Adient(ADNT) - 2025 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Unaudited Financial Statements The company's Q3 net income improved to $36 million, but the nine-month net loss widened to $299 million due to a significant goodwill impairment charge Consolidated Statements of Income (Loss) Highlights | Indicator (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $3,741 | $3,716 | $10,847 | $11,126 | | Gross profit | $237 | $207 | $714 | $683 | | Earnings before interest and income taxes | $118 | $94 | $(5) | $213 | | Net income (loss) attributable to Adient | $36 | $(11) | $(299) | $(61) | | Diluted EPS | $0.43 | $(0.12) | $(3.56) | $(0.67) | Consolidated Statements of Financial Position Highlights | Indicator (in millions) | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Total current assets | $4,022 | $4,086 | | Total assets | $8,836 | $9,351 | | Total current liabilities | $3,598 | $3,678 | | Long-term debt | $2,385 | $2,396 | | Total liabilities | $6,676 | $6,817 | | Total shareholders' equity | $2,074 | $2,443 | Consolidated Statements of Cash Flows Highlights (Nine Months Ended June 30) | Indicator (in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Cash provided by operating activities | $236 | $280 | | Cash used by investing activities | $(127) | $(183) | | Cash used by financing activities | $(212) | $(313) | | Decrease in cash and cash equivalents | $(85) | $(220) | | Cash and cash equivalents at end of period | $860 | $890 | - A triggering event in Q2 fiscal 2025 led to a $333 million non-cash goodwill impairment charge for the EMEA reporting unit, leaving no remaining goodwill in that segment[35][36] - In February 2025, the company issued $795 million of 7.50% senior unsecured notes due 2033 to redeem its 4.875% notes due 2026[50] - Adient repurchased 4,014,410 ordinary shares for $75 million during the first nine months of fiscal 2025, with $185 million remaining under the repurchase authorization[75] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Macroeconomic pressures and slower EV adoption impacted performance, leading to a goodwill impairment, while restructuring efforts continue amid sufficient liquidity Factors Affecting Adient's Operating Environment The company's operating environment is challenged by weakening consumer demand, tariffs, and market pressures, which prompted a significant goodwill impairment charge - The company faces uncertainties from weakening consumer demand, tariffs, market share loss for foreign OEMs in Asia, and overcapacity in EMEA due to slower EV adoption rates[117] - As a result of these macroeconomic factors, Adient recorded a $333 million non-cash goodwill impairment in its EMEA segment as of March 31, 2025[118] Consolidated Results of Operations Q3 net sales rose 1% to $3.74 billion, while the nine-month net loss widened to $299 million, primarily due to a goodwill impairment charge Net Sales Performance | Period | Net Sales (in millions) | Change YoY | | :--- | :--- | :--- | | Q3 2025 | $3,741 | +1% | | Nine Months 2025 | $10,847 | -3% | - Q3 2025 net sales increase was driven by favorable foreign currencies ($84M) and pricing ($10M), partially offset by lower volumes ($54M)[125] - Gross profit margin improved from 5.6% to 6.3% in Q3 YoY and from 6.1% to 6.6% for the nine-month period YoY, driven by favorable pricing and operating performance[127] - The nine-month net loss of $299 million was primarily driven by a $333 million goodwill impairment charge in EMEA and a $10 million impairment on an investment[132][143] Segment Analysis Segment performance varied, with Americas and Asia showing Adjusted EBITDA growth, while the EMEA segment experienced a decline Adjusted EBITDA by Segment (Q3 2025 vs Q3 2024) | Segment | Q3 2025 Adj. EBITDA (in millions) | Q3 2024 Adj. EBITDA (in millions) | Change YoY | | :--- | :--- | :--- | :--- | | Americas | $112 | $99 | +13% | | EMEA | $21 | $25 | -16% | | Asia | $113 | $101 | +12% | - Americas: Adjusted EBITDA increased by $13 million in Q3 due to favorable pricing adjustments ($22M) and improved operating performance ($6M)[160] - EMEA: Adjusted EBITDA decreased by $4 million in Q3 due to higher administrative expenses ($11M) and lower production volumes ($5M), partially offset by favorable pricing ($14M)[164] - Asia: Adjusted EBITDA increased by $12 million in Q3 due to favorable operating performance ($10M) and positive currency effects ($6M)[168] Liquidity and Capital Resources The company maintains sufficient liquidity through operating cash flow and its credit facility while continuing share repurchases and restructuring efforts Cash Flow Summary (Nine Months Ended June 30) | Cash Flow (in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Operating Activities | $236 | $280 | | Investing Activities | $(127) | $(183) | | Financing Activities | $(212) | $(313) | - As of June 30, 2025, Adient had $872 million of availability under its ABL Credit Facility, with no amounts drawn down[172] - The company initiated the "2025 Plan" for restructuring, with expected annual operating cost savings of approximately $53 million upon completion[181] Quantitative and Qualitative Disclosures About Market Risk There were no material changes to the company's market risk exposures since the last annual report - Adient reported no material adverse changes in its market risk exposures since its last annual report[197] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period[198] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[199] PART II - OTHER INFORMATION Legal Proceedings Ongoing legal proceedings are not expected to have a material adverse effect on the company's financial condition - The company is involved in various legal proceedings but does not expect them to have a material adverse effect on its financial condition or results[201] Risk Factors Updated risks include impacts from U.S. trade policy, auto industry conditions evidenced by a goodwill impairment, and potential limitations on tax attribute usage - An updated risk factor highlights the adverse effect of U.S. trade policy and tariffs, noting that Adient had incurred $13 million of incremental tariff expense, net of recoveries[204] - The risk related to the global automotive industry's condition was updated to reflect the $333 million non-cash goodwill impairment in the EMEA reporting unit[207] - A new risk factor was added regarding the potential limitation on using net operating loss carryforwards if the company undergoes an "ownership change" under U.S. tax law[208] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased approximately $50 million of its shares in June 2025, with $185 million remaining under its repurchase authorization Share Repurchase Activity (Q3 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Total Cost (approx. in millions) | | :--- | :--- | :--- | :--- | | April 2025 | — | $— | $0 | | May 2025 | — | $— | $0 | | June 2025 | 2,787,081 | $17.94 | $50 | | Total | 2,787,081 | $17.94 | $50 | - As of June 30, 2025, the remaining authorized amount for share repurchases under the program was $185 million[211] Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the period - None[212] Mine Safety Disclosures This item is not applicable to Adient's business - Not applicable[213] Other Information No directors or executive officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter - No directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements during the quarter[214] Exhibits This section indexes the exhibits filed with the report, including required CEO/CFO certifications and interactive data files - The report includes CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, as well as Inline XBRL documents[217]