What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-11-22 compared with 2021-11-23 · 186 added, 204 removed, 386 unchanged (50% of the section changed)

4 unchanged sentences

The information presented herein are based on management’s perspective of Adient’s results of operations.

Adient plc | Form 10-K | 29

Forward-Looking Statements

Adient has made statements in this section and other parts of this Annual Report on Form 10-K ("Form 10-K") that are management’s perspective of forward-looking information and, therefore, are subject to risks and uncertainties.

All statements in this Form 10-K other than statements of historical fact are statements that are, or could be, deemed "forward-looking statements", within the meaning of the Private Securities Litigation Reform Act of 1995.

All statements in this Form 10-K other than statements of historical fact are statements that are, or could be, deemed "forward-looking

Adient plc | Form 10-K | 29

statements", within the meaning of the Private Securities Litigation Reform Act of 1995.

In this Form 10-K, statements regarding Adient's future financial position, sales, costs, earnings, cash flows, other measures of results of operations, capital expenditures or debt levels and plans, objectives, outlook, targets, guidance or goals are forward-looking statements.

1 unchanged sentence

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:

whether recently completed strategic transactions in China and deleveraging activities may yield additional value for shareholders at all or on the same or different terms as those described herein, the timing, benefits and outcomes of the strategic transactions in China and / or the activities relating to our capital structure, the effects of local and national economic, credit and capital market conditions on the economy in general, and other risks and uncertainties, the continued financial and operational impacts of and uncertainties relating to the COVID-19 pandemic on Adient and its customers, suppliers, joint venture partners and other parties, the ability of Adient to execute its turnaround plan, work stoppages, including due to supply chain disruptions and similar events, energy and commodity (particularly steel) prices, the availability of raw materials (including petrochemicals) and component products (including components required by our customers for the manufacture of vehicles (i.e., semiconductor chips)), automotive vehicle production levels, mix and schedules, as well as our concentration of exposure to certain automotive manufacturers, the ability of Adient to effectively launch new business at forecast and profitable levels, the ability of Adient to meet debt service requirements, the terms of future financing, the impact of tax reform legislation, uncertainties in U.S.

the Ukraine conflict and COVID lockdowns in China and their impact on regional and global economies and additional pressure on supply chains and vehicle production, the effects of local and national economic, credit and capital market conditions on the economy in general, and other risks and uncertainties, the continued financial and operational impacts of and uncertainties relating to the COVID-19 pandemic on Adient and its customers, suppliers, joint venture partners and other parties, work stoppages, including due to supply chain disruptions and similar events, energy and commodity availability and prices, the Company’s ability and timing of customer recoveries for increased input costs, the availability of raw materials and component products (including components required by our customers for the manufacture of vehicles (i.e., semiconductors)), whether deleveraging activities may yield additional value for shareholders at all or on the same or different terms as those described herein, the ability of Adient to execute its turnaround plan, automotive vehicle production levels, mix and schedules, as well as our concentration of exposure to certain automotive manufacturers, the ability of Adient to effectively launch new business at forecast and profitable levels, the ability of Adient to meet debt service requirements, the terms of future financing, the impact of tax reform legislation, uncertainties in U.S.

administrative policy regarding trade agreements, tariffs and other international trade relations, general economic and business conditions, the strength of the U.S.

or other economies, shifts in market shares among vehicles, vehicle segments or away from vehicles on which Adient has significant content, changes in consumer demand, global climate change and related emphasis on ESG matters by various stakeholders, currency exchange rates and cancellation of or changes to commercial arrangements, and the ability of Adient to identify, recruit and retain key leadership.

or other economies, shifts in market shares among vehicles, vehicle segments or away from vehicles on which Adient has significant content, changes in consumer demand, global climate change and related emphasis on ESG matters by various stakeholders, the ability of Adient to achieve its ESG-related goals, currency exchange rates and cancellation of or changes to commercial arrangements, and the ability of Adient to identify, recruit, and retain key leadership.

Potential investors and others should consider these factors in evaluating the forward-looking statements and should not place undue reliance on such statements.

14 unchanged sentences

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 operates in 208 wholly- and

Adient plc | Form 10-K | 30

majority-owned manufacturing or assembly facilities, with operations in 33 countries.

Adient operates more than 200 wholly- and majority-owned manufacturing or assembly facilities, with operations in 31 countries.

Additionally, Adient has partially-owned affiliates in China, Asia, Europe and North America.

Through its global footprint and vertical integration, Adient leverages its capabilities to drive growth in the automotive seating industry.

Adient plc | Form 10-K | 30

Adient manages its business on a geographic basis and operates in the following three reportable segments for financial reporting purposes:

5 unchanged sentences

Refer to Note 17, "Segment Information," of the notes to the consolidated financial statements for additional information on Adient's reportable segments.

Supply Chain Disruptions and Inflationary Pressures

The global automotive industry continues to experience widespread supply chain disruptions primarily related to semiconductor chip shortages.

Although Adient’s seating products are not highly dependent on semiconductor chips, Adient is directly impacted by the lower production levels at the OEM’s as a result of these supply disruptions.

Factors Affecting Adient’s Operating Environment

The global automotive industry has continued to experience unprecedented supply chain and other disruptions over the past year related to semiconductor chip shortages, hostilities in Ukraine and localized COVID-19 lockdowns in China.

These disruptions have led to unplanned downtime at Adient’s production facilities, often with very little warning, which results in operating inefficiencies and limits Adient’s ability to adequately mitigate such inefficiencies.

The automotive industry has also experienced a period of sustained price increases for commodities, primarily related to steel, and to a lesser extent petrochemicals.

Shipping costs have also sharply increased throughout the fiscal year.

These commodity and shipping cost increases may continue into the future as demand increases and supply may remain constrained, which has resulted in, and may continue to result in, increased costs for Adient that may not be, or may only be partially, offset.

Adient is also closely monitoring labor availability and wage inflationary pressures, both internally and at key vendors, to assess any impact labor shortages and wage inflation might have on Adient’s ability to perform its obligations.

Although Adient has developed and implemented strategies to mitigate the impact of higher raw material, commodity and shipping costs, these strategies (which include targeted SG&A savings through hiring freezes, delayed merit increases, suspended 401(k) matches in the U.S.

and RSU replacement awards in lieu of salary for certain executives of Adient), together with commercial negotiations with Adient's customers and suppliers, are only expected to offset a portion of the adverse impact.

The automotive industry has also experienced a period of rising input costs and potential shortages related to energy (particularly in EMEA as a result of the conflict in Ukraine), freight and commodities as well as facing an environment of unfavorable foreign currency exchange and rising interest rates.

In addition, Adient, along with the automotive industry, has experienced and continues to face wage inflationary pressures as a result of constrained labor availability, particularly in certain jurisdictions in EMEA.

COVID-19 and related variants and sub-variants, also continues to be present throughout the world, including in all global and regional markets served by Adient.

The elevated COVID-19 rates in China led to lockdowns at various times during fiscal 2022, negatively impacting the automotive production levels in that region, along with creating further supply chain disruptions.

As a result of these disruptions, new vehicle sales continue to be significantly lower than historical and previously projected pre-pandemic sales levels.

Adient believes that its current financial resources will be sufficient to fund the Company's liquidity requirements for at least the next twelve months.

Refer to the consolidated results of operations and segment analysis discussion below for additional information on the impacts of these items on Adient's results.

Also refer to Item 1A.

Risk Factors section for additional information.

On-Going Impact of COVID-19

The impact of COVID-19, and related mutations, continues to be present throughout the world, including in all global and regional markets served by Adient.

Although vaccines have been introduced that are expected to have the result of reducing the effect of COVID-19 and COVID-19 started to wane in certain geographic areas, governmental authorities continue to implement numerous measures attempting to contain and mitigate the effects of COVID-19, including travel bans and restrictions, quarantines, social distancing orders, shelter in place orders and shutdowns of non-essential activities.

Adient's manufacturing facilities are located in areas that continue to be affected by the pandemic.

As previously disclosed, beginning at the end of January 2020 and continuing through June 2020, Adient experienced the shutdown of its facilities in all geographic regions (Asia, Americas and EMEA) at various points in time.

Production finally started to resume in all regions and continued to ramp up through Adient’s fiscal fourth quarter, and as of December 31, 2020, virtually all of Adient's plants had resumed production.

Although the global automotive industry experienced increased demand for new vehicles as Adient emerged from the global shutdowns in late fiscal year 2020 and early fiscal year 2021, it is possible that, in the event of the resurgence of COVID-19, the global automotive industry will experience significantly lower demand for new vehicle sales over the long-term as a result of the global economic slowdown caused by the COVID-19 pandemic because new vehicle sales are highly dependent on strong consumer confidence and low unemployment.

As a result, new vehicle sales could be significantly lower than historical and previously projected pre-pandemic sales levels.

Adient plc | Form 10-K | 31

Throughout fiscal year 2020 and 2021 and into fiscal year 2022, Adient continues to actively monitor the threat and impacts of COVID-19.

Adient has taken, and continues to take, steps to mitigate the potential risks to the Company posed by COVID-19 and its impacts.

In addition, Adient continues to assess and update its business continuity plans in the context of this pandemic, including analyzing constraints at its customers and suppliers, particularly components and labor-related shortages, respectively.

Adient has taken precautions to help keep its workforce healthy and safe, including establishing a Global Response Team, implementing strict travel restrictions, enforcing rigorous hygiene protocols, increasing sanitization efforts at all facilities, enacting visitor restrictions, social distancing, face covering expectations, and temperature and health screenings and implementing remote working arrangements for the vast majority of Adient's employees who work outside the plants.

Adient took significant measures to reduce its overall cash burn rate (defined as net cash outflow associated with operating the company) during the shutdown, including the furlough of direct/salary plant workers, reductions of salaries in all areas of the globe and retirement benefits for U.S.

employees outside the plants, reduced/delayed capex spending to coincide with the resumption of production and effectively eliminating all discretionary spending.

In addition to the significant measures taken to reduce and contain costs, Adient took actions to provide additional liquidity, primarily including the draw down on its ABL revolving credit facility of $825 million at the end of March 2020 and the issuance of $600 million of senior secured notes due 2025 on April 20, 2020.

Adient's ability to borrow against the ABL revolving credit facility is limited to its borrowing base, which consists primarily of accounts receivable, inventory and certain cash account balances at certain Adient subsidiaries.

Adient repaid $825 million of the ABL revolving credit facility during the third and fourth quarters of fiscal 2020 and maintains $739 million of availability under the ABL revolving credit facility as of September 30, 2021.

The automotive production shutdown in fiscal 2020 also significantly impacted Adient’s daily working capital.

During the third quarter of fiscal 2020, Adient experienced significantly lower trade working capital balances (accounts receivable, inventory and accounts payable) due to the shutdown of production in the early part of the third quarter and resumption of production only toward the latter part of the quarter.

Trade working capital was favorably impacted during the early part of the third quarter but was more than offset by the unfavorable impact to trade working capital during the latter part of the quarter.

The resumption of production in the fourth quarter of fiscal 2020 had a favorable impact to trade working capital as Adient returned to a more stabilized production run rate.

Adient has also pursued, wherever it qualifies, governmental assistance.

For example, Adient deferred the employer portion of FICA until fiscal 2021 or beyond and deferred VAT payments.

Adient is seeking to take advantage of all such assistance to either defer payments to government authorities or to receive cash to help defray operating costs.

Adient cannot guarantee that it will continue to qualify for, or receive any of, the assistance that it is pursuing.

The spread of COVID-19 and the measures taken to restrain the spread of the virus have had, and may continue to have, a material negative impact on Adient's financial results and liquidity, and such negative impact may continue well beyond the containment of COVID-19 through the results of widespread use of the vaccine or otherwise.

Adient cannot assure that the assumptions used to estimate its liquidity requirements will be correct because it has never previously experienced such a widespread cessation of its operations as it experienced during fiscal year 2020, and it is unclear what the lasting impacts of the slowdown in the automotive industry will be.

In addition, the magnitude, duration, speed and potential resurgence or surges of the global pandemic are all uncertain.

Consequently, the impact of the pandemic and its myriad of effects on Adient's business, financial condition or longer-term financial or operational results remain uncertain.

Based on the actions it has taken and its current assumptions regarding the impact of COVID-19, Adient believes that its current financial resources will be sufficient to fund the company's liquidity requirements for at least the next twelve months.

Global Automotive Industry

Adient conducts its business globally in the automotive industry, which is highly competitive and sensitive to economic, political and social factors in the various regions.

During fiscal 2020, automotive production across the globe declined due to the economic slow down resulting from the COVID-19 pandemic.

During fiscal 2021, automotive production at the beginning of the year was higher in all regions, but experienced a slow down in the second half of the fiscal year due to the widespread supply chain disruptions impacting the global automotive industry.

During fiscal 2021, automotive production across the globe declined due to the economic slow down resulting from the COVID-19 pandemic and the widespread supply chain disruptions primarily due to semiconductor chip shortages.

During fiscal 2022, global light vehicle production increased 2.4% year-over-year despite on-going supply chain disruptions and despite the impact of the Russia/Ukraine conflict on production volumes in Europe in 2022.

Unplanned production stoppages by customers continue to negatively impact Adient’s results through operating inefficiencies and other surcharges.

These and other challenges will continue to exist in Adient’s operating environment in fiscal 2023.

Light vehicle production levels by geographic region are provided below:

Adient plc | Form 10-K | 32

Light Vehicle Production

7 unchanged sentences

IHS Automotive, October 2022

Adient plc | Form 10-K | 31

Financial Results Summary

Significant aspects of Adient's financial results for fiscal 2021 include the items discussed below.

The recently completed transactions in China had a significant impact on the fiscal 2021 financial results.

Significant aspects of Adient's financial results for fiscal 2022 are summarized below.

Adient's financial results for fiscal 2021 include the strategic transactions in China which had a significant impact on the fiscal 2021 financial results.

Refer to Note 3, “Acquisitions and Divestitures,” in Part II, Item 8 of this Form 10-K for more information on these transactions.

• Adient recorded net sales of $14,121 million for fiscal 2022, representing an increase of $441 million when compared to fiscal 2021.

The increase in net sales is attributable to prior year operational interruptions due to COVID-19, the favorable impact of foreign currencies and favorable material economics recoveries, partially offset by current year temporary operational interruptions and production stoppages primarily resulting from semiconductor chip shortages, and prior year divestitures primarily consisting of the fabrics businesses, and unfavorable commercial settlements.

The increase in net sales is attributable to higher overall production volumes in the Americas, operational footprint changes primarily related to the consolidation of CQADNT in China and favorable material economics recoveries, partially offset by the unfavorable impact of foreign currencies, unplanned operational interruptions and production stoppages primarily resulting from on-going supply chain disruptions, the impact of the Russia/Ukraine conflict particularly on European volumes, and the impact of localized COVID-19 lockdowns in China.

• Gross profit was $807 million, or 5.7% of net sales for fiscal 2022 compared to $826 million, or 6.0% of net sales for fiscal 2021.

Profitability, including gross profit as a percentage of net sales, was higher due to higher current year volumes primarily resulting from prior year operational interruptions due to COVID-19, current year operational improvements, a one-time gain associated with retrospective recoveries of Brazil indirect tax credits, the favorable impact of foreign currencies, and favorable commercial settlements, partially offset by temporary operational inefficiencies and premium freight caused by unplanned production stoppages resulting from semiconductor chip shortages, and unfavorable impacts of material economics, net of recoveries.

Profitability, including gross profit as a percentage of net sales, was lower due to the impact of foreign currencies, higher input costs, and inefficiencies caused by unplanned production stoppages, partially offset by operational footprint changes primarily related to the consolidation of CQADNT in China.

• Equity income was $75 million for fiscal 2022, which compares to equity income of $1,484 million for fiscal 2021.

The significant increase is primarily attributable to a $1,181 million current year gain recognized upon sales of certain of Adient’s equity interests in China as part of the 2021 Yanfeng Transaction and $33 million current year gain on the sale of SJA, favorable impact of foreign currencies, a $231 million prior year non-cash impairment of the YFAI investment as part of the 2020 Yanfeng transaction, and operational performance improvements primarily at Adient's affiliates in China.

Excluding the impacts of current year transactional gains and prior year impairments, equity income increased by $17 million.

• Net income attributable to Adient was $1,108 million for fiscal 2021, compared to a loss of $547 million for fiscal 2020.

The increased net income attributable to Adient is due to $1,214 million of one-time gains from sales of certain of Adient’s equity interests in China, higher current year volumes primarily resulting from prior year operational interruptions due to COVID-19, current year operational improvements, lower restructuring charges, a one-time gain associated with retrospective recoveries of Brazil indirect tax credits, and a $231 million prior year non-cash impairment of the YFAI investment, partially offset by operational inefficiencies and premium freight caused by unplanned production stoppages resulting from semiconductor and petrochemical shortages, higher net financing charges, and higher income tax expense primarily resulting from the withholding taxes paid in association with the 2021 Yanfeng Transaction.

The decrease is primarily attributable to one-time gains resulting from the prior year divestitures of Adient's interests in certain China joint ventures (YFAS, SJA and others) as well as the acquisition of controlling interest in CQADNT, the impact of KEIPER supply agreement modifications, and current year non-cash impairment charges recorded on certain of Adient's investments in non-consolidated affiliates in South Africa and China.

• Net loss attributable to Adient was $120 million for fiscal 2022, compared to an income of $1,108 million for fiscal 2021.

The net loss in fiscal 2022 is primarily attributable to operational inefficiencies resulting from supply chain disruptions including higher freight cost, overall higher input costs, lower overall production volumes in EMEA, and lower equity income resulting from prior year divestitures of certain affiliates in China, partially offset by the favorable impact of operational footprint changes primarily related to the consolidation of CQADNT in China, favorable material economics recoveries, lower net financing charges and lower income tax expense.

Adient plc | Form 10-K | 32

20 unchanged sentences

Net sales $ 14,121 3% $ 13,680 8% $ 12,670

Net sales increased by $1,010 million, or 8%, in fiscal 2021 primarily due to the prior year significant operational interruptions related to COVID-19 starting in the second quarter of fiscal 2020 which resulted in lower sales volumes across all regions and despite current year certain unplanned temporary production stoppages primarily resulting from semiconductor and petrochemical shortages ($786 million), favorable foreign currency impact ($273 million), favorable material economics recoveries ($83 million), and favorable commercial settlements and net pricing adjustments, partially offset by the impact of divestitures primarily related to RECARO and fabrics businesses ($156 million).

Refer to the segment analysis below for a discussion of segment net sales.

Net sales decreased by $3,856 million, or 23%, in fiscal 2020 primarily due to the significant operational interruptions related to COVID-19 starting in the second quarter of fiscal 2020 which resulted in lower sales volumes across all regions, unfavorable foreign currency impact ($217 million), and the impact of divestitures primarily related to RECARO ($115 million), partially offset by favorable commercial settlements and net pricing adjustments, including material economics, net of recoveries.

Net sales increased by $441 million, or 3%, in fiscal 2022 primarily due to operational footprint changes primarily related to the consolidation of CQADNT in China ($620 million), favorable material economics recoveries ($312 million), and higher overall production volumes despite certain unplanned production stoppages resulting from semiconductor chip shortages and other supply chain disruptions, and despite the impact of the Russia/Ukraine conflict on EMEA production volumes and localized COVID-19 lockdowns in China ($90 million), partially offset by the unfavorable impact of foreign currencies ($568 million) and lower levels of commercial settlements ($13 million).

Net sales increased by $1,010 million, or 8%, in fiscal 2021 primarily due to the significant operational interruptions related to COVID-19 which resulted in lower sales volumes across all regions in fiscal 2020 and despite certain unplanned temporary production stoppages primarily resulting from semiconductor and petrochemical shortages ($786 million), favorable foreign currency impact ($273 million), favorable material economics recoveries ($83 million), and favorable commercial settlements and net pricing adjustments, partially offset by the impact of fiscal 2020 divestitures primarily related to RECARO and fabrics businesses ($156 million).

Refer to the segment analysis below for a discussion of segment net sales.

Cost of Sales / Gross Profit

Adient plc | Form 10-K | 33

September 30,

3 unchanged sentences

% of sales 5.7 % 6.0 % 4.7 %

Adient plc | Form 10-K | 34

Cost of sales increased by $460 million, or 4%, and gross profit decreased by $19 million in fiscal 2022 as compared to fiscal 2021.

The year-over-year increase in cost of sales was due primarily to operational footprint changes related to the consolidation of CQADNT in China ($527 million), higher input costs including higher energy cost in EMEA as a result of the Russia/Ukraine conflict ($327 million), higher overall production volumes ($136 million), operational inefficiencies resulting from unplanned production stoppages including higher freight ($74 million), net impact of gains associated with retrospective recoveries of Brazil indirect tax credits ($5 million), and higher depreciation and amortization expense ($6 million), partially offset by the favorable impact of foreign currencies ($542 million), and favorable supplier pricing including the impact of a modified pricing agreement with KEIPER ($71 million).

Gross profit was unfavorably impacted by foreign currencies, higher input costs, and inefficiencies caused by unplanned production stoppages, partially offset by operational footprint changes primarily related to the consolidation of CQADNT in China.

Cost of sales increased by $776 million, or 6%, and gross profit increased by $234 million, or 40%, in fiscal 2021 as compared to fiscal 2020.

The cost of sales year-over-year increase is primarily attributable to higher sales volumes in all regions ($507 million), the unfavorable impact of foreign currencies ($258 million), higher commodity costs ($150 million), temporary operational inefficiencies including premium freight and unplanned production stoppages resulting from semiconductor and petrochemical shortages and to a lesser extent COVID-19 related costs ($165 million) and prior year non-recurring favorable benefits related to actions taken as described in the On-Going Impact of COVID-19 section above ($36 million), partially offset by the impact of prior year divestitures primarily consisting of the RECARO and fabrics businesses ($120 million), overall operational performance improvements ($106 million), favorable material margins ($76 million), and a one-time gain associated with retrospective recoveries of Brazil indirect tax credits ($38 million).

The increase in gross profit was due to higher overall volumes, the favorable impact of foreign currencies, operational performance improvements, the favorable commercial settlements and net pricing adjustments, including material economics, and the one-time gain in Brazil, partially offset by higher commodity costs, inefficiencies caused by unplanned production stoppages and certain prior year incentive compensation costs and to a lesser extent other benefits that were not expected to recur.

Refer to the segment analysis below for a discussion of segment profitability.

Cost of sales decreased by $3,647 million, or 23%, and gross profit decreased by $209 million, or 26%, in fiscal 2020 as compared to fiscal 2019.

Cost of sales were lower primarily due to the decrease in sales volumes as a result of the COVID-19 impact along with overall business performance improvements, the favorable impact of foreign currency ($195 million), and the impact of divestitures primarily related to RECARO ($97 million).

Gross profit was lower as a result of the negative impact of lower sales volume due to the COVID-19 impact, partially offset by the impact of business performance improvements including lower launch inefficiencies, and reductions in operational waste and freight along with favorable commercial settlements and net pricing adjustments.

The cost of sales year-over-year increase is primarily attributable to higher sales volumes in all regions ($507 million), the unfavorable impact of foreign currencies ($258 million), higher commodity costs ($150 million), temporary operational inefficiencies including premium freight and unplanned production stoppages resulting from semiconductor and petrochemical shortages and to a lesser extent COVID-19 related costs ($165 million) and non-recurring favorable benefits related to actions taken in fiscal 2020 to reduce the impact of COVID-19 ($36 million), partially offset by the impact of divestitures in fiscal 2020 primarily consisting of the RECARO and fabrics businesses ($120 million), overall operational performance improvements ($106 million), favorable material margins ($76 million), and a one-time gain associated with retrospective recoveries of Brazil indirect tax credits ($38 million).

The increase in gross profit was due to higher overall volumes, the favorable impact of foreign currencies, operational performance improvements, the favorable commercial settlements and net pricing adjustments, including material economics, and the one-time gain in Brazil, partially offset by higher commodity costs, and inefficiencies caused by unplanned production stoppages and certain incentive compensation costs that were not expected to recur.

Refer to the segment analysis below for a discussion of segment profitability.

4 unchanged sentences

% of sales 4.2 % 3.9 % 4.4 %

Selling, general and administrative expenses (SG&A) decreased by $21 million, or 4% in fiscal 2021 as compared to fiscal 2020.

SG&A was favorably impacted by lower overall engineering and other administrative spending ($41 million), and prior year RECARO and fabrics administrative costs ($30 million), partially offset by higher stock-based compensation costs ($21 million), prior year non-recurring favorable benefits related to actions taken as described in the On-Going Impact of COVID -19 section above ($4 million), the unfavorable impact of foreign currencies ($21 million), and higher transaction costs ($4 million).

Selling, general and administrative expenses (SG&A) in fiscal 2022 increased by $61 million as compared to fiscal 2021.

The year-over-year increase in SG&A is attributable to higher overall engineering and other administrative spending in the current year ($36 million), the impact of the prior year acquisitions and consolidations of CQADNT and LFADNT ($35 million), the impact of a non-recurring contract related settlement with a customer ($14 million), higher depreciation expense ($7 million), and higher amortization expense attributable to the acquired intangible assets ($7 million).

These were offset by lower compensation expense including stock-based and performance-based incentive compensation costs ($12 million), the favorable impact of foreign currencies ($17 million), and lower transaction costs ($11 million).

Selling, general and administrative expenses (SG&A) decreased by $21 million, or 4% in fiscal 2021 as compared to fiscal 2020.

SG&A was favorably impacted by lower overall administrative and engineering spending ($88 million), including lower levels of certain compensation and discretionary spending which are not expected to recur as part of the annual SG&A run rate, prior year Adient Aerospace and RECARO costs ($39 million), lower share based compensation expense ($5 million) and the favorable impact of foreign currency ($5 million), partially offset by higher transaction costs in the current year related to the Yanfeng transaction and sale of the fabrics business ($12 million).

SG&A was favorably impacted by lower overall engineering and other administrative spending ($41 million), and RECARO and fabrics administrative costs in fiscal 2020 ($30 million), partially offset by higher stock-based compensation costs ($21 million), non-recurring favorable benefits in fiscal 2020 related to actions taken to reduce the impact of COVID-19 ($4 million), the unfavorable impact of foreign currencies ($21 million), and higher transaction costs ($4 million).

Adient plc | Form 10-K | 34

Refer to the segment analysis below for a discussion of segment profitability.

3 unchanged sentences

Restructuring and impairment costs $ 25 19% $ 21 (91)% $ 238

Restructuring and impairment costs were lower by $217 million in fiscal 2021 as compared to fiscal 2020 due primarily to higher levels of restructuring actions taken in fiscal 2020 after the industry experienced significant volume decreases resulting from the COVID-19 impact, and $53 million of one-time non-cash impairment charges in the prior year of long-lived assets in China and other assets held for sale.

Adient plc | Form 10-K | 35

Restructuring and impairment charges increased by $62 million in fiscal 2020 as compared to fiscal 2019 due primarily to higher levels of restructuring actions taken in fiscal 2020 after the industry experienced significant volume decreases resulting from the COVID-19 impact, and $53 million of one-time non-cash impairment charges of long-lived assets in China and other assets held for sale, partially offset by one-time non-cash impairment charges in the prior year related to the seat structures and mechanisms business ($66 million).

Refer to Note 3, "Acquisitions and Divestitures," of the notes to the consolidated financial statements for information related to the assets held for sale.

Refer to Note 6, "Goodwill and Other Intangible Assets," of the notes to the consolidated financial statements for information related to the non-cash impairment charges of long-lived assets in fiscal 2020.

Refer to Note 15, "Restructuring and Impairment Costs," of the notes to the consolidated financial statements for information related to Adient's restructuring plans.

Refer to Note 16, "Impairment of Long-Lived Assets," of the notes to the consolidated financial statements for information related to the impairment charges recorded in fiscal 2020 and 2019.

Restructuring and impairment charges increased by $4 million in fiscal 2022 as compared to fiscal 2021 due primarily to one-time non-cash impairment charges related to the withdrawal from and sale of Adient’s operations in Russia and other assets held for sale in EMEA.

Restructuring and impairment costs were lower by $217 million in fiscal 2021 as compared to fiscal 2020 due primarily to higher levels of restructuring actions taken in fiscal 2020 after the industry experienced significant volume decreases resulting from the COVID-19 impact, and $53 million of one-time non-cash impairment charges of long-lived assets in China and other assets held for sale in fiscal 2020.

Refer to Note 3, "Acquisitions and Divestitures," of the notes to the consolidated financial statements for information related to Adient’s withdrawal from and sale of operations in Russia and assets held for sale.

Equity Income

2 unchanged sentences

Equity income (loss) $ 75 (95)% $ 1,484 >100% $ 22

Equity income was $75 million in fiscal 2022 compared to $1,484 million in fiscal 2021.

The decrease is primarily attributable to the significant prior year gains on divestitures of Adient's interests in certain China joint ventures (YFAS, SJA and others) as well as the prior year acquisition of controlling interest in CQADNT and resulting lower equity in the current year ($1,376 million), current year non-cash impairment charges recorded on certain of Adient's investments in non-consolidated affiliates in South Africa and China ($10 million), the impact of KEIPER supply agreement modifications ($17 million), the unfavorable impact of foreign currencies ($3 million), higher restructuring charges primarily at Adient's affiliates in China ($5 million), and current year operational interruptions and production stoppages resulting from supply chain disruptions and localized COVID-19 lockdowns in China ($1 million), partially offset by lower purchase accounting amortization ($3 million).

Refer to Note 3, "Acquisitions and Divestitures," and Note 18, "Nonconsolidated Partially-Owned Affiliates," of the notes to the consolidated financial statements for more information.

Equity income was $1,484 million for fiscal 2021, compared to $22 million for fiscal 2020.

The significant increase during fiscal 2021 was due primarily to a one-time gain associated with the 2021 Yanfeng Transaction ($1,181 million), one-time gain associated with the sale of Adient's interest in SJA ($33 million), a prior year non-cash impairment charge related to Adient's YFAI investment divestiture ($231 million), a one-time gain on previously held interest at YFAS in an affiliate during the first quarter of fiscal 2021 ($5 million), favorable impact of foreign currencies ($19 million), and prior year lower production volumes within Adient's China affiliates due to the impact of COVID-19 primarily during the second quarter of fiscal 2020 despite the current year operational interruptions and temporary production stoppages resulting from semiconductor chip shortages ($27 million).

These were partially offset by the impact of prior year divestitures of YFAI and the fabrics business as well as current year divestiture of SJA ($30 million), and prior year tax benefits at various China affiliates that are not expected to recur ($10 million).

As a result of the 2021 Yanfeng Transaction, equity income associated with the equity interests sold by Adient and, therefore will not recur, equaled $155 million, including the equity income associated with the entities which Adient acquired controlling interests.

The significantly higher equity income in fiscal 2021 was due primarily to the one-time gain associated with the 2021 Yanfeng Transaction and the sale of Adient's interest in SJA, a fiscal 2020 non-cash impairment charge related to Adient's YFAI investment divestiture ($231 million), favorable impact of foreign currencies ($19 million), and lower production volumes within Adient's China affiliates due to the impact of COVID-19 lockdowns during fiscal 2020 ($27 million).

Refer to Note 3, "Acquisitions and Divestitures," of the notes to the consolidated financial statements for more information.

Equity income was $22 million for fiscal 2020, compared to $275 million for fiscal 2019.

The decrease during fiscal 2020 was due primarily to the non-cash impairment charge recorded in fiscal 2020 of the YFAI investment as part of the 2020 Yanfeng Transaction ($231 million), and the impact from the planned divestiture of YFAI ($26 million), partially offset by higher income at certain China seating affiliates that included $10 million of benefits from tax credits at various China affiliates that are not expected to recur.

Adient plc | Form 10-K | 35

Net Financing Charge

Net Financing Charges

September 30,

1 unchanged sentence

Net financing charges $ 215 (31)% $ 311 41% $ 220

Net financing charges increased in fiscal 2021 as compared to fiscal 2020 primarily as a result of premium and related transaction costs paid on the repurchase of debt ($50 million), a write off of the associated deferred financing costs ($20 million), a derivative loss associated with the 2021 Yanfeng Transaction ($30 million), and higher levels of outstanding debt and higher average interest rates during the current fiscal year.

Net financing charges increased in fiscal 2020 as a result of higher levels of outstanding debt and to higher average interest rates in fiscal 2020, partially offset by $3 million of net gain resulting from the partial extinguishment of debt.

Net financing charges decreased in fiscal 2022 as compared to fiscal 2021 as a result of lower levels of outstanding debt, higher amounts of premiums paid to tender outstanding debt and higher levels of accelerated expense of deferred financing costs in the prior year associated with the pay-down of debt.

Net financing charges increased in fiscal 2021 as compared to fiscal 2020 primarily as a result of premiums paid on the repurchase of debt ($50 million), an accelerated expense of the associated deferred financing costs ($20 million), a derivative loss associated with the 2021 Yanfeng Transaction ($30 million), and higher levels of outstanding debt and higher average interest rates during fiscal 2021.

Refer to Note 9, "Debt and Financing Arrangements," of the notes to the consolidated financial statements for information related to the components of Adient's net financing charges.

4 unchanged sentences

Other pension expense (income) consists of mark-to-market adjustments of Adient's retirement plans and non-service components of Adient's net periodic pension costs.

A pension mark-to-market gain ($15 million) occurred in fiscal 2021 compared to the $22 million mark-to-market charge in fiscal 2020.

The decrease in pension expense in fiscal 2020 is due to the lower level of pension mark-to-market impact (a $22 million charge in fiscal 2020 compared to a $49 million charge in fiscal 2019), partially offset by a $2 million pension settlement expense related to the settlement of two plans in the United States.

The lower fiscal 2022 (income) is due primarily to a lower pension mark-to-market gain ($8 million) and a lower expected return on plan assets ($4 million).

The decrease in pension expense in fiscal 2021 as compared to fiscal 2020 was due to the favorable impact of pension mark-to-market (a $15 million gain in fiscal 2021 compared to a $22 million charge in fiscal 2020).

Refer to Note 14, "Retirement Plans," of the notes to the consolidated financial statements for information related to the components of Adient's net periodic pension costs.

3 unchanged sentences

Income tax provision (benefit) $ 94 (62)% $ 249 >100% $ 57

The fiscal 2021 income tax expense of $249 million was higher than the Irish statutory rate of 12.5% primarily due to the inability to recognize a tax benefit for losses in jurisdictions with valuation allowances, the establishment of valuation allowances in certain jurisdictions, and the repatriation of foreign earnings, partially offset by tax benefits from audit settlements, the write-off of deferred tax liabilities related to withholding taxes, and withholding taxes on the 2021 Yanfeng Transaction at a rate lower than the Irish statutory rate of 12.5%.

The fiscal 2022 income tax expense of $94 million was higher than the Irish statutory rate of 12.5% primarily due to the inability to recognize a tax benefit for losses in jurisdictions with valuation allowances, the establishment of valuation allowances in certain jurisdictions, and the repatriation of foreign earnings, partially offset by tax benefits related to the release of valuation allowances in certain jurisdictions.

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.

2 unchanged sentences

Since future financial results may differ from previous estimates, periodic adjustments to Adient's valuation allowances may be necessary.

As a result of Adient's fiscal 2021 analysis of the realizability of its worldwide deferred tax assets, and after considering tax planning initiatives and other positive and negative evidence, Adient determined it was more likely than not that certain deferred tax assets in the Czech Republic, Korea, Mexico, and other jurisdictions would not be realized and recorded income tax expense of $5 million, $5 million, $8 million, and $4 million, respectively, to establish valuation allowances.

Adient continues to record valuation allowances on certain deferred tax assets in Germany, Hungary, Luxembourg, Mexico, Poland, Spain, the United Kingdom, the U.S.

and other jurisdictions as it remains more likely than not that they will not be realized.

As a result of Adient's fiscal 2022 analysis of the realizability of its worldwide deferred tax assets, and after considering tax planning initiatives and other positive and negative evidence, Adient determined it was more likely than not that certain deferred tax assets in Canada, Japan, and other jurisdictions would not be realized and recorded income tax expense of $12 million, $3 million and $3 million, respectively, to establish valuation allowances.

Additionally, Adient determined it was more likely than not that deferred tax assets in the Czech Republic and other jurisdictions would be realizable and recorded income tax benefit of $11 million and $2 million, respectively, to release valuation allowances.

Adient continues to record valuation

Adient plc | Form 10-K | 36

allowances on certain deferred tax assets in Germany, Hungary, Luxembourg, Mexico, Poland, Spain, the United Kingdom, the U.S.

and other jurisdictions as it remains more likely than not that they will not be realized.

The fiscal 2020 income tax expense of $57 million was higher than the Irish statutory rate of 12.5% primarily due to the inability to recognize a tax benefit for losses in jurisdictions with valuation allowances, the repatriation of foreign earnings, and changes in uncertain tax positions, partially offset by the tax benefits related to the impairment and sale of Adient’s YFAI investment, sale of Adient’s automotive fabrics manufacturing business, and impairment charges recorded in the Asia segment.

1 unchanged sentence

These valuation allowances did not have a material impact on the consolidated financial statements.

The fiscal 2019 income tax expense of $410 million was higher than the Irish statutory rate of 12.5% primarily due to the recognition of valuation allowances in Luxembourg, Poland, and the United Kingdom, repatriation of foreign earnings, changes in uncertain tax positions, and the impact of recognizing no tax benefit for losses in jurisdictions with valuation allowances.

As a result of Adient's fiscal 2019 analysis of the realizability of its worldwide deferred tax assets, and after considering tax planning initiatives and other positive and negative evidence (including the external debt refinancing, the related incremental net financing costs, and the restructuring of the internal financing which occurred in the third quarter of fiscal 2019 and including the long-lived asset impairment recorded in the second quarter of fiscal 2019), Adient determined it was more likely than not that deferred tax assets in Luxembourg (Q3), the United Kingdom (Q3) and certain Poland entities (Q2) would not be realized and recorded income tax expense of $229 million, $25 million and $43 million, respectively, to establish valuation allowances.

Adient is subject to income taxes in Ireland, the U.S.

12 unchanged sentences

Income attributable to noncontrolling interests $ 80 (2)% $ 82 34% $ 61

The increase in income attributable to noncontrolling interests for fiscal 2021 is attributable to higher income resulting from higher volumes in the current year, attributable primarily to the impact of the COVID-19 pandemic at certain Seating affiliates in varying jurisdictions during the prior year.

The decrease in income attributable to noncontrolling interests for fiscal 2020 is primarily attributable to lower income resulting from lower volumes, as a result of the COVID-19 impact at certain Seating affiliates in varying jurisdictions during fiscal 2020 as compared to fiscal 2019.

The $2 million decrease in income attributable to noncontrolling interests for fiscal 2022 is attributable to lower income due to operational inefficiencies resulting from unplanned production stoppages including higher freight at certain Seating joint ventures in varying jurisdictions during the current year.

The increase in income attributable to noncontrolling interests for fiscal 2021 is attributable to higher income resulting from higher volumes in fiscal 2021, attributable primarily to the impact of the COVID-19 pandemic at certain Seating affiliates in varying jurisdictions during fiscal 2020.

Net Income (Loss) Attributable to Adient

3 unchanged sentences

Adient plc | Form 10-K | 37

Net loss attributable to Adient was $120 million for fiscal 2022, compared to net income attributable to Adient of $1,108 million for fiscal 2021.

The current year net loss attributable to Adient is primarily due to lower equity income attributable to prior year one-time gains on divestitures of Adient's interests in certain China joint ventures as described above, current year operational inefficiencies resulting from unplanned production stoppages including higher freight and other supply chain disruptions, the impact of the Russia/Ukraine conflict on EMEA production volumes and higher energy costs, the impact of localized COVID-19 lockdowns in China, and higher overall engineering and other administrative spending, partially offset by the favorable impact of operational footprint changes primarily related to the consolidation of CQADNT in China, favorable material economics recoveries, lower net financing charges, and lower income tax expense.

Net income attributable to Adient was $1,108 million for fiscal 2021, compared to a loss of $547 million for fiscal 2020.

The increased net income attributable Adient is due to $1,214 million of one-time gains from sales of certain of Adient’s equity interests in China, higher current year volumes primarily resulting from prior year operational interruptions due to COVID-19, current year operational improvements, lower restructuring charges, a one-time gain associated with retrospective recoveries of Brazil indirect tax credits, and a $231 million prior year non-cash impairment of the YFAI investment, partially offset by operational inefficiencies and premium freight caused by unplanned production stoppages resulting from semiconductor and petrochemical shortages, higher net financing charges, and higher income tax expense primarily resulting from the withholding taxes paid in association with the 2021 Yanfeng Transaction.

Net loss attributable to Adient was $547 million for fiscal 2020, compared to a loss of $491 million for fiscal 2019.

The increased net loss attributable to Adient is primarily due to the impact of having significantly lower volumes due to COVID-19 along with a one-time non-cash impairment charge of $231 million on Adient's YFAI investment, a $25 million loss on the sale of the RECARO business and deconsolidation of Adient Aerospace, higher restructuring costs, and overall higher net financing costs, partially offset by operating improvements and lower administrative costs and one-time charges in the prior year related to impairment in the seat structures and mechanism business of $66 million and income tax charges to establish valuation allowances of $297 million.

The increased net income attributable Adient is due to $1,214 million of one-time gains from sales of certain of Adient’s equity interests in China, higher current year volumes primarily resulting from prior year operational interruptions due to COVID-19, fiscal 2021 operational improvements, lower restructuring charges, a one-time gain associated with retrospective recoveries of Brazil indirect tax credits, and a $231 million non-cash impairment of the YFAI investment in fiscal 2020, partially offset by operational inefficiencies and premium freight caused by unplanned production stoppages resulting from semiconductor and petrochemical shortages, higher net financing charges, and higher income tax expense primarily resulting from the withholding taxes paid in association with the 2021 Yanfeng Transaction.

Comprehensive Income Attributable to Adient

2 unchanged sentences

Comprehensive income (loss) attributable to Adient $ (338) >(100%) $ 1,146 >100% $ (643)

Comprehensive loss attributable to Adient was $338 million for fiscal 2022 compared to comprehensive income attributable to Adient for fiscal 2021 of $1,146 million.

The comprehensive loss in fiscal 2022 is attributable to lower net income ($1,230 million), the unfavorable impact in foreign currency translation adjustments resulting from overall strengthening of U.S.

dollar against virtually all other currencies ($266 million), less favorable impact in realized and unrealized losses on derivatives ($20 million), partially offset by the decrease in comprehensive income attributable to noncontrolling interests ($32 million).

Comprehensive income attributable to Adient was $1,146 million for fiscal 2021 compared to a comprehensive loss attributable to Adient of $643 million for fiscal 2020.

The increased level of comprehensive income attributable to Adient in fiscal 2021 is primarily due to higher net income ($1,676 million), the favorable change in foreign currency translation adjustments ($85 million) and favorable change in realized and unrealized gains (losses) on derivatives ($40 million), partially offset by the increase in comprehensive income attributable to noncontrolling interests ($13 million).

Comprehensive loss attributable to Adient was $643 million for fiscal 2020 compared to comprehensive loss attributable to Adient for fiscal 2019 of $529 million.

This increased level of comprehensive loss attributable to Adient in fiscal 2020 is primarily due to the unfavorable impact of higher levels of net loss ($56 million), the unfavorable impact in foreign currency transaction adjustments resulting from overall weakening of emerging market currencies, partially offset by the strengthening of the Chinese yuan ($34 million), and the unfavorable impact in realized and unrealized losses on derivatives ($19 million), partially offset by the decrease in comprehensive income attributable to noncontrolling interests ($15 million).

Segment Analysis

26 unchanged sentences

Restructuring related charges (4)

(9) (20) (31)

Loss on business divestitures - net (5)

10 unchanged sentences

(2) Reflects restructuring charges for costs that are directly attributable to restructuring activities and meet the definition of restructuring under ASC 420 and non-recurring impairment charges.

Included in restructuring charges in fiscal 2021 is a $9 million held for sale non-cash impairment charge in EMEA, and a $1 million non-cash pre-tax impairment charge related to long-lived assets in EMEA.

Included in restructuring charges in fiscal 2020 is a non-cash pre-tax impairment related to China intangible assets of $24 million, held for sale asset impairments of $21 million, and $8 million of other long-lived asset impairments.

Included in restructuring charges in fiscal 2019 is a $66 million non-cash pre-tax impairment charge related to long-lived assets ($11 million in the Americas and $55 million in EMEA) and an $18 million non-cash impairment charge related to assets held for sale ($6 million in the Americas and $12 million in Asia).

Refer to Note 6, "Goodwill and Other Intangible Assets," Note 15, "Restructuring and Impairment Costs," and Note 16, "Impairment of Long-Lived Assets," of the notes to the consolidated financial statements for more information.

During fiscal 2022, an impairment charge of $4 million related to the withdrawal from and sale of its operations in Russia, and a held-for-sale impairment charge of $6 million were recorded in EMEA.

Included in restructuring charges in fiscal 2021 is $10 million of held for sale and other non-cash impairment charges in EMEA.

Included in restructuring charges in fiscal 2020 is a non-cash pre-tax impairment related to intangible assets of $24 million, held for sale asset impairments of $21 million, $8 million of other long-lived asset impairments, all within Asia, and $175 million of charges in EMEA which primarily related to workforce reductions.

Refer to Note 15, "Restructuring and Impairment Costs," of the notes to the consolidated financial statements for more information.

(3) Reflects amortization of intangible assets including those related to partially owned affiliates recorded within equity income.

Adient plc | Form 10-K | 40

(4) Reflects restructuring related charges for costs that are directly attributable to restructuring activities, but do not meet the definition of restructuring under ASC 420 along with restructuring costs at partially owned affiliates recorded within equity income.

(5) The year ended September 30, 2021 includes a $21 million loss associated with certain aspects of the 2021 Yanfeng Transaction and a $5 million loss on sale of non-core assets in China.

The year ended September 30, 2020 includes a $21 million loss of sale of RECARO and $4 million loss on deconsolidation of Aerospace, partially offset by a $12 million gain on completion of the 2020 Yanfeng Transaction.

(6) The year ended September 30, 2021 includes a gain associated with the 2021 Yanfeng Transaction of $1,181 million and a gain of $33 million on the sale of Adient's interest in SJA.

The year ended September 30, 2020 includes non-cash impairment charges related to Adient's YFAI investment balance recorded in conjunction with the 2020 Yanfeng Transaction.

Adient plc | Form 10-K | 39

(5) Fiscal 2021 includes a $21 million loss associated with certain aspects of the 2021 Yanfeng Transaction and a $5 million loss on sale of non-core assets in Asia.

Fiscal 2020 includes a $21 million loss of sale of RECARO and $4 million loss on deconsolidation of Aerospace, partially offset by a $12 million gain on completion of the 2020 Yanfeng Transaction.

(6) Fiscal 2022 includes $3 million and $7 million of non-cash impairments of certain of Adient's investments in nonconsolidated partially-owned affiliates in Asia and EMEA, respectively.

Fiscal 2021 includes a gain associated with the 2021 Yanfeng Transaction of $1,181 million and a gain of $33 million on the sale of Adient's interest in SJA.

Fiscal 2020 includes non-cash impairment charges related to Adient's YFAI investment balance recorded in conjunction with the 2020 Yanfeng Transaction.

All of these impacts have been recorded within the equity income line in the consolidated statements of income.

(7) The year ended September 30, 2021 reflects a one-time gain of $38 million associated with the retrospective recovery of indirect tax credits in Brazil resulting from a favorable court ruling (of which $36 million relates to recoveries covering the past 20 years and is adjusted out of Americas' segment results), a $5 million gain on previously held interest at YFAS in an affiliate, and $19 million of transaction costs.

The year ended September 30, 2020 includes $15 million of transaction costs and $1 million of tax adjustments at YFAI.

The year ended September 30, 2019 includes $4 million of integration costs associated with the acquisition of Futuris, $3 million of transaction costs and $2 million of tax adjustments at YFAI.

(7) Fiscal 2022 reflects $8 million of transaction costs, a one-time gain of $32 million associated with the retrospective recovery of indirect tax credits in Brazil, a $14 million charge related to a non-recurring contract related settlement, $1 million of allowance for doubtful accounts resulting from the withdrawal from and sale of operations in Russia, and $2 million of loss on finalization of asset sale in Turkey.

Fiscal 2021 reflects a one-time gain of $38 million associated with the retrospective recovery of indirect tax credits in Brazil (of which $36 million relates to recoveries covering the past 20 years and is adjusted out of Americas' segment results), a $5 million gain on previously held interest at YFAS in an affiliate, and $19 million of transaction costs.

Fiscal 2020 includes $15 million of transaction costs and $1 million of tax adjustments at YFAI.

September 30,

2 unchanged sentences

Adjusted EBITDA $ 242 4% $ 232 2% $ 228

Net sales increased during fiscal 2021 by $275 million as a result of prior year operational interruptions due to COVID-19 and despite certain unplanned temporary production stoppages in the current year primarily resulting from semiconductor and petrochemical shortages ($262 million), favorable commercial settlements and net pricing adjustments ($33 million), and the favorable impact of material economics recoveries ($24 million), partially offset by the unfavorable impact of foreign currencies ($34 million), and the impact of the prior year divestiture of RECARO ($10 million).

Adjusted EBITDA increased during fiscal 2021 by $4 million due primarily to higher current year volumes as explained above and product mix ($120 million), operational performance improvements ($3 million), the favorable impact of foreign currencies ($8 million), and favorable commercial settlements and net pricing adjustments ($70 million), partially offset by operational inefficiencies including premium freight and unplanned temporary production stoppages in the current year resulting from semiconductor and petrochemical shortages and to a lesser extent COVID-19 related costs ($104 million), higher administrative expense primarily related to certain prior year benefits related costs that were not expected to recur, net of current year efficiency improvements ($44 million), the unfavorable material economics, net of recoveries ($46 million), and lower equity income ($3 million).

Net sales decreased during fiscal 2020 by $1,896 million due to lower production volumes ($1,787 million) resulting primarily from the operational shutdowns during fiscal 2020 as a result of the COVID-19 pandemic as well as $55 million attributable to the GM labor strike during the first quarter of fiscal 2020 and the impact of Adient specific launches, along with the unfavorable impact of foreign currency ($75 million), the unfavorable impact of material economics ($21 million), and the unfavorable impact of the RECARO divestiture ($39 million), partially offset by the favorable impact of commercial settlements and net pricing adjustments ($26 million).

Adjusted EBITDA increased during fiscal 2020 by $18 million due to the impact of operational performance improvements ($104 million), lower administrative and engineering expense ($100 million) including lower levels of certain compensation and discretionary spending which are not expected to recur as part of the annual run rate, the favorable impact of Adient Aerospace deconsolidation and RECARO divestiture ($25 million), the favorable impact of commercial settlements and net pricing adjustments ($55 million) and favorable material economics, net of recoveries ($15 million), partially offset by lower production volumes ($274 million), lower equity income ($2 million), and the unfavorable impact of foreign currency ($5 million).

Net sales increased in fiscal 2022 by $393 million as a result of higher production volumes despite certain unplanned production stoppages primarily resulting from semiconductor chip shortages and other supply chain disruptions ($278 million), the favorable impact of material economics recoveries ($179 million), and the favorable impact of foreign currencies ($2 million), partially offset by the impact of unfavorable commercial settlements and net pricing adjustments ($45 million) and the impact of operational footprint changes ($21 million).

Adjusted EBITDA increased in fiscal 2022 by $10 million due to operational performance improvements ($62 million), lower administrative and engineering expense ($20 million), the favorable impact of KEIPER supply agreement modifications ($14 million), higher current year production volumes ($12 million), the favorable impact of foreign currencies ($8 million), and higher equity income ($3 million), partially offset by higher freight costs ($55 million), lower levels of commercial settlements and net pricing adjustments ($34 million), unfavorable material economics, net of recoveries ($15 million), and the impact of operational footprint changes ($5 million).

Net sales increased during fiscal 2021 by $275 million as a result of operational interruptions in fiscal 2020 due to COVID-19 and despite certain unplanned temporary production stoppages primarily resulting from semiconductor and petrochemical shortages in fiscal 2021 ($262 million), favorable commercial settlements and net pricing adjustments ($33 million), and the favorable impact of material economics recoveries ($24 million), partially offset by the unfavorable impact of foreign currencies ($34 million), and the impact of the divestiture of RECARO ($10 million) in fiscal 2020.

Adjusted EBITDA increased during fiscal 2021 by $4 million due primarily to higher volumes and product mix ($120 million), operational performance improvements ($3 million), the favorable impact of foreign currencies ($8 million), and favorable commercial settlements and net pricing adjustments ($70 million), partially offset by operational inefficiencies including premium freight and unplanned temporary production stoppages in fiscal 2020 resulting from semiconductor and petrochemical shortages and to a lesser extent COVID-19 related costs ($104 million), higher administrative expense primarily related to certain fiscal 2020 benefits related costs that were not expected to recur, net of efficiency improvements ($44 million), the unfavorable material economics, net of recoveries ($46 million), and lower equity income ($3 million).

Adient plc | Form 10-K | 40

3 unchanged sentences

Adjusted EBITDA $ 138 (50)% $ 277 >100% $ 101

Net sales increased during fiscal 2021 by $416 million as a result of prior year operational interruptions due to COVID-19 and despite certain unplanned temporary production stoppages in the current year primarily resulting from semiconductor and petrochemical shortages ($254 million), the favorable impact of foreign currency ($234 million), the favorable impact of commercial settlements and net pricing adjustments ($22 million), and the favorable impact of material economics recoveries ($50 million), partially offset by the impact of prior year divestitures primarily consisting of the RECARO and fabrics businesses ($144 million).

Adjusted EBITDA increased during fiscal 2021 by $176 million due primarily to higher current year volumes as explained above ($110 million), current year operational performance improvements ($61 million), lower administrative and engineering expense related to efficiencies and the impact of certain launch delays ($50 million), favorable commercial settlements and net pricing adjustments ($51 million) and higher equity income ($1 million), partially offset by operational inefficiencies as a result of unplanned temporary production stoppages in the current year stemming from semiconductor shortages and to a lesser extent COVID-19 related costs ($55 million), unfavorable net commodity pricing adjustments ($11 million), unfavorable impact of foreign currencies ($9 million), higher administrative and engineering expense due to prior year benefits that were not expected to recur ($18 million), and the impact of prior year divestitures primarily consisting of the RECARO and fabrics businesses ($4 million).

Net sales decreased during fiscal 2020 by $1,527 million due to lower production volumes ($1,353 million) resulting primarily from the operational shutdowns during fiscal 2020 as a result of the COVID-19 pandemic along with the unfavorable impact of foreign currency ($137 million), the unfavorable impact of the RECARO divestiture ($39 million) and the unfavorable impact of material economics ($14 million), partially offset by favorable commercial settlements and net pricing adjustments ($16 million).

Adjusted EBITDA decreased during fiscal 2020 by $60 million due to lower volumes ($243 million), the unfavorable impact of foreign currency ($12 million), unfavorable material economics, net of recovery ($10 million), and lower equity income ($3 million), partially offset by operational performance improvements ($91 million), lower administrative and engineering expense ($56 million) including lower levels of certain compensation and discretionary spending which are not expected to recur as part of the annual run rate, favorable net material and pricing adjustments ($57 million), and the favorable impact of divestitures primarily related to RECARO ($4 million).

Net sales decreased in fiscal 2022 by $800 million primarily as a result of operational interruptions due to certain unplanned production stoppages resulting from semiconductor chip shortages and other supply chain disruptions along with the negative impact of the Russia/Ukraine conflict on EMEA production volumes ($362 million), the unfavorable impact of foreign currency ($466 million), the impact of operational footprint changes ($129 million), partially offset by the favorable impact of material economics recoveries ($115 million), and favorable impact of commercial settlements and net pricing adjustments ($42 million).

Adjusted EBITDA decreased in fiscal 2022 by $139 million due primarily to lower current year production volumes as explained above ($88 million), increased utilities, labor and freight costs along with other operating inefficiencies associated with lower volumes ($71 million), the impact of operational footprint changes ($27 million), the unfavorable impact of foreign currencies ($20 million), and higher administrative and engineering expense ($1 million), partially offset by favorable commercial settlements and net pricing adjustments ($66 million), and favorable material economics, net of recoveries ($2 million).

Net sales increased during fiscal 2021 by $416 million as a result of operational interruptions in fiscal 2020 due to COVID-19 and despite certain unplanned temporary production stoppages in fiscal 2021 primarily resulting from semiconductor and petrochemical shortages ($254 million), the favorable impact of foreign currency ($234 million), the favorable impact of commercial settlements and net pricing adjustments ($22 million), and the favorable impact of material economics recoveries ($50 million), partially offset by the impact of the fiscal 2020 divestitures primarily consisting of the RECARO and fabrics businesses ($144 million).

Adjusted EBITDA increased during fiscal 2021 by $176 million due primarily to higher volumes as explained above ($110 million), operational performance improvements ($61 million), lower administrative and engineering expense related to efficiencies and the impact of certain launch delays ($50 million), favorable commercial settlements and net pricing adjustments ($51 million) and higher equity income ($1 million), partially offset by operational inefficiencies as a result of unplanned temporary production stoppages in fiscal 2021 stemming from semiconductor shortages and to a lesser extent COVID-19 related costs ($55 million), unfavorable net commodity pricing adjustments ($11 million), unfavorable impact of foreign currencies ($9 million), higher administrative and engineering expense due to certain fiscal 2020 benefits that were not expected to recur ($18 million), and the impact of the fiscal 2020 divestitures primarily consisting of the RECARO and fabrics businesses ($4 million).

September 30,

2 unchanged sentences

Adjusted EBITDA $ 383 (21)% $ 486 15% $ 424

Net sales increased during fiscal 2021 by $301 million due to higher production volumes across the region, which was primarily a result of prior year operational interruptions due to COVID-19 and despite certain unplanned temporary production stoppages in the current year primarily resulting from semiconductor shortages ($263 million), the favorable impact of foreign currencies ($74 million), and the favorable impact of material economics recoveries ($9 million), partially offset by the impact of unfavorable commercial settlements and net pricing adjustments ($31 million), and the impact of the prior year divestiture of RECARO ($14 million).

Adjusted EBITDA increased during fiscal 2021 by $62 million due primarily to higher current year volumes as explained above ($50 million), higher equity income as a result of the prior year operational interruptions at Adient's China affiliates due to COVID-19 ($34 million), operational performance improvements ($33 million), lower administrative and engineering expense

Net sales increased in fiscal 2022 by $803 million due to the impact of operational footprint changes in China primarily related to the consolidation of CQADNT ($770 million), favorable volume and mix ($153 million), and the favorable impact of material economics recoveries ($18 million), partially offset by the unfavorable impact of foreign currencies ($128 million), and unfavorable impact of commercial settlements and net pricing adjustments ($10 million).

Adjusted EBITDA decreased in fiscal 2022 by $103 million due primarily to operational footprint changes including the impact of the 2021 Yanfeng Transaction ($75 million), operating inefficiencies including freight and labor economics, and launch timing ($27 million), lower equity income due to the impact of KEIPER supply agreement modifications ($17 million), the unfavorable impact of foreign currencies ($15 million), higher administrative and engineering expense ($6 million), lower equity income due to lower volumes primarily at Adient's affiliates in China attributable to the COVID-19 lockdowns ($4

Adient plc | Form 10-K | 41

($3 million), and the favorable impact of foreign currencies ($29 million), partially offset by the unfavorable impact of material economics, net of recoveries ($9 million), unfavorable commercial settlements and net pricing adjustments ($21 million), the impact of current year divestiture of SJA ($9 million), the impact of prior year divestiture of YFAI ($18 million) and RECARO ($5 million), prior year tax benefits at various affiliates that were not expected to recur ($10 million), higher administrative expense due in part to prior year benefits that were not expected to recur ($9 million), and operational inefficiencies including premium freight and unplanned temporary production stoppages resulting from semiconductor shortages and to a lesser extent COVID-19 related costs ($6 million).

Net sales decreased during the fiscal 2020 by $515 million due to lower production volumes ($474 million) primarily resulting from the operational shutdowns in China and in other Asia countries in fiscal 2020 as a result of the COVID-19 pandemic, the unfavorable impact of the RECARO divestiture ($37 million), the unfavorable impact of foreign currency ($13 million), and the unfavorable impact of material economics ($3 million), partially offset by the favorable impact of commercial settlements and net pricing adjustments ($12 million).

Adjusted EBITDA decreased during fiscal 2020 by $89 million due to the impact of lower production volumes ($73 million), the unfavorable impact of the planned YFAI divestiture ($26 million), unfavorable material economics, net of recoveries ($3 million), the unfavorable impact of foreign currency ($12 million), the unfavorable impact of the RECARO divestiture ($9 million), and higher administrative and engineering costs ($2 million), partially offset by operational performance improvements ($8 million), higher equity income from China seating affiliates that included $10 million of benefits from tax credits at various China affiliates that are not expected to recur ($16 million), and favorable net material and pricing adjustments ($12 million).

million), and the unfavorable impact of material economics, net of recoveries ($2 million), partially offset by favorable volume and mix despite the impact of localized COVID-19 lockdowns in China during the second quarter of fiscal 2022 ($30 million), and favorable commercial settlements and net pricing adjustments which includes $9 million of a non-recurring settlement in China ($13 million).

Net sales increased during fiscal 2021 by $301 million due to higher production volumes across the region, which was primarily a result of operational interruptions due to COVID-19 in fiscal 2020 and despite certain unplanned temporary production stoppages in fiscal 2021 primarily resulting from semiconductor shortages ($263 million), the favorable impact of foreign currencies ($74 million), and the favorable impact of material economics recoveries ($9 million), partially offset by the impact of unfavorable commercial settlements and net pricing adjustments ($31 million), and the impact of the fiscal 2020 divestiture of RECARO ($14 million).

Adjusted EBITDA increased during fiscal 2021 by $62 million due primarily to higher volumes as explained above ($50 million), higher equity income as a result of the operational interruptions at Adient's China affiliates due to COVID-19 in fiscal 2020 ($34 million), operational performance improvements ($33 million), lower administrative and engineering expense ($3 million), and the favorable impact of foreign currencies ($29 million), partially offset by the unfavorable impact of material economics, net of recoveries ($9 million), unfavorable commercial settlements and net pricing adjustments ($21 million), the impact of the divestiture of SJA ($9 million), the impact of fiscal 2020 divestitures of YFAI ($18 million) and RECARO ($5 million), tax benefits at various affiliates in fiscal 2020 that were not expected to recur ($10 million), higher administrative expense due in part to fiscal 2020 benefits that were not expected to recur ($9 million), and operational inefficiencies including premium freight and unplanned temporary production stoppages resulting from semiconductor shortages and to a lesser extent COVID-19 related costs ($6 million).

Liquidity and Capital Resources

2 unchanged sentences

Adient actively manages its working capital and associated cash requirements and continually seeks more effective uses of cash.

Adient also recently announced a share repurchase authorization (up to $600 million) with no expiration date, wherein Adient expects to take a measured approach as to the timing and amount of share repurchases as part of its assessment of the most effective use 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 9, "Debt and Financing Arrangements," of the notes to consolidated financial statements for discussion of financing arrangements.

Refer to Note 3, "Acquisitions and Divestitures," for more information on strategic transactions that have provided significant liquidity that will allow for additional voluntary debt pay down in fiscal 2022.

Following the first quarter of fiscal 2019 dividend payout, Adient has suspended future dividends.

Adient US LLC ("Adient US"), a wholly owned subsidiary of Adient, together with certain of Adient's other subsidiaries, maintains an asset-based revolving credit facility (the “ABL Credit Facility”), which provides for a revolving line of credit up to $1,250 million, including a North American subfacility of up to $950 million and a European subfacility of up to $300 million, subject to borrowing base capacity.

The ABL Credit Facility will mature on May 6, 2024, subject to a springing maturity date 91 days earlier if certain amounts remain outstanding at that time under the Term Loan B Agreement (defined below).

Interest is payable on the ABL Credit Facility at a fluctuating rate of interest determined by reference to the Eurodollar rate plus an applicable margin of 1.50% to 2.00%.

Refer to Note 3, "Acquisitions and Divestitures," for more information on strategic transactions that have provided significant liquidity that allowed for additional voluntary debt pay down in fiscal 2022 and 2021.

Following the first quarter of fiscal 2019 dividend payout, Adient suspended future dividends.

The ABL Credit Facility was set to mature on May 6, 2024, subject to a springing maturity date 91 days earlier if certain amounts remain outstanding at that time under the Term Loan B Agreement (defined below).

Adient will pay a commitment fee of 0.25% to 0.375% on the unused portion of the commitments under the asset-based revolving credit facility based on average global availability.

4 unchanged sentences

The ABL Credit Agreement is secured on a first-priority lien on all accounts receivable, inventory and bank accounts (and funds on deposit therein) and a second-priority lien on all of the tangible and intangible assets of certain Adient subsidiaries.

As of September 30, 2021, Adient had not drawn down on the ABL Credit Facility and had availability under this facility of $739 million (net of $59 million of letters of credit).

In addition, Adient US and Adient Global Holdings S.à r.l., a wholly-owned subsidiary of Adient, maintain a term loan credit agreement (the “Term Loan B Agreement”) that initially provided for a 5-year $800 million senior secured term loan facility that was fully drawn on closing.

The Term Loan B Agreement amortizes in equal quarterly installments at a rate of 1.00% per annum of the original principal amount thereof, with the remaining balance originally due at final maturity on May 6, 2024.

Interest on the Term Loan B Agreement accrues at the Eurodollar rate plus an applicable margin originally equal to 4.25% (with one 0.25% step down based on achievement of a specific secured net leverage level starting with the fiscal quarter ending

On November 24, 2021, Adient entered into an amendment to its ABL Credit Facility (the “2021 ABL Amendment”) to amend certain terms and provisions, including to (i) change the interest rate benchmark rates applicable under the ABL Credit Facility for borrowings denominated in euro, Swedish krona and pounds sterling to EURIBOR, STIBOR, and SONIA, in each case subject to certain adjustments, and (ii) update the provisions in our ABL Credit Facility by which U.S.

dollar LIBOR will eventually be replaced with SOFR or another interest rate benchmark, in each case, to reflect the most recent standards and practices used in the industry.

Interest is payable on the ABL Credit Facility at a fluctuating rate of interest determined by reference to LIBOR, in the case of amounts outstanding in

Adient plc | Form 10-K | 42

December 31, 2019).

dollars, EURIBOR, in the case of amounts outstanding in euros, STIBOR, in the case of amounts outstanding in Swedish krona and SONIA, in the case of amounts outstanding in pounds sterling, in each case, plus an applicable margin of 1.50% to 2.00%.

On November 2, 2022, Adient entered into an amendment to its ABL Credit Facility (the “2022 ABL Amendment”) to amend certain terms and provisions, including to (i) extend its maturity date to November 2, 2027 (subject to certain springing maturity provisions), (ii) replace LIBOR with Term SOFR as the benchmark rate of interest for U.S.

dollar borrowings thereunder and (iii) provide flexibility for future amendments to the ABL Credit Facility to incorporate certain sustainability-based pricing provisions.

Other key terms and conditions of the facility remain unchanged.

As of September 30, 2022, Adient had not drawn down on the ABL Credit Facility and had availability under this facility of $899 million (net of $13 million of letters of credit).

In addition, Adient US and Adient Global Holdings S.à r.l., a wholly-owned subsidiary of Adient, maintain a term loan credit agreement, as amended in fiscal 2021, (the “Term Loan B Agreement”) that provides for a $1.0 billion senior secured term loan facility.

The Term Loan B Agreement amortizes in equal quarterly installments at a rate of 1.00% per annum of the original principal amount thereof, with the remaining balance due at final maturity on April 8, 2028.

Interest on the Term Loan B Agreement accrues at the Eurodollar rate plus an applicable margin equal to 3.25%.

The Term Loan B Agreement also permits Adient to incur incremental term loans in an aggregate amount not to exceed the greater of $750 million and an unlimited amount subject to a pro forma first lien secured net leverage ratio of not greater than 1.75 to 1.00 and certain other conditions.

In April 2021, Adient amended the Term Loan B Agreement ("Amended Agreement") which, among other changes (i) extended the maturity date for loans outstanding to April 8, 2028, (ii) reduced the interest rate margin applicable thereunder by 0.75% to 3.50%, in the case of Eurodollar Rate loans, and 2.50% (in the case of Base Rate loans) (in each case, with one 0.25% step down based on achievement of a specified first lien secured net leverage level starting with the fiscal quarter ending December 31, 2021) and (iii) made certain other negative covenant and mandatory prepayment changes in connection therewith.

The amendment also established incremental term loans in an aggregate principal amount of $214 million resulting in total loans outstanding under the Amended Agreement of $1.0 billion.

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

Adient paid $7 million related to the fiscal 2021 amendment along with expensing $8 million of previously deferred financing costs to net financing charges.

Adient US was also a party to an indenture relating to the issuance of $800 million aggregate principal amount of Senior First Lien Notes.

The notes originally mature on May 15, 2026 and bear interest at a rate of 7.00% per annum.

Interest on these notes was payable semi-annually in arrears on November 15 and May 15 of each year, commencing on November 15, 2019.

During the second quarter of fiscal 2021, Adient repurchased $640 million of the outstanding balance of the Senior First Lien Notes at a price of 107% of the principal plus $17 million of accrued and unpaid interest.

As a result, $9 million of previously deferred financing costs was written off to net financing charges.

During the third quarter of fiscal 2021, Adient redeemed the $160 million of remaining balance of the Senior First Lien Notes at a price of 103% of the principal plus $4 million of accrued and unpaid interest, and wrote off $3 million of previously deferred financing costs as a result of the debt extinguishment.

The ABL Credit Facility, Term Loan B Agreement and the Senior First Lien Notes due 2026 contain covenants that are usual and customary for facilities and debt instruments of this type and that, among other things, restrict the ability of Adient and its restricted subsidiaries to:

The notes were set to mature on May 15, 2026 and bore interest at a rate of 7.00% per annum.

Interest on these notes was payable semi-annually in arrears on November 15 and May 15 of each year.

During fiscal 2021, Adient repurchased the full amount of the outstanding balance of the Senior First Lien Notes at a premium of $50 million plus $21 million of accrued and unpaid interest.

As a result, $12 million of previously deferred financing costs were expensed to net financing charges.

The ABL Credit Facility and Term Loan B Agreement contain covenants that are usual and customary for facilities and debt instruments of this type and that, among other things, restrict the ability of Adient and its restricted subsidiaries to:

create certain liens and enter into sale and lease-back transactions;

6 unchanged sentences

Adient Global Holdings Ltd.

(“AGH”), a wholly-owned subsidiary of Adient, maintains $900 million aggregate principal amount of 4.875% USD-denominated unsecured notes due 2026.

(“AGH”), a wholly-owned subsidiary of Adient, previously maintained $900 million aggregate principal amount of 4.875% USD-denominated unsecured notes due 2026.

During the fourth quarter of fiscal 2020, Adient redeemed $103 million of face value of these notes, resulting in a remaining balance of $797 million as of September 30, 2020.

Adient recorded a gain of $3 million associated with this partial redemption.

AGH also maintains €1.0 billion aggregate principal amount of 3.50% unsecured notes due 2024.

Adient further redeemed $2 million of the notes during fiscal 2021, resulting in a remaining balance of $795 million as of September 30, 2022 and 2021.

AGH also previously maintained €1.0 billion aggregate principal amount of 3.50% unsecured notes due 2024.

In fiscal 2022, Adient repurchased €177 million ($198 million) of the 3.50% unsecured notes due 2024 at a premium of €3 million ($4 million) plus €3 million ($3 million) of accrued and unpaid interest, and expensed €1 million ($1 million) of previously deferred financing costs to net financing charges.

As of September 30, 2022, the remaining balance of this debt was €823 million ($809 million).

Adient Germany Ltd.

KG, a wholly owned subsidiary of Adient, maintains €135 million in an unsecured term loan from the European Investment Bank (“EIB”) due in 2022.

The loan bears interest at the 6-month EURIBOR rate plus 158 basis points.

Adient is compliant with the net leverage ratio at September 30, 2021 and expects to be compliant for the remainder of the term.

During the first quarter of fiscal 2021, Adient repaid $16 million of the EIB loan, triggered in part by the redemption of debt in the prior year.

Adient repaid $20 million of the EIB loan in May 2021, triggered by the prior year sale of the fabrics business.

On April 20, 2020, Adient US offered $600 million (net proceeds of $591 million) aggregate principal amount of 9.00% Senior First Lien Notes due 2025.

These notes will mature on April 15, 2025, provided that if AGH has not refinanced (or otherwise redeemed) in whole its outstanding 3.50% unsecured notes due 2024 or any refinancing indebtedness thereof that matures earlier than 91 days prior to the maturity date of the Senior First Lien Notes due 2025 on or prior to May 15, 2024, these notes will mature on May 15, 2024.

Interest on these notes is due on April 15 and October 15 each year, beginning on October 15, 2020.

These notes contain covenants that are usual and customary, similar to the covenants on the Senior First Lien Notes due 2026 as described above.

KG, a wholly owned subsidiary of Adient, previously maintained €135 million ($156 million) in an unsecured term loan from the European Investment Bank (“EIB”) due in 2022.

The loan bore interest at the 6-month EURIBOR rate plus 158 basis points.

During fiscal 2021, Adient repaid $36 million of the EIB loan, triggered in part by the redemption of debt and the sale of the fabrics business in the prior year.

Adient fully repaid the remaining balance of the EIB loan in May 2022 upon its maturity.

On April 20, 2020, Adient US issued $600 million (net proceeds of $591 million) aggregate principal amount of 9.00% Senior First Lien Notes due 2025.

These notes were set to mature on April 15, 2025, provided that if AGH has not refinanced (or otherwise redeemed) in whole its outstanding 3.50% unsecured notes due 2024 or any refinancing indebtedness thereof that matures earlier than 91 days prior to the maturity date of the Senior First Lien Notes due 2025 on or prior to May 15, 2024, these notes will mature on May 15, 2024.

Interest on these notes was due on April 15 and October 15 each year, beginning on October 15, 2020.

These notes contained covenants that were usual and customary, similar to the covenants as described above.

Adient incurred $10 million of debt issuance cost associated with this new debt in fiscal 2020.

In fiscal 2022, Adient

Adient plc | Form 10-K | 43

repurchased the full $600 million of 9.00% Senior First Lien Notes due 2025 at a premium of $34 million plus $19 million of accrued and unpaid interest, and expensed $7 million of previously deferred financing costs to net financing charges.

Sources of Cash Flows

7 unchanged sentences

Fiscal 2022 compared to Fiscal 2021:

The increase in cash flows from operating activities is primarily due to higher levels of operating profits, partially offset by unfavorable changes to working capital year-over-year driven by higher levels of inventory, higher levels of restructuring amounts paid and higher levels of interest paid in the current year.

Fiscal 2020 compared to Fiscal 2019:

The decrease in operating cash flows is due primarily to lower levels of operating profits, partially offset by lower levels of trade working capital, specifically lower levels of accounts receivable, inventory and accounts payable.

The increase in operating cash flows is primarily due to favorable changes of trade working capital, specifically lower levels of inventory and restructuring spending, and higher levels of accounts payable, partially offset by higher levels of accounts receivable (net of $137 million of favorable impact from accounts receivable factoring programs).

Operating cash flows were also positively impacted by lower interest payments, but were negatively impacted by lapsed non-income related tax deferral programs and lower levels of dividends from nonconsolidated partially-owned affiliates.

See the working capital section below for further information on changes in working capital.

Fiscal 2021 compared to Fiscal 2020:

Cash flows from investing activities

Fiscal 2022 compared to Fiscal 2021:

The increase in cash provided by investing activities is due to higher levels of proceeds received from business divestitures (primarily $715 million from the 2021 Yanfeng Transaction and $53 million from the sale of SJA) and lower levels of capital expenditures, partially offset by business acquisitions in the current year.

The increase in cash provided by investing activities is primarily attributable to the $652 million of proceeds received related to the 2021 Yanfeng Transaction, the $46 million in proceeds received from the sale of the assets in Turkey, and the collection of $41 million of deferred proceeds from the sale of Adient's interest in YFAI as part of the 2020 Yanfeng Transaction and lower capital expenditures, partially offset by the $30 million settlement of the derivative contracts related to the cash proceeds of the 2021 Yanfeng Transaction.

Refer to Note 3, “Acquisitions and Divestitures,” and Note 10, “Derivative Instruments and Hedging Activities,” of the notes to the consolidated financial statements for additional information.

Fiscal 2021 compared to Fiscal 2020:

The increase in cash provided by investing activities is primarily due to lower levels of capital expenditures in the current year as well as $329 million of proceeds from the Yanfeng transaction and $170 million of net proceeds from the sale of the fabrics business, partially offset by lower proceeds from the sale of assets as compared to the prior year and a $37 million cash outflow as a result of the deconsolidation of the Adient Aerospace joint venture.

Cash flows from financing activities

Fiscal 2022 compared to Fiscal 2021:

The significant increase in cash used by financing activities is primarily due to the repayment of long-term debt, including premium paid, of $895 million, the prior year draw down of the ABL revolver of $179 million, and the $600 million of proceeds from the issuance of 9.00% Senior Notes in April 2020, partially offset by the $214 million incremental borrowing in the third quarter of fiscal 2021 under the amended Term Loan B Agreement.

The increase in cash used by financing activities is attributable to the repayment of long-term debt, including premiums paid, of $987 million, amounts paid to acquire the noncontrolling interest of CQADNT ($153 million), along with higher dividend payments to noncontrolling interests primarily in connection with the acquisition of CQANDT.

Refer to Note 9, “Debt and Financing Arrangements,” and Note 3, “Acquisitions and Divestitures,” of the notes to the consolidated financial statements for additional information.

Fiscal 2021 compared to Fiscal 2020:

The increase in cash from financing activities is primarily attributable to the issuance of $600 million of debt in fiscal 2020 along with lower repayments of long-term debt.

Capital expenditures

Fiscal 2022 compared to Fiscal 2021:

Capital expenditures decreased year over year based on timing of program spend on product launches including certain launch delays in EMEA and tightening controls around overall spending.

Fiscal 2020 compared to Fiscal 2019:

The decrease in capital expenditures was primarily related to decreased year over year spending based on timing of program spend on product launches and tightening controls around overall spending.

Capital expenditures decreased year-over-year based on timing of program spend on product launches and continued tightening of overall spending.

Adient plc | Form 10-K | 44

Fiscal 2021 compared to Fiscal 2020:

Capital expenditures decreased year-over-year based on timing of program spend on product launches including certain launch delays in EMEA and tightening controls around overall spending.

Working capital

3 unchanged sentences

Working capital $ 662 $ 1,575

The increase in working capital of $912 million is primarily attributable to higher levels of inventory and other current assets (of which $643 million is attributable to the receivable related to the 2021 Yanfeng Transaction), lower levels of restructuring reserve, and other current liabilities, partially offset by lower levels of accounts receivable.

The decrease in working capital of $913 million is primarily attributable to lower cash and cash equivalents as a result of the repayment of long-term debt during the current year, and lower other current assets balances due to the settlement of all outstanding balances related to the 2021 Yanfeng Transaction.

Off-Balance Sheet Arrangements

Adient enters into supply chain financing programs in certain foreign jurisdictions to sell accounts receivable without recourse to third-party financial institutions.

Sales of accounts receivable are reflected as a reduction of accounts receivable on the consolidated statements of financial position and the proceeds are included in cash flows from operating activities in the consolidated statements of cash flows.

As of September 30, 2021, $132 million has been funded under these programs.

Adient enters into supply chain financing programs in domestic and certain foreign jurisdictions to either sell or discount accounts receivable without recourse to third-party institutions.

Sales or discounts of accounts receivable are reflected as a reduction of accounts receivable on the consolidated statements of financial position and the proceeds are included in cash flows from operating activities in the consolidated statements of cash flows.

As of September 30, 2022 and 2021, $269 million and $132 million have been funded under these programs, respectively.

Contractual Obligations

8 unchanged sentences

Total contractual cash obligations $ 3,952 $ 443 $ 1,200 $ 1,105 $ 1,204

(1) Includes $67 million of committed capital expenditures.

(1) Primarily consists of commitments for production materials and other supply items, as well as $92 million of committed capital expenditures.

Effects of Inflation and Changing Prices

The effects of inflation have historically not been significant to Adient's results of operations.

Generally, Adient has been able to implement operating efficiencies to sufficiently offset cost increases, which have been moderate.

The automotive industry has recently experienced a period of sustained price increases for commodities such as steel and to a lesser extent petrochemicals, as well as higher freight costs, that may continue in the future as demand increases and supply may remain constrained which has resulted in, and may continue to result in, increased costs for Adient that may not be, or may only be partially, offset.

Generally, Adient has been able to implement operating efficiencies to sufficiently offset cost increases, which over time have been moderate.

The automotive industry has recently experienced a period of significant volatility in commodity and other input costs, including steel, petrochemical, freight energy and labor costs.

This price volatility may continue into the future as demand increases and/or supply remains constrained.

Price volatility has resulted in an overall increase of input costs for Adient that may not be, or may only be partially, offset through customer negotiations.

During fiscal 2023, commodity prices and availability could fluctuate throughout the year and significantly affect Adient's results of operations.

Critical Accounting Estimates and Policies

Adient prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (U.S.

This requires management to make estimates and assumptions that affect reported amounts and related disclosures.

Actual results could differ from those estimates.

The following policies are considered by management

This requires management to make estimates and assumptions that affect reported amounts

Adient plc | Form 10-K | 45

to be the most critical in understanding the judgments that are involved in the preparation of Adient's consolidated financial statements and the uncertainties that could impact results of operations, financial position and cash flows.

and related disclosures.

Actual results could differ from those estimates.

The following policies are considered by management to be the most critical in understanding the judgments that are involved in the preparation of Adient's consolidated financial statements and the uncertainties that could impact results of operations, financial position and cash flows.

Revenue Recognition

14 unchanged sentences

The estimated future cash flows reflect management's latest assumptions of the financial projections based on current and anticipated competitive landscape, including estimates of revenue based on production volumes over the foreseeable future and long-term growth rates, and operating margins based on historical trends and future cost containment activities.

The financial projections also considered the impact that COVID-19, operational interruptions due to semiconductor shortages and higher commodity and shipping costs are having on Adient’s current and future operations as well as the impact to new vehicle sales in future years.

The financial projections also considered the impact that the COVID-19 pandemic, supply-chain disruptions, higher commodity, shipping and energy costs, and the Russia/Ukraine conflict are having on Adient’s current and future operations as well as the impact to new vehicle sales in future years.

A change in any of these estimates and assumptions could produce a different fair value, which could have a material impact on the results of the goodwill impairment test and on Adient's results of operations.

8 unchanged sentences

A considerable amount of management judgment and assumptions are required in performing the impairment tests.

No triggering events were identified during fiscal 2022 and 2021.

During the fourth quarter of fiscal 2020, Adient concluded it had a triggering event requiring assessment of an impairment within a separate China entity and as a result recorded a $5 million pre-tax non-cash impairment in the Asia segment related to long-lived assets due to an overall decline in the forecasted operations within that business.

During the third quarter of fiscal 2020, Adient concluded it had a triggering event requiring assessment of impairment within the Futuris China business and as a result recorded a pre-tax non-cash impairment of $27 million in the Asia segment, which consisted of customer relationship intangible assets of $24 million and other long-lived assets of $3 million, due to an

During the third quarter of fiscal 2020, Adient concluded it had a triggering event requiring assessment of impairment within the Futuris China business and as a result

Adient plc | Form 10-K | 46

overall decline in forecasted operations within that business.

In the second quarter of fiscal 2019, Adient concluded it had triggering events requiring assessment of impairment of long-lived assets in the seat structure and mechanism operations.

As a result, Adient reviewed the long-lived assets for impairment and recorded a $66 million impairment charge within restructuring and impairment costs on the consolidated statements of income (loss).

The impairment charge related to long-lived assets in North America and Europe asset groups as of March 31, 2019 in support of current programs.

No other long-lived asset impairments were identified in fiscal 2019.

recorded a pre-tax non-cash impairment of $27 million in the Asia segment, which consisted of customer relationship intangible assets of $24 million and other long-lived assets of $3 million, due to an overall decline in forecasted operations within that business.

These impairments were measured, depending on the asset, either under an income approach utilizing forecasted discounted cash flows or a market approach utilizing appraisal techniques to determine fair values of the impaired assets.

2 unchanged sentences

To the extent that profitability on current or future programs decline as compared to forecasted profitability or if adverse changes occur to key assumptions or other fair value measurement inputs, further impairment of long-lived assets could occur in the future.

Refer to Note 16, "Impairment of Long-Lived Assets," of the notes to the consolidated financial statements for additional information.

Adient monitors its investments in partially-owned affiliates for indicators of other-than-temporary declines in value on an ongoing basis.

1 unchanged sentence

Fair value is generally determined using an income approach based on discounted cash flows or negotiated transaction values.

During the second quarter of fiscal 2022, Adient entered into agreements, whereby Adient would sell its interests in two joint ventures in China held directly by Adient, each of which represented 25% of their total issued and outstanding equity interests, for $3 million.

As a result, Adient concluded that indicators of other-than-temporary impairment were present related to the investments in these joint ventures, and recorded a non-cash impairment charge of $3 million.

Also during the second quarter of fiscal 2022, Adient concluded that indicators of other-than-temporary impairment were present related to a partially-owned affiliate in South Africa as the Company pursued a sale of a portion of its interest in the joint venture and recorded a non-cash impairment charge of $6 million.

During fiscal 2020, Adient entered into an agreement to, among other things, transfer all of the issued and outstanding equity interest in YFAI held, directly or indirectly, by Adient, which represented 30% of YFAI’s total issued and outstanding equity interest, to Yanfeng Automotive Trim Systems Company Ltd.

for $369 million, of which $309 million was paid at closing and $60 million is to be paid on a deferred basis.

for $369 million, of which $309 million was paid at closing and $60 million was subsequently paid in fiscal 2021 and 2022.

This transaction closed during the fourth quarter of fiscal 2020.

13 unchanged sentences

Adient considers the expected benefit payments on a plan-by-plan basis when setting assumed discount rates.

As a result, Adient uses different discount rates for each plan depending on the plan jurisdiction, the demographics of participants and the expected timing of benefit payments.

As a result, Adient uses different discount rates for each plan depending on the plan jurisdiction, the demographics of participants and the

Adient plc | Form 10-K | 47

expected timing of benefit payments.

pension plans, Adient uses a discount rate provided by an independent third party calculated based on an appropriate mix of high quality bonds.

For the non-U.S.

pension, Adient consistently uses the

Adient plc | Form 10-K | 48

relevant country specific benchmark indices for determining the various discount rates.

pension, Adient consistently uses the relevant country specific benchmark indices for determining the various discount rates.

Adient's discount rate on U.S.

7 unchanged sentences

The actual rate of return on U.S.

pension plans was below 5.75% in fiscal 2021 and 2020.

pension plans was below 5.75% in fiscal 2022 and was below 5.75% in fiscal 2021.

For fiscal years 2022 and 2021, Adient's weighted average expected long-term return on non-U.S.

1 unchanged sentence

The actual rate of return on non-U.S.

pension plans was above 3.68% in fiscal 2021 and was above 4.01% in fiscal 2020.

pension plans was below 3.20% in fiscal 2022 and was above 3.68% in fiscal 2021.

For fiscal 2023, Adient estimates the long-term rate of return will approximate 6.75% and 4.53% for U.S.

5 unchanged sentences

Adient expects to contribute at least $14 million in cash to its defined benefit pension plans in fiscal 2023.

In fiscal 2021, total Adient contributions to the postretirement plans were not significant.

Based on information provided by its independent actuaries and other relevant sources, Adient believes that the assumptions used are reasonable;

however, changes in these assumptions could impact Adient's financial position, results of operations or cash flows.

The following table illustrates estimated increases (decreases) in projected benefit obligation (PBO) and net periodic benefit cost excluding changes in mark-to-market adjustments (NPBC) as of September 30, 2022 and for fiscal 2022 assuming a decrease of 100 basis points in the discount rate and expected return on plan assets.

Pension Benefits

Plans Non-U.S.

(in millions) Change in PBO Change in NPBC Change in PBO Change in NPBC

100 basis point decrease in discount rate $ 1 $ — $ 46 $ (4)

100 basis point decrease in expected return on plan assets N/A — N/A 4

Refer to Note 14, "Retirement Plans," of the notes to consolidated financial statements for more information on Adient's pension plans.

6 unchanged sentences

Since future financial results may differ from previous estimates, periodic adjustments to Adient's valuation allowances may be necessary.

Adient plc | Form 10-K | 48

Adient is subject to income taxes in Ireland, the U.S.

8 unchanged sentences

Adient's intent is for such earnings to be reinvested by the subsidiaries or to be repatriated only when it would be tax efficient.

Adient plc | Form 10-K | 49

Refer to Note 16, "Income Taxes," of the notes to consolidated financial statements for Adient's income tax disclosures.

6 unchanged sentences

During fiscal 2022, Adient committed to a restructuring plan ("2022 Plan") of $25 million that was offset by $10 million of prior year underspend.

Of the restructuring costs recorded, $23 million related to the EMEA segment, $3 million related to the Americas segment, and $1 million relates to the Asia segment.

The restructuring actions relate to cost reduction initiatives and consist primarily of workforce reductions in EMEA and Americas.

Adient currently estimates that upon completion of the restructuring actions, the fiscal 2022 restructuring plan will reduce annual operating costs by approximately $20 million, which is primarily the result of lower costs of sales and selling, general and administrative expenses due to reduced employee-related costs, of which approximately 20% will result in net savings.

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 2024.

During fiscal 2021, Adient committed to a restructuring plan ("2021 Plan") of $27 million that was offset by $16 million of prior year underspend.

Of the restructuring costs recorded, $23 million related to the EMEA segment, $3 million related to the Americas segment, and $1 million related to the Asia segment.

The restructuring actions relate to cost reduction initiatives and consist primarily of workforce reductions and lease contract terminations.

Adient currently estimates that upon completion of the restructuring actions, the fiscal 2021 restructuring plan will reduce annual operating costs by approximately $23 million, which is primarily the result of lower costs of sales and selling, general and administrative expenses due to reduced employee-related costs, of which approximately 20%-30% will result in net savings.

The restructuring actions are expected to be substantially completed in fiscal 2023.

During fiscal 2020, Adient committed to a restructuring plan ("2020 Plan") of $205 million.

1 unchanged sentence

The restructuring actions relate to cost reduction initiatives and consist primarily of workforce reductions.

Also recorded in fiscal 2020 is $20 million of underspend related to prior year plan reserves.

Adient currently estimates that upon completion of the restructuring actions, the fiscal 2020 restructuring plan will reduce annual operating costs by approximately $180 million, which is primarily the result of lower costs of sales and selling, general and administrative expenses due to reduced employee-related costs, of which approximately 35%-40% will result in net savings.

The restructuring actions are expected to be substantially completed by fiscal 2024.

During fiscal 2019, Adient committed to a restructuring plan ("2019 Plan") of $105 million.

Of the restructuring costs recorded, $81 million relates to the EMEA segment, $16 million relates to the Americas segment and $8 million relates to the Asia segment.

The restructuring actions relate to cost reduction initiatives and consist primarily of workforce reductions.

Also recorded in fiscal 2019 was $16 million of prior year underspend, a $9 million increase to a prior year reserve and $6 million of recoveries from a customer related to previous restructuring charges.

New Accounting Pronouncements

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis