Stock-Based Compensation

12 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

12. Stock-Based Compensation

Adient provides certain key employees equity awards in the form of restricted stock units (RSU) and performance share units (PSUs) 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 $15 million, $20 million and $47 million for the fiscal years ended September 30, 2020, 2019 and 2018, respectively. No income tax benefits were recognized in the consolidated statements of income for the share-based compensation arrangements in any of these years due to tax valuation allowances in those years.

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 year ended September 30, 2020 along with the composition of outstanding and exercisable awards at September 30, 2020 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 elected to defer past awards 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 stock awards typically vest over a three year period following 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, 2020, and changes for the fiscal year then ended, is presented below:


	Weighted Average Price		Shares/Units Subject to Restriction
Nonvested, September 30, 2019	$	42.19	558,932
Granted	$	18.84	1,189,567
Vested	$	43.95	(287,300)
Forfeited	$	28.21	(126,360)
Nonvested, September 30, 2020	$	22.27	1,334,839

At September 30, 2020, Adient had approximately $18 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 1.6 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 except for certain non-U.S. employees or those who elected to defer a portion or all of past awards 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, 2020, and changes for the fiscal year then ended is presented below:


	Weighted Average Price		Shares/Units Subject to PSU
Nonvested, September 30, 2019	$	34.61	632,072
Granted	$	20.69	497,335
Vested	$	44.60	(153,020)
Forfeited	$	24.52	(72,986)
Nonvested, September 30, 2020	$	26.07	903,401

At September 30, 2020, Adient had approximately $6 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 1.7 years.

Stock Options

No new stock options have been granted under the 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, 2020, 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, 2019	$	38.25	591,630

Exercised	$	27.53	(50,900)
Forfeited or expired	$	26.79	(29,231)
Outstanding, September 30, 2020	$	40.09	511,499	3.4	$	2

Exercisable, September 30, 2020	$	40.09	511,499	3.4	$	2

Former Parent outstanding and exercisable, September 30, 2020	$	40.29	437,562	3.5	$	2
Adient outstanding and exercisable, September 30, 2020	$	38.93	73,937	2.7	$	—
Total outstanding and exercisable, September 30, 2020	$	40.09	511,499	3.4	$	2

There were no stock options granted in fiscal years 2020, 2019 and 2018 respectively. The total intrinsic value of options exercised by Adient employees during the fiscal years ended September 30, 2020, 2019 and 2018 was approximately $1 million, $5 million and $7 million, respectively, primarily consisting of former Parent awards.

Stock Appreciation Rights

No new SARs have been granted under the Plan. 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, 2020, 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, 2019	$	30.24	291,464

Exercised	$	26.85	(105,377)
Forfeited or expired	$	25.12	(14,987)
Outstanding, September 30, 2020	$	32.78	171,100	2.4	$	2

Exercisable, September 30, 2020	$	32.78	171,100	2.4	$	2

Former Parent outstanding and exercisable, September 30, 2020	$	32.48	154,857	2.4	$	2
Adient outstanding and exercisable, September 30, 2020	$	35.72	16,243	2.4	$	—
Total outstanding and exercisable, September 30, 2020	$	32.78	171,100	2.4	$	2

In conjunction with the exercise of SARs, Adient made payments of $1 million, $1 million and $3 million during the fiscal years ended September 30, 2020, 2019 and 2018, respectively.