

11. Stock-Based Compensation

Adient provides certain key employees equity awards in the form of performance share units (PSUs) and restricted stock units (RSUs) under the Adient plc 2016 Omnibus Incentive Plan (the Plan) and provides directors with share awards under the Adient plc 2016 Director Share Plan. These plans were adopted in conjunction with the separation.

Total stock-based compensation cost included in the consolidated statements of income was $45 million, $28 million and $16 million for the fiscal years ended September 30, 2017, 2016 and 2015, respectively. The total income tax benefit recognized in the consolidated statements of income for the share-based compensation arrangements was $21 million, $11 million and $6 million for the fiscal years ended September 30, 2017, 2016 and 2015, respectively. Stock-based compensation expense prior to the separation was allocated to Adient based on the portion of Adient's equity compensation programs in which Adient employees participated.

In conjunction with the separation, previously outstanding stock-based compensation awards granted under the former Parent's equity compensation programs prior to the separation and held by certain executives and employees of Adient were adjusted and converted into new Adient equity awards using a formula designated to preserve the intrinsic value of the awards. Upon the separation on October 31, 2016, holders of former Parent stock options, RSUs, and SARs generally received one ordinary share of Adient for every ten ordinary shares of the former parent held at the close of business on October 19, 2016, the record date of the distribution, and cash in lieu of fractional shares (if any) of Adient. Accordingly, certain executives and employees of Adient hold converted awards in both the former Parent and Adient shares subsequent to the separation. Converted awards retained the vesting schedule and expiration date of the original awards. Outstanding stock awards related to the former Parent stock are not included in Adient's dilutive share calculation.

The following tables present activity related to the conversion and granting of awards during the twelve months ended September 30, 2017 along with the composition of outstanding and exercisable awards at September 30, 2017 for remaining former Parent and new Adient awards.

Restricted Stock

The Plan provides for the award of restricted stock or restricted stock units to certain employees. These awards are typically share settled except for certain non-U.S. employees or those who elect to defer settlement until retirement at which point the award would be settled in cash. Cash settled awards are recorded in Adient's consolidated statements of financial position as a liability and adjusted each reporting period for changes in share value until the settlement of the award. Restricted awards typically vest after three years from the grant date. The Plan allows for different vesting terms on specific grants with approval by Adient's Board of Directors.

A summary of the status of nonvested restricted stock awards at September 30, 2017, and changes for the fiscal year then ended, for Adient employees is presented below:



	Weighted Average Price		Shares/Units Subject to Restriction
Nonvested, September 30, 2016	$	46.42	1,320,448
Converted	48.06		135,026
Converted and nonvested on October 31, 2016	46.57		1,455,474
Granted	45.19		1,162,213
Vested	50.29		(281,539	)
Forfeited	44.08		(83,710	)
Nonvested, September 30, 2017	$	45.49	2,252,438

Former Parent nonvested, September 30, 2017	$	45.57	1,010,967
Adient nonvested, September 30, 2017	45.42		1,241,471
Total nonvested, September 30, 2017	$	45.49	2,252,438

At September 30, 2017, Adient had approximately $60 million of total unrecognized compensation cost related to nonvested restricted stock arrangements granted. That cost is expected to be recognized over a weighted-average period of 2.0 years.

Performance Share Awards

The Plan permits the grant of PSU awards. The number of PSUs granted is equal to the PSU award value divided by the closing price of a Adient ordinary share at the grant date. The PSUs are generally contingent on the achievement of predetermined performance goals over a three-year performance period as well as on the award holder's continuous employment until the vesting date. Each PSU that is earned will be settled with an ordinary share of Adient following the completion of the performance period, unless the award holder elected to defer a portion or all of the award until retirement, which would then be settled in cash. Cash settled awards are recorded in Adient's consolidated statements of financial position as a liability and adjusted each reporting period for changes in share value until the settlement of the award.

A summary of the status of Adient's nonvested PSUs at September 30, 2017, and changes for the fiscal year then ended, for Adient employees is presented below:



	Weighted Average Price		Shares/Units Subject to PSU
Nonvested, September 30, 2016	$	—	—
Converted and nonvested on October 31, 2016	—		—
Granted	44.60		236,034
Vested	—		—
Forfeited	—		—
Nonvested, September 30, 2017	$	44.60	236,034

At September 30, 2017, Adient had approximately $18 million of total unrecognized compensation cost related to nonvested performance share units granted. That cost is expected to be recognized over a weighted-average period of 2.1 years.

Stock Options

No new stock options have been granted under the Adient plc 2016 Omnibus Incentive Plan. Stock options were previously granted to eligible employees prior to the separation from the former Parent. Stock option awards typically vest between two and three years after the grant date and expire ten years from the grant date. The fair value of each option was estimated on the date of grant using a Black-Scholes option valuation model.

A summary of stock option activity at September 30, 2017, and changes for the year then ended, is presented below:



	Weighted Average Option Price		Shares Subject to Option		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value (in millions)
Outstanding, September 30, 2016	$	32.42	2,336,028
Exercised	27.22		(6,280	)
Forfeited or expired	31.71		(3,330	)
Converted	33.28		169,125
Converted and outstanding on October 31, 2016	32.49		2,495,543
Granted	—		—
Exercised	27.58		(1,070,284	)
Forfeited or expired	26.32		(3,126	)
Outstanding, September 30, 2017	$	32.04	1,422,133		4.7	$	22
Exercisable, September 30, 2017	$	29.58	1,151,192		4.0	$	21

Former Parent outstanding, September 30, 2017	$	31.83	1,221,817		4.8	$	12
Adient outstanding, September 30, 2017	33.32		200,316		4.1	10
Total outstanding, September 30, 2017	$	32.04	1,422,133		4.7	$	22

Former Parent exercisable, September 30, 2017	$	29.26	975,505		4.1	$	12
Adient exercisable, September 30, 2017	31.34		175,687		3.6	9
Total exercisable, September 30, 2017	$	29.58	1,151,192		4.0	$	21

There were no stock options granted in fiscal 2017. The weighted-average grant-date fair value of options granted to Adient employees during the fiscal years ended September 30, 2016 and 2015 was $13.15 and $15.53, respectively. The total intrinsic value of options exercised by Adient employees during the fiscal years ended September 30, 2017, 2016 and 2015 was approximately $18 million, $4 million and $30 million, respectively, primarily consisting of former Parent awards. At September 30, 2017, Adient had approximately $0.2 million of total unrecognized compensation cost related to nonvested stock options granted. That cost is expected to be recognized during fiscal 2018.

Stock Appreciation Rights

SARs vest under the same terms and conditions as stock option awards; however, they are settled in cash for the difference between the market price on the date of exercise and the exercise price. As a result, SARs are recorded in Adient's consolidated statements of financial position as a liability until the date of exercise.

The fair value of each SAR award is estimated using a similar method described for stock options. The fair value of each SAR award is recalculated at the end of each reporting period and the liability and expense are adjusted based on the new fair value.

A summary of SAR activity at September 30, 2017, and changes for the year then ended, is presented below:



	Weighted Average SAR Price		Shares Subject to SAR		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value (in millions)
Outstanding, September 30, 2016	$	31.26	654,694
Exercised	29.68		(9,470	)
Converted	33.16		41,713
Converted and outstanding on October 31, 2016	31.40		686,937
Granted	—		—
Exercised	32.35		(131,470	)
Forfeited or expired	45.95		(6,309	)
Outstanding, September 30, 2017	$	28.12	549,158		3.8	$	9
Exercisable, September 30, 2017	$	27.10	511,854		3.6	$	9

Former Parent outstanding, September 30, 2017	$	27.79	495,754		3.8	$	6
Adient outstanding, September 30, 2017	31.19		53,404		3.8	3
Total outstanding, September 30, 2017	$	28.12	549,158		3.8	$	9

Former Parent exercisable, September 30, 2017	$	26.78	461,841		3.6	$	6
Adient exercisable, September 30, 2017	30.12		50,013		3.5	3
Total exercisable, September 30, 2017	$	27.10	511,854		3.6	$	9

In conjunction with the exercise of SARs, Adient made payments of $1 million, $4 million and $7 million during the fiscal years ended September 30, 2017, 2016 and 2015, respectively.