Forfeitable Rights . With respect to an award which is subject to a risk of forfeiture, a Participant may make a deferral election prior to or within the first thirty (30) days following the grant date; provided , the election may apply only to the portion of the award that vests on or after the first anniversary of the award grant date. This election shall be available even if the terms of the award provide that the award will vest prior to the first anniversary of the award grant date in the event of the Participant’s death, disability (as defined in Code Section 409A) or a change of control event (as defined in Code Section 409A); provided that, if the award so vests prior to the first anniversary of the grant date, then if and to the extent required by Code Section 409A, such deferral election shall be cancelled.

(d)     Initial Eligibility . A Participant may make a deferral election within the first thirty (30) days of becoming a Participant; provided such Participant has not previously been eligible for participation in any other deferred compensation plan that is required to be aggregated with this Plan for purposes of Code Section 409A. Such election shall only be effective with respect to compensation for services to be performed subsequent to the date of the election.

(e)     Performance-Based Compensation . With respect to a performance-based award, a Participant may make a deferral election within the first 180 days of the performance period for which the award is made. Notwithstanding the foregoing:

(1)    if the Company determines that an award qualifies as performance-based compensation within the meaning of Code Section 409A, the Company may specify a later election period, which in all events must end 180 days prior to the end of the performance period for such award; provided that any election made hereunder shall not be applicable to compensation that is readily ascertainable at the time of the election, or

(2)    if the Company determines that an award does not qualify as performance-based compensation within the meaning of Code Section 409A, or determines that, at the time of the election described above, the compensation payable under such award will be readily ascertainable, then the Company may specify an earlier election period consistent with the requirements of Code Section 409A.

(f)     Other Deferrals Rules . A Participant may make a deferral election at such other times not described above as may be permitted by the Company consistent with the requirements of Code Section 409A.

(g)     Automatic Elections from the Prior Plan . A Participant’s deferral election(s) under the Prior Plan that relate to bonus or equity awards made by Johnson Controls International plc prior to the Effective Date, shall automatically apply hereunder with respect to the awards to which they relate.

Section 4.4. Administration of Deferral Elections . All deferral elections must be made in the form and manner and within such time periods as the Company prescribes in order to be effective.

ARTICLE 5.
HYPOTHETICAL INVESTMENT OPTIONS

Section 5.1. Investment Election .

(a)     Investment Elections . Subject to subsection (b) and unless otherwise determined by the Administrator, amounts credited to a Participant’s Account shall reflect the investment experience of the Investment Options selected by the Participant. The Participant may make an initial investment election at the time of enrollment in the Plan in whole increments of one percent (1%).
 


5

Exhibit 10.1

In addition, the investment elections in effect for a Participant under the Prior Plan, if any, as of immediately prior to the Effective Date, shall apply to the Participant’s Account hereunder on the Effective Date, without action by the Participant; provided that a Participant’s investment election with respect to an Investment Option that is not offered under the Adient US LLC Savings and Investment (401k) Plan on the Effective Date shall be automatically changed to the default fund specified for such plan.
Subject to subsection (b), a Participant may also elect to reallocate his or her Account, and may elect to allocate any future Deferrals, among the various Investment Options in whole increments of one percent (1%) from time to time as prescribed by the Administrator. Such investment elections shall remain in effect until changed by the Participant. All investment elections shall become effective as soon as practicable after receipt of such election by the Administrator, and must be made in the form and manner and within such time periods as the Administrator prescribes in order to be effective. In the absence of an effective investment election, the Participant’s Account (to the extent the Plan does not require Deferrals to be allocated to the Share Unit Account) shall be deemed invested in the default fund specified for the Adient US LLC Savings and Investment (401k) Plan (or any successor plan thereto).
Notwithstanding the foregoing, unless otherwise determined by the Committee:
(1) Share Deferrals or Other Incentive Compensation measured in relation to a Share (including measured in relation to Shares of Johnson Controls International plc with respect to awards made prior to the Effective Date) shall be automatically invested in the Share Unit Account and may be re-allocated out of such Investment Option only after the Share Deferrals or Other Incentive Compensation are either vested or earned, subject to any additional restrictions on re-allocation as may be imposed by the Company; and

(2) Notwithstanding the above, deferrals arising from performance share units granted on and after October 1, 2018 and deferrals arising from restricted share units granted on or after October 1, 2019, shall be automatically invested in the Share Unit Account and may not be re-allocated out of such Investment Option thereafter.

(b)     Crediting of Investment Return . On each Valuation Date, the Administrator (or its designee) shall credit the deemed investment experience with respect to the selected (or required) Investment Options to each Participant’s Account. Notwithstanding anything herein to the contrary, the Company retains the right to allocate actual amounts hereunder without regard to a Participant’s request.

Section 5.2. Allocations to Investment Options . All Deferrals will be allocated to a Participant’s Account and deemed invested in an Investment Option as of the date on which the deferrals would have otherwise been paid to the Participant.
 
Section 5.3. Valuation of Share Unit Account . When any amounts are to be allocated to a Share Unit Account (whether in the form of Deferrals or amounts that are deemed re-allocated from another Investment Option), such amount shall be converted to whole and fractional Share Units, with fractional units calculated to three decimal places, by dividing the amount to be allocated by the Fair Market Value of a Share on the effective date of such allocation. If any dividends or other distributions are paid on Shares while a Participant has Share Units credited to his or her Account, such Participant shall be credited with additional Share Units equal to (a) the amount of the cash dividend paid or Fair Market Value of other property distributed on one Share, multiplied by the number of Share Units credited to the Participant’s Share Unit Account on the date the dividend is declared, and then divided by (b) the Fair Market Value of a Share on the date the dividend is paid or distributed. Any other provision of this Plan to the contrary notwithstanding, if a dividend is paid on Shares in the form of a right or rights to purchase shares of capital stock of the Company or any entity acquiring the Company, no additional Share Units shall be credited to the Participant’s Share Unit Account with respect to such dividend, but each Share Unit credited to a Participant’s Share Unit Account at the time such dividend is paid, and each Share Unit thereafter credited to the Participant’s Share Unit Account at a time when such rights are attached to Shares, shall thereafter be valued as of any point in time on the basis of the aggregate of the then Fair Market Value of one Share plus the then Fair Market Value of such right or rights then attached to one Share. The Company may set aside Shares in a rabbi trust or other similar arrangement as a means to account for the amounts owed with respect to the Share Unit Account or to satisfy its obligations to issue Shares hereunder, and in such event, the Company may provide rules different from those set forth above to account for the fact that actual Shares have been set aside with respect to all or a portion of the Share Unit Account.

With respect to Share Units credited as part of the opening balance of a Participant’s Account hereunder on the Effective Date, such Share Units shall be credited as a combination of Johnson Controls International plc shares and Adient plc shares. Thereafter, the Share Units relating to Johnson Controls International plc shares shall be allocated to a separate subaccount, which shall be subject to the terms and conditions of this Plan (including the right to receive additional Share Units with respect


6

Exhibit 10.1

to Johnson Controls International plc shares whenever a dividend is declared on Johnson Controls International plc shares), except that a Participant may only elect to re-allocate out of the subaccount relating to Johnson Controls International plc shares. For clarity, if a Participant has made a deferral election with respect to awards granted prior to the Effective Date that are settled in, or measured in relation to, Johnson Controls International plc shares, such deferred amounts shall be credited to the Share Unit Account as Adient plc share units.
In the event of any merger, share exchange, reorganization, consolidation, recapitalization, stock dividend, stock split or other change in corporate structure of Adient plc (or Johnson Controls International plc) affecting Shares, the Committee may make appropriate equitable adjustments with respect to the Share Units credited to the Share Unit Account of each Participant, including without limitation, adjusting the date as of which such units are valued and/or distributed, as the Committee determines is necessary or desirable to prevent the dilution or enlargement of the benefits intended to be provided under the Plan.
Section 5.4. Securities Law Restrictions . Notwithstanding anything to the contrary herein, all elections under Article 4 or 5 by a Participant who is subject to Section 16 of the Exchange Act are subject to review by the Administrator prior to implementation. The Administrator may restrict additional transactions, rescind transactions, or impose other rules and procedures, to the extent deemed desirable by the Administrator in order to comply with the Exchange Act, including, without limitation, application of the review and approval provisions of this Section 5.4 to Participants who are not subject to Section 16 of the Exchange Act.
 
Section 5.5. No Shareholder Rights With Respect to Share Units . Participants shall have no rights as a stockholder pertaining to Share Units credited to their Accounts, unless and until Shares are issued to the Participant hereunder.

Section 5.6. Accounts are For Record Keeping Purposes Only . Plan Accounts and the record keeping procedures described herein serve solely as a device for determining the amount of benefits accumulated by a Participant under the Plan, and shall not constitute or imply an obligation on the part of the Company or any Affiliate to fund such benefits.

ARTICLE 6.
DISTRIBUTION OF ACCOUNTS

Section 6.1. Form of Distribution . A Participant, at the time he or she makes an initial deferral election under the Plan pursuant to any provision of Article 4, shall elect the form of distribution with respect to each of the following subaccounts:

(a)    Annual Incentive Deferrals, including interest, earnings or losses thereon.

(b)    Long-Term Incentive Deferrals, including interest, earnings or losses thereon.

(c)    Share Deferrals, as adjusted for gains or losses thereon, that are held in the Participant’s Share Unit Account as of that date. Notwithstanding the foregoing, if a Participant receives a single lump sum payment of his or her vested Share Deferrals under the Plan, any Share Deferrals vesting after such payment date shall be paid in a single lump sum promptly (but not more than seventy-five (75) days) after the vesting date.

(d)    Other Incentive Compensation Deferrals, including interest, earnings or losses thereon.

(e)    Base Salary Deferrals, including interest, earnings or losses thereon.

Such election shall be made in such form and manner as the Administrator may prescribe, and shall be irrevocable. The election shall specify whether distributions shall be made in a single lump sum or from two (2) to ten (10) annual installments. In the absence of a distribution election with respect to a particular subaccount, payment shall be made in ten (10) annual installments.
Notwithstanding the foregoing, subject to Section 6.5, a Participant’s distribution elections in effect under the Prior Plan as of immediately prior to the Effective Date shall automatically apply hereunder on the Effective Date with respect to any deferrals subject to such elections. Such a Participant shall be permitted, however, to make a new distribution election for Share Deferrals that are subject to deferral elections made hereunder on and after the Effective Date.


7

Exhibit 10.1

Section 6.2. Time of Distribution . Upon a Participant’s Separation from Service for any reason, the Participant, or his or her Beneficiary in the event of his or her death, shall be entitled to payment of the amount accumulated in such Participant’s Account in cash.

Section 6.3. Manner of Distribution . The Participant’s relevant subaccounts shall be paid in the following manner:

(a)     Lump Sum . If payment is to be made in a lump sum,
 
(1)    for those Participants whose Separation from Service occurs from January 1 through June 30 of a year, payment shall be made in the first calendar quarter of the following year, and

(2)    for those Participants whose Separation from Service occurs from July 1 through December 31 of a year, payment shall be made in the third calendar quarter of the following year.

The lump sum payment shall equal the balance of the Participant’s subaccount as of the Valuation Date immediately preceding the distribution date.
(b)     Installments . If payment is to be made in annual installments, the first annual payment shall be made:

(1)    for those Participants whose Separation from Service occurs from January 1 through June 30 of a year, in the first calendar quarter of the following year, and

(2)    for those Participants whose Separation from Service occurs during the period from July 1 through December 31 of a year, in the third calendar quarter of the following year.

The amount of the first annual payment shall equal the value of 1/10 th (or 1/9 th , 1/8 th , 1/7 th , etc. depending on the number of installments elected) of the balance of the Participant’s subaccount as of the Valuation Date immediately preceding the distribution date. All subsequent annual payments shall be made on or around the anniversary of the initial payment date of each subsequent calendar year, and shall be in an amount equal to the value of 1/9 th (or 1/8 th , 1/7 th , 1/6 th , etc. depending on the number of installments elected) of the balance of the Participant’s subaccount as of the Valuation Date immediately preceding the distribution date. The final annual installment payment shall equal the then remaining balance of such subaccount as of the Valuation Date preceding such final payment date.
Notwithstanding the foregoing provisions, if the balance of a Participant’s Account as of the Valuation Date immediately preceding a distribution date is $50,000 or less, then the entire remaining balance of the Participant’s Account shall be paid in a lump sum on such distribution date.
(c)     Form of Payment . Payments under the Plan shall be made in cash, except that deferrals arising from performance share units granted on and after October 1, 2018 and deferrals arising from restricted share units granted on or after October 1, 2019, shall be paid in the form of whole Shares (and any fractional shares shall be forfeited or settled in cash). Such Shares shall be issued under the Adient plc 2016 Omnibus Incentive Plan (or such other equity plan under which the underlying deferred award was granted).

Section 6.4. Death Benefit .

(a)    In the event of the Participant’s death prior to receiving all payments due under this Article 6, the balance of the Participant’s Account shall be paid to the Participant’s Beneficiary in a lump sum in the first calendar quarter or the third calendar quarter, whichever first occurs after the Participant’s death. Notwithstanding the foregoing, if the Administrator cannot make payment at such time because the Administrator has not received all information needed to authorize such payment (such as a copy of the Participant’s death certificate), then the Administrator shall make payment to the Beneficiary as soon as practicable after it has received all information necessary to make such payment, provided that payment in all events must be made by December 31 of the year following the year of the Participant’s death in order to avoid additional taxes under Code Section 409A.
 
(b)    Each Participant may designate a Beneficiary in such form and manner and within such time periods as the Administrator may prescribe. Notwithstanding the foregoing, the beneficiary designation in effect under the Prior Plan as of immediately prior to the Effective Date, shall automatically apply for purposes of this Plan on the Effective Date. A Participant can change his or her beneficiary designation at any time, provided that each beneficiary designation shall revoke the most recent designation, and the last designation received by the Administrator while the Participant was alive shall be given effect.


8

Exhibit 10.1

If a Participant designates a Beneficiary without providing in the designation that the Beneficiary must be living at the time of distribution, the designation shall vest in the Beneficiary the distribution payable after the Participant’s death, and such distribution if not paid by the Beneficiary’s death shall be made to the Beneficiary’s estate. In the event there is no valid beneficiary designation in effect at the time of the Participant’s death, in the event the Participant’s designated Beneficiary does not survive the Participant, or in the event that the beneficiary designation provides that the Beneficiary must be living at the time of distribution and such designated Beneficiary does not survive to the distribution date, the Participant’s estate will be deemed the Beneficiary and will be entitled to receive payment. If a Participant designates his or her spouse as a beneficiary, such beneficiary designation automatically shall become null and void on the date the Administrator receives notice of the Participant’s divorce or legal separation.

Section 6.5. Special Election Provision for Participants on Effective Date. Notwithstanding anything herein to the contrary, a Participant on the Effective Date who was a participant in the Prior Plan immediately prior to the Effective Date may elect to change his or her distribution election made with respect to prior deferred compensation (including deferred compensation for which a deferral election was made under the Prior Plan, but which has not yet been credited to a subaccount hereunder) in accordance with the following: (a) such new election must be made by deadline and pursuant to such procedures as the Committee may prescribe, provided an election may not be made later than December 31, 2016, (b) such new election will be given effect only if the Participant does not incur a Separation from Service for twelve (12) months after such new election is made, and (c) such new election shall result in the deferred amounts to which they apply being distributed (or beginning to be distributed if installments are elected) on the fifth anniversary of the Participant’s Separation from Service. If a new election is filed hereunder, then the provisions of this Plan (such as the investment provisions) shall continue to apply to the relevant subaccount(s) during the 5-year redeferral period, and payments shall be made in accordance with Section 6.3, but applied by substituting the “fifth anniversary of the Separation from Service” for “Separation from Service” thereunder.
 
ARTICLE 7.
ADDITIONAL PAYMENT PROVISIONS

Section 7.1. Acceleration of Payment . Notwithstanding the foregoing:

(a)    If an amount deferred under this Plan is required to be included in income under Code Section 409A prior to the date such amount is actually distributed, a Participant shall receive a distribution, in a lump sum within ninety (90) days after the Plan fails to meet the requirements of Code Section 409A, of the amount required to be included in the Participant’s income as a result of such failure.

(b)    If an amount under the Plan is required to be immediately distributed in a lump sum under a domestic relations order within the meaning of Code Section 414(p)(1)(B), it may be distributed according to the terms of such order, provided the Participant holds the Administrator harmless with respect to such distribution. The Plan shall not distribute amounts required to be distributed under a domestic relations order other than in the limited circumstance specifically stated herein.

Section 7.2. Delay in Payment . Notwithstanding the foregoing:

(a)    If a distribution required under the terms of this Plan would jeopardize the ability of the Company or an Affiliate to continue as a going concern, the Company or the Affiliate shall not be required to make such distribution. Rather, the distribution shall be delayed until the first date that making the distribution does not jeopardize the ability of the Company or of an Affiliate to continue as a going concern. Any distribution delayed under this provision shall be treated as made on the date specified under the terms of this Plan.

(b)    If the distribution will violate the terms of Section 16(b) of the Exchange Act or other U.S. federal securities laws, or any other applicable law, then the distribution shall be delayed until the earliest date on which making the distribution will not violate such law.

ARTICLE 8.
NON-ALIENATION OF PAYMENTS

Except as specifically provided herein, benefits payable under the Plan shall not be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment, garnishment or encumbrance of any kind. Any attempt to alienate, sell, transfer, assign, pledge or otherwise encumber any such benefit payment, whether currently or thereafter payable, shall not be recognized by the Administrator or the Company. Any benefit payment due hereunder shall not in any manner be liable for or subject to the debts or liabilities of any Participant or other person entitled thereto. If any such person shall attempt to


9

Exhibit 10.1

alienate, sell, transfer, assign, pledge or encumber any benefit payments to be made to that person under the Plan or any part thereof, or if by reason of such person’s bankruptcy or other event happening at any time, such payments would devolve upon anyone else or would not be enjoyed by such person, then the Administrator, in its discretion, may terminate such person’s interest in any such benefit payment, and hold or apply it to or for the benefit of that person, the spouse, children or other dependents thereof, or any of them, in such manner as the Administrator deems proper.
ARTICLE 9.
LIMITATION OF RIGHTS

Section 9.1. No Right to Employment . Participation in this Plan, or any modifications thereof, or the payments of any benefits hereunder, shall not be construed as giving to any person any right to be retained in the service of the Company or any Affiliate, limiting in any way the right of the Company or any Affiliate to terminate such person’s employment at any time, evidencing any agreement or understanding that the Company or any Affiliate will employ such person in any particular position or any particular rate of compensation or guaranteeing such person any right to receive any other form or amount of remuneration from the Company or any Affiliate.

Section 9.2. No Right to Benefits .

(a)     Unsecured Claim . The right of a Participant or his or her Beneficiary to receive a distribution hereunder shall be an unsecured claim, and neither the Participant nor any Beneficiary shall have any rights in or against any amount credited to his or her Account or any other specific assets of the Company or an Affiliate. The right of a Participant or Beneficiary to the payment of benefits under this Plan shall not be assigned, encumbered, or transferred, except as permitted under Section 6.4(b). The rights of a Participant hereunder are exercisable during the Participant’s lifetime only by him or her or his or her guardian or legal representative.

(b)     Contractual Obligation . The Company or an Affiliate may authorize the creation of a trust or other arrangements to assist it in meeting the obligations created under the Plan, subject to the restrictions on funding such trust or arrangement imposed by Code Sections 409A(b)(2) or (3). However, any liability to any person with respect to the Plan shall be based solely upon any contractual obligations that may be created pursuant to the Plan. No obligation of the Company or an Affiliate shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company or any Affiliate. Nothing contained in this Plan and no action taken pursuant to its terms shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company or an Affiliate and any Participant or Beneficiary, or any other person.

ARTICLE 10.
AMENDMENT OR TERMINATION

Section 10.1. Amendment . The Committee may at any time amend the Plan, including but not limited to modifying the terms and conditions applicable to (or otherwise eliminating) Deferrals to be made on or after the amendment date to the extent not prohibited by Code Section 409A; provided, however, that no amendment may reduce or eliminate any vested Account balance accrued to the date of such amendment (except as such Account balance may be reduced as a result of investment losses allocable to such Account) without a Participant’s consent except as otherwise specifically provided herein; and provided further that the Board must approve any amendment that is required to be approved by the Board by any applicable law or the listing requirements of the national securities exchange upon which the ordinary shares of Adient plc are then traded. In addition, the Administrator may at any time amend the Plan to make administrative changes and changes necessary to comply with applicable law. The Company intends that amounts hereunder which are considered payable pursuant to a binding contract in effect as of November 2, 2017 shall continue to be fully deductible for purposes of Code Section 162(m).

(a)     Termination . The Committee may terminate the Plan in accordance with the following provisions. Upon termination of the Plan, any deferral elections then in effect shall be cancelled to the extent permitted by Code Section 409A. Upon termination of the Plan, the Committee may authorize the payment of all amounts accrued under the Plan in a single lump sum payment without regard to any distribution election then in effect, only in the following circumstances:

(1)    The Plan is terminated within twelve (12) months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court pursuant to 11 U.S.C. Section 503(b)(1)(A). In such event, the single lump sum payment must be distributed by the latest of: (A) the last day of the calendar year


10

Exhibit 10.1

in which the Plan termination occurs, (B) the first calendar year in which the amount is no longer subject to a substantial risk of forfeiture, or (C) the first calendar year in which payment is administratively practicable.
(2)    The Plan is terminated at any other time, provided that such termination does not occur proximate to a downturn in the financial health of the Company or an Affiliate, and all other plans required to be aggregated with this Plan under Code Section 409A are also terminated and liquidated. In such event, the single sum payment shall be paid no earlier than twelve (12) months (and no later than twenty-four (24) months) after the date of the Plan’s termination. Notwithstanding the foregoing, any payment that would otherwise be paid during the twelve (12)-month period beginning on the Plan termination date pursuant to the terms of the Plan shall be paid in accordance with such terms. In addition, the Company or any Affiliate shall be prohibited from adopting a similar arrangement within three (3) years following the date of the Plan’s termination.

ARTICLE 11.
SPECIAL RULES APPLICABLE IN THE EVENT OF A
CHANGE OF CONTROL

SECTION 11.1. Acceleration of Payments . Notwithstanding any other provision of this Plan, each Participant (or any Beneficiary thereof entitled to receive payments hereunder), including Participants (or Beneficiaries) receiving installment payments under the Plan, shall receive a lump sum payment of all amounts accumulated in such Participant’s Account within ninety (90) days following the Change of Control.

In determining the amount accumulated in a Participant’s Share Unit Account related to Shares of Adient plc, each Share Unit shall have a value equal to the higher of (a) the highest reported sales price, regular way, of such a Share on the Composite Tape for New York Stock Exchange Listed Stocks (or such other national securities exchange that is the primary exchange on which the Shares are listed) during the sixty (60)-day period prior to the date of the Change of Control and (b) if the Change of Control is the result of a transaction or series of transactions described in Section 8.2(a), the highest price per Share paid in such transaction or series of transactions.
SECTION 11.2. Definition of a Change of Control . A Change of Control means any of the following events, provided that each such event would constitute a change of control within the meaning of Code Section 409A:

(a)    The acquisition by any Person (as defined below) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty-five percent (35%) or more of either (1) the then-outstanding Shares of Adient plc (the “Outstanding Adient Ordinary Shares”) or (2) the combined voting power of the then-outstanding voting securities of Adient plc entitled to vote generally in the election of directors (the “Outstanding Adient Voting Securities ”); provided, however , that the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from Adient plc, (B) any acquisition by Adient plc, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Adient plc or any Affiliate or (D) any acquisition by any corporation pursuant to a transaction that complies with subsections (c)(1)-(3);

(b)    Any time at which individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however , that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by Adient plc’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

(c)    Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction, whether by way of scheme of arrangement or otherwise, involving Adient plc or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of Adient plc, or the acquisition of assets or shares of another entity by Adient plc or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Adient Ordinary Shares and the Outstanding Adient Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the then-outstanding common or ordinary shares and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns Adient plc or all or substantially all of Adient plc’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the


11

Exhibit 10.1

Outstanding Adient Ordinary Shares and the Outstanding Adient Voting Securities, as the case may be, (2) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of Adient plc or an Affiliate or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, thirty-five percent (35%) or more of, respectively, the then-outstanding shares of common or ordinary shares of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

(d)    Approval by the shareholders of Adient plc of a complete liquidation or dissolution of Adient plc.

For purposes hereof, the term “Person” means any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).

Section 11.3. Maximum Payment Limitation.

(a)     Limit on Payments . Except as provided in subsection (b) below, if any portion of the payments or benefits described in this Plan or under any other agreement with or plan of the Company or an Affiliate (in the aggregate, “Total Payments”), would constitute an “excess parachute payment”, then the Total Payments to be made to the Participant shall be reduced such that the value of the aggregate Total Payments that the Participant is entitled to receive shall be one dollar ($1) less than the maximum amount which the Participant may receive without becoming subject to the tax imposed by Section 4999 of the Code or which the Company may pay without loss of deduction under Section 280G(a) of the Code. The terms “excess parachute payment” and “parachute payment” shall have the meanings assigned to them in Section 280G of the Code, and such “parachute payments” shall be valued as provided therein. Present value shall be calculated in accordance with Section 280G(d)(4) of the Code. Within forty (40) days following delivery of notice by the Company to the Participant of its belief that there is a payment or benefit due the Participant which will result in an excess parachute payment, the Participant and the Company, at the Company’s expense, shall obtain the opinion (which need not be unqualified) of nationally recognized tax counsel selected by the Company’s independent auditors and acceptable to the Participant in his or her sole discretion (which may be regular outside counsel to the Company), which opinion sets forth (1) the amount of the Base Period Income, (2) the amount and present value of Total Payments and (3) the amount and present value of any excess parachute payments determined without regard to the limitations of this Section. As used in this Section, the term “Base Period Income” means an amount equal to the Participant’s “annualized includible compensation for the base period” as defined in Section 280G(d)(1) of the Code. For purposes of such opinion, the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company’s independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code, which determination shall be evidenced in a certificate of such auditors addressed to the Company and the Participant. Such opinion shall be addressed to the Company and the Participant and shall be binding upon the Company and the Participant. If such opinion determines that there would be an excess parachute payment, the payments hereunder that are includible in Total Payments or any other payment or benefit determined by such counsel to be includible in Total Payments shall be reduced or eliminated as specified by the Participant in writing delivered to the Company within thirty (30) days of his or her receipt of such opinion or, if the Participant fails to so notify the Company, then as the Company shall reasonably determine, so that under the bases of calculations set forth in such opinion there will be no excess parachute payment. If such legal counsel so requests in connection with the opinion required by this Section, the Participant and the Company shall obtain, at the Company’s expense, and the legal counsel may rely on in providing the opinion, the advice of a firm of recognized executive compensation consultants as to the reasonableness of any item of compensation to be received by the Participant. If the provisions of Sections 280G and 4999 of the Code are repealed without succession, then this Section shall be of no further force or effect.

(b)     Employment Contract Governs . The provisions of subsection (a) above shall not apply to a Participant whose employment is governed by an employment contract that provides for Total Payments in excess of the limitation described in subsection (a) above.

ARTICLE 12.
ERISA PROVISIONS

Section 12.1. Claims Procedures .

(a)     Initial Claim . If a Participant or Beneficiary (the “claimant”) believes that he or she is entitled to a benefit under the Plan that is not provided, the claimant or his or her legal representative shall file a written claim for such benefit with the Administrator within ninety (90) days of the date the payment that is in dispute should have been made. The Administrator


12

Exhibit 10.1

shall review the claim and render a decision within ninety (90) days following the receipt of the claim; provided that the Administrator may determine that an additional ninety (90)-day extension is necessary due to circumstances beyond the Administrator’s control, in which event the Administrator shall notify the claimant prior to the end of the initial period that an extension is needed, the reason therefor, and the date by which the Administrator expects to render a decision. If the claimant’s claim is denied in whole or part, the Administrator shall provide written notice to the claimant of such denial. The written notice shall include: the specific reason(s) for the denial; reference to specific Plan provisions upon which the denial is based; a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of which such material or information is necessary; and a description of the Plan’s review procedures (as set forth in subsection (b)) and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse determination upon review.

(b)     Request for Appeal . The claimant has the right to appeal the Administrator’s decision by filing a written appeal to the Administrator within sixty (60) days after the claimant’s receipt of the Administrator’s decision, although to avoid penalties under Code Section 409A, the claimant’s appeal must be filed within one hundred eighty (180) days of the date payment could have been timely made in accordance with the terms of the Plan and pursuant to Regulations promulgated under Code Section 409A. The claimant will have the opportunity, upon request and free of charge, to have reasonable access to and copies of all documents, records and other information relevant to the claimant’s appeal. The claimant may submit written comments, documents, records and other information relating to his or her claim with the appeal. The Administrator will review all comments, documents, records and other information submitted by the claimant relating to the claim, regardless of whether such information was submitted or considered in the initial claim determination. The Administrator shall make a determination on the appeal within sixty (60) days after receiving the claimant’s written appeal; provided that the Administrator may determine that an additional sixty (60)-day extension is necessary due to circumstances beyond the Administrator’s control, in which event the Administrator shall notify the claimant prior to the end of the initial period that an extension is needed, the reason therefor and the date by which the Administrator expects to render a decision. If the claimant’s appeal is denied in whole or part, the Administrator shall provide written notice to the claimant of such denial. The written notice shall include: the specific reason(s) for the denial; reference to specific Plan provisions upon which the denial is based; a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, records, and other information relevant to the claimant’s claim; and a statement of the claimant’s right to bring a civil action under section 502(a) of ERISA. If the claimant does not receive a written decision within the time period(s) described above, the appeal shall be deemed denied on the last day of such period(s).

Section 12.2. ERISA Fiduciary . For purposes of ERISA, the Committee shall be considered the named fiduciary under the Plan and the plan administrator, except with respect to claims and appeals, for which the Administrator shall be considered the named fiduciary.

ARTICLE 13.
TAX WITHHOLDING

The Company or any Affiliate shall have the right to deduct from any deferral or payment made hereunder, or from any other amount due a Participant, the amount of cash sufficient to satisfy the Company’s or Affiliate’s foreign, federal, state or local income tax withholding obligations with respect to such deferral (or vesting thereof) or payment. In addition, if prior to the date of distribution of any amount hereunder, the Federal Insurance Contributions Act (FICA) tax imposed under Code Sections 3101, 3121(a) and 3121(v)(2), where applicable, becomes due, the Participant’s Account balance shall be reduced by the amount needed to pay the Participant’s portion of such tax, plus an amount equal to the withholding taxes due under federal, state or local law resulting from the payment of such FICA tax, and an additional amount to pay the additional income tax at source on wages attributable to the pyramiding of the Code Section 3401 wages and taxes, but no greater than the aggregate of the FICA tax amount and the income tax withholding related to such FICA tax amount.
ARTICLE 14.
OFFSET

The Company or any Affiliate shall have the right to offset from any amount payable hereunder (at the time such amount would have otherwise been paid) any amount that the Participant owes to the Company or to any Affiliate without the consent of the Participant (or his or her Beneficiary, in the event of the Participant’s death).


13

Exhibit 10.1

ARTICLE 15.
SUCCESSORS

All obligations of the Company or any Affiliate under the Plan shall be binding on any successor to the Company or such Affiliate, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business and/or assets of the Company or such Affiliate.
ARTICLE 16.
DISPUTE RESOLUTION

Section 16.1. Governing Law . This Plan is intended to be a plan of deferred compensation maintained for a select group of management or highly compensated employees as that term is used in ERISA, and shall be interpreted so as to comply with the applicable requirements thereof. In all other respects, the Plan is to be construed and its validity determined according to the laws of the State of New York (without reference to conflict of law principles thereof) to the extent such laws are not preempted by federal law.

Section 16.2. Limitation on Actions . Any action or other legal proceeding under ERISA with respect to the Plan may be brought only after the claims and appeals procedures of Section 9.4 are exhausted and only within the period ending on the earlier of (a) one year after the date the claimant receives notice of a denial or deemed denial upon appeal under Section 9.4(b), or (b) the expiration of the applicable statute of limitations period under applicable federal law. Any action or other legal proceeding not adjudicated under ERISA must be arbitrated in accordance with the provisions of Section 16.3.

Section 16.3. Arbitration .

(a)     Application . Notwithstanding any employee agreement in effect between a Participant and the Company or any Affiliate, if a Participant or Beneficiary brings a claim that relates to benefits under this Plan that is not covered under ERISA, and regardless of the basis of the claim (including but not limited to, actions under Title VII, wrongful discharge, breach of employment agreement, etc.), such claim shall be settled by final binding arbitration in accordance with the rules of the American Arbitration Association (“AAA”) and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

(b)     Initiation of Action . Arbitration must be initiated by serving or mailing a written notice of the complaint to the other party. Normally, such written notice should be provided to the other party within one year (365 days) after the day the complaining party first knew or should have known of the events giving rise to the complaint. However, this time frame may be extended if the applicable statute of limitation provides for a longer period of time. If the complaint is not properly submitted within the appropriate time frame, all rights and claims that the complaining party has or may have against the other party shall be waived and void. Any notice sent to the Company shall be delivered to:
 
Office of General Counsel
Adient US LLC
49200 Halyard Drive
Plymouth, MI 48170

The notice must identify and describe the nature of all complaints asserted and the facts upon which such complaints are based. Notice will be deemed given according to the date of any postmark or the date of time of any personal delivery.

(c)     Compliance with Personnel Policies . Before proceeding to arbitration on a complaint, the Participant or Beneficiary must initiate and participate in any complaint resolution procedure identified in the Company’s or Affiliate’s personnel policies. If the claimant has not initiated the complaint resolution procedure before initiating arbitration on a complaint, the initiation of the arbitration shall be deemed to begin the complaint resolution procedure. No arbitration hearing shall be held on a complaint until any applicable Company or Affiliate complaint resolution procedure has been completed.

(d)     Rules of Arbitration . All arbitration will be conducted by a single arbitrator according to the Employment Dispute Arbitration Rules of the AAA. The arbitrator will have authority to award any remedy or relief that a court of competent jurisdiction could order or grant including, without limitation, specific performance of any obligation created under policy, the awarding of punitive damages, the issuance of any injunction, costs and attorney’s fees to the extent permitted by law, or the imposition of sanctions for abuse of the arbitration process. The arbitrator’s award must be rendered in a writing that sets forth the essential findings and conclusions on which the arbitrator’s award is based.



14

Exhibit 10.1

(e)     Representation and Costs . Each party may be represented in the arbitration by an attorney or other representative selected by the party. The Company or Affiliate shall be responsible for its own costs, the AAA filing fee and all other fees, costs and expenses of the arbitrator and AAA for administering the arbitration. The claimant shall be responsible for his or her attorney’s or representative’s fees, if any. However, if any party prevails on a statutory claim which allows the prevailing party costs and/or attorneys’ fees, the arbitrator may award costs and reasonable attorneys’ fees as provided by such statute.
(f)     Discovery; Location; Rules of Evidence . Discovery will be allowed to the same extent afforded under the Federal Rules of Civil Procedure. Arbitration will be held at a location selected by the Company. AAA rules notwithstanding, the admissibility of evidence offered at the arbitration shall be determined by the arbitrator who shall be the judge of its materiality and relevance. Legal rules of evidence will not be controlling, and the standard for admissibility of evidence will generally be whether it is the type of information that responsible people rely upon in making important decisions.

(g)     Confidentiality . The existence, content or results of any arbitration may not be disclosed by a party or arbitrator without the prior written consent of both parties. Witnesses who are not a party to the arbitration shall be excluded from the hearing except to testify.



15


Exhibit 31.1
Certification
I, R. Bruce McDonald , certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Adient plc;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d)
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5.
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and report financial information; and
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
Date:
May 7, 2018
 
 
 
 
 
By:
 
/s/ R. Bruce McDonald
 
 
 
 
R. Bruce McDonald
Chief Executive Officer






Exhibit 31.2
Certification
I, Jeffrey M. Stafeil , certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Adient plc;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d)
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5.
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and report financial information; and
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
Date:
May 7, 2018
 
 
 
 
 
By:
 
/s/ Jeffrey M. Stafeil
 
 
 
 
Jeffrey M. Stafeil
Executive Vice President and Chief Financial Officer






Exhibit 32.1
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, R. Bruce McDonald, certify, as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Adient plc on Form 10-Q for the period ended March 31, 2018 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Adient plc.
Date:
May 7, 2018
 
 
 
 
 
By:
 
/s/ R. Bruce McDonald
 
 
 
 
R. Bruce McDonald
Chief Executive Officer
I, Jeffrey M. Stafeil, certify, as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Adient plc on Form 10-Q for the period ended March 31, 2018 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Adient plc.
Date:
May 7, 2018
 
 
 
 
 
By:
 
/s/ Jeffrey M. Stafeil
 
 
 
 
Jeffrey M. Stafeil
Executive Vice President and Chief Financial Officer
A signed original of this written statement required by Section 906 has been provided to Adient plc and will be retained by Adient plc and furnished to the Securities and Exchange Commission or its staff upon request.