Garrett Motion Inc. [GTX] Filings

10-Q 1 gtx-20240630.htm 10-Q gtx-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

________________________________________________

FORM 10-Q

________________________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number: 001-38636

________________________________________________

Garrett Motion Inc.

(Exact Name of Registrant as Specified in its Charter)

________________________________________________


Delaware			82-4873189
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

La Pièce 16, 1180 Rolle, Switzerland
and
47548 Halyard Drive, Plymouth, MI 48170
(Address of principal executive offices) (Zip Code)

+41 21 695 30 00


and
734 392 5500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	GTX	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of July 19, 2024, the registrant had 218,606,857 shares of Common Stock, $0.001 par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (Unaudited)	2
	Consolidated Interim Statements of Operations (Unaudited)	2
	Consolidated Interim Statements of Comprehensive Income (Unaudited)	3
	Consolidated Interim Balance Sheets (Unaudited)	4
	Consolidated Interim Statements of Cash Flows (Unaudited)	5
	Consolidated Interim Statements of Equity (Deficit) (Unaudited)	6
	Notes to Consolidated Interim Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	36
PART II.	OTHER INFORMATION	37
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	38
Item 6.	Exhibits	39
Signatures		41

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

GARRETT MOTION INC.

CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(Dollars in millions, except per share amounts)
Net sales (Note 3)	$	890	$	1,011	$	1,805	$	1,981
Cost of goods sold	705		809		1,448		1,590
Gross profit	185		202		357		391
Selling, general and administrative expenses	61		63		125		119
Other expense, net	3		1		4		2
Interest expense	62		29		93		56

Gain on sale of equity investment (Note 21)	(27)		—		(27)		—
Non-operating (income) expense	(1)		8		(6)		5

Income before taxes	87		101		168		209
Tax expense (Note 5)	23		30		38		57
Net income	64		71		130		152
Less: preferred stock dividends	—		(40)		—		(80)
Less: preferred stock deemed dividends	—		(232)		—		(232)
Net income (loss) available for distribution	$	64	$	(201)	$	130	$	(160)

Earnings (loss) per common share
Basic	$	0.29	$	(1.88)	$	0.56	$	(1.86)
Diluted	0.28		(1.88)		0.56		(1.86)

Weighted average common shares outstanding
Basic	224,321,948		107,408,432		230,493,039		86,269,694
Diluted	225,898,814		107,408,432		232,455,083		86,269,694

The Notes to the Consolidated Interim Financial Statements are an integral part of this statement.

GARRETT MOTION INC.

CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(Dollars in millions)
Net income	$	64	$	71	$	130	$	152
Foreign exchange translation adjustment	—		(8)		18		(6)

Defined benefit pension plan adjustment, net of tax	2		—		3		—
Changes in fair value of effective cash flow hedges, net of tax (Note 16)	(2)		2		1		(1)
Changes in fair value of net investment hedges, net of tax (Note 16)	8		3		27		(2)
Total other comprehensive income (loss), net of tax	8		(3)		49		(9)
Comprehensive income	$	72	$	68	$	179	$	143

The Notes to the Consolidated Interim Financial Statements are an integral part of this statement.

GARRETT MOTION INC.

CONSOLIDATED INTERIM BALANCE SHEETS

(Unaudited)


	June 30, 2024		December 31, 2023
	(Dollars in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	98	$	259
Restricted cash	1		1
Accounts, notes and other receivables – net (Note 6)	736		808
Inventories – net (Note 8)	272		263
Other current assets	85		75
Total current assets	1,192		1,406
Investments and long-term receivables	11		29
Property, plant and equipment – net	438		477
Goodwill	193		193
Deferred income taxes	199		216
Other assets (Note 9)	196		206
Total assets	$	2,229	$	2,527
LIABILITIES
Current liabilities:
Accounts payable	$	984	$	1,074

Current maturities of long-term debt (Note 14)	7		7


Accrued liabilities (Note 11)	283		293
Total current liabilities	1,274		1,374
Long-term debt (Note 14)	1,465		1,643

Deferred income taxes	24		27
Other liabilities (Note 12)	191		218


Total liabilities	$	2,954	$	3,262
COMMITMENTS AND CONTINGENCIES (Note 19)
EQUITY (DEFICIT)

Common Stock, par value $0.001; 1,000,000,000 and 1,000,000,000 shares authorized, 240,783,003 and 238,543,624 issued and 220,720,522 and 238,249,056 outstanding as of June 30, 2024 and December 31, 2023, respectively	—		—
Additional paid–in capital	1,203		1,190
Retained deficit	(1,792)		(1,922)
Accumulated other comprehensive income (loss) (Note 17)	46		(3)
Treasury Stock, at cost; 20,062,481 and 0 shares as of June 30, 2024 and December 31, 2023, respectively (Note 15)	(182)		—
Total deficit	(725)		(735)
Total liabilities and deficit	$	2,229	$	2,527

The Notes to the Consolidated Interim Financial Statements are an integral part of this statement.

GARRETT MOTION INC.

CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
	2024		2023
	(Dollars in millions)
Cash flows from operating activities:
Net income	$	130	$	152
Adjustments to reconcile net income to net cash provided by operating activities

Deferred income taxes	14		8
Depreciation	44		43
Amortization of deferred issuance costs	33		5


Loss on remeasurement of forward purchase contract	—		13
Gain on sale of equity investment	(27)		—
Foreign exchange loss (gain)	13		(11)
Stock compensation expense	13		8
Pension expense	1		1

Unrealized loss on derivatives	1		19
Other	3		9
Changes in assets and liabilities:
Accounts, notes and other receivables	50		(69)
Inventories	(24)		(47)
Other assets	17		(10)
Accounts payable	(33)		105
Accrued liabilities	(5)		32

Other liabilities	(20)		(2)
Net cash provided by operating activities	$	210	$	256
Cash flows from investing activities:
Expenditures for property, plant and equipment	(49)		(33)
Proceeds from cross-currency swap contracts	21		9
Proceeds from sale of equity investment	46		$	—
Net cash provided by (used for) investing activities	$	18	$	(24)
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net of debt financing costs	794		667

Payments of long-term debt	(989)		(4)


Repurchases of Series A Preferred Stock	—		(580)
Repurchases of Common Stock	(173)		(15)
Payments of Additional Amounts for conversion of Series A Preferred Stock	—		(25)
Payments for preference dividends	—		(42)
Payments for debt and revolving facility financing costs	(7)		(2)
Other	(9)		(1)
Net cash used for financing activities	$	(384)	$	(2)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	(5)		1
Net (decrease) increase in cash, cash equivalents and restricted cash	(161)		231
Cash, cash equivalents and restricted cash at beginning of the period	260		248
Cash, cash equivalents and restricted cash at end of the period	$	99	$	479
Supplemental cash flow disclosure:
Income taxes paid (net of refunds)	$	27	$	27
Interest paid	42		24

The Notes to the Consolidated Interim Financial Statements are an integral part of this statement

GARRETT MOTION INC.

CONSOLIDATED INTERIM STATEMENTS OF EQUITY (DEFICIT)

(Unaudited)


	Series A Preferred Stock			Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Deficit		Accumulated Other Comprehensive Income		Total Deficit
	Shares	Amount		Shares	Amount		Shares	Amount
	(in millions)
Balance at December 31, 2023	—	$	—	238	$	—	—	$	—	$	1,190	$	(1,922)	$	(3)	$	(735)
Net income	—	—		—	—		—	—		—		66		—		66
Share repurchases	—	—		(12)	—		12	(109)		—		—		—		(109)
Excise tax on share repurchases	—	—		—	—		—	(1)		—		—		—		(1)
Shares issued under stock plan, net of shares withheld for employee taxes	—	—		1	—		1	(5)		—		—		—		(5)
Other comprehensive income, net of tax	—	—		—	—		—	—		—		—		41		41

Stock-based compensation	—	—		—	—		—	—		8		—		—		8
Balance at March 31, 2024	—	$	—	227	$	—	13	$	(115)	$	1,198	$	(1,856)	$	38	$	(735)
Net income	—	—		—	—		—	—		—		64		—		64

Share repurchases	—	—		(7)	—		7	(65)		—		—		—		(65)
Excise tax on share repurchases	—	—		—	—		—	(1)		—		—		—		(1)
Shares issued under stock plan, net of shares withheld for employee taxes	—	—		1	—		—	(1)		—		—		—		(1)
Other comprehensive loss, net of tax	—	—		—	—		—	—		—		—		8		8


Stock-based compensation	—	—		—	—		—	—		5		—		—		5
Balance at June 30, 2024	—	$	—	221	$	—	20	$	(182)	$	1,203	$	(1,792)	$	46	$	(725)







	Series A Preferred Stock			Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Deficit		Accumulated Other Comprehensive Income		Total Deficit
	Shares	Amount		Shares	Amount		Shares	Amount
	(in millions)
Balance at December 31, 2022	246	$	—	64	$	—	—	$	—	$	1,333	$	(1,485)	$	36	$	(116)
Net income	—	—		—	—		—	—		—		81		—		81

Other comprehensive loss, net of tax	—	—		—	—		—	—		—		—		(6)		(6)
Dividends	—	—		—	—		—	—		—		(42)		—		(42)
Stock-based compensation	—	—		—	—		—	—		3		—		—		3
Balance at March 31, 2023	246	$	—	64	$	—	—	$	—	$	1,336	$	(1,446)	$	30	$	(80)
Net income	—	—		—	—		—	—		—		71		—		71
Repurchases of Series A Preferred Stock	(70)	—		—	—		—	—		(366)		(201)		—		(567)
Repurchases of Common Stock	—	—		(2)	—		—	—		—		(18)		—		(18)
Excise tax on share repurchases	—	—		—	—		—	—		—		(6)		—		(6)
Other comprehensive income, net of tax	—	—		—	—		—	—		—		—		(3)		(3)
Issuance of Common Stock for preference dividends	—	—		26	—		—	—		209		(209)		—		—
Conversion of Series A Preferred Stock	(176)	—		176	—		—	—		—		(25)		—		(25)
Stock-based compensation	—	—		—	—		—	—		5		—		—		5
Balance at June 30, 2023	—	$	—	264	$	—	—	$	—	$	1,184	$	(1,834)	$	27	$	(623)

The Notes to the Consolidated Interim Financial Statements are an integral part of this statement.

GARRETT MOTION INC.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions, except per share amounts)

Note 1. Background and Basis of Presentation

Background

Garrett Motion Inc. (the “Company” or “Garrett”) is a cutting-edge technology leader delivering differentiated solutions for emission reduction and energy efficiency. We design, manufacture, and sell highly engineered turbocharging, air and fluid compression, and high-speed electric motor technologies to original equipment manufacturers (“OEMs”) and distributors within the mobility and industrial space. We have significant expertise in delivering products at scale for internal combustion engines using gasoline, diesel, natural gas, and hydrogen, as well as for zero emission technologies using hydrogen fuel cell systems, both for mobility and industrial use. As our customers continue to progress on electrification, we are applying our technological pillars to develop highly engineered E-Powertrain and E-Cooling compressor products to support their ambition. These products are key enablers for fuel economy, energy efficiency, thermal management, and compliance with emissions standards and overall greenhouse gas and other emission reduction targets.

Basis of Presentation

The accompanying unaudited Consolidated Interim Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission applicable to interim financial statements. While these statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by United States generally accepted accounting principles (“GAAP”) for complete financial statements. The unaudited Consolidated Interim Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and accompanying notes for the year ended December 31, 2023 included in our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on February 15, 2024 (our “2023 Form 10-K”). The results of operations for the three and six months ended June 30, 2024 and cash flows for the six months ended June 30, 2024 should not necessarily be taken as indicative of the entire year. All amounts presented are in millions, except per share amounts.

We report our quarterly financial information using a calendar convention: the first, second, and third quarters are consistently reported as ending on March 31, June 30 and September 30. It has been our practice to establish actual quarterly closing dates using a predetermined fiscal calendar, which requires our businesses to close their books on a Saturday to minimize the potentially disruptive effects of quarterly closing on our business processes. For differences in actual closing dates that are material to year-over-year comparisons of quarterly or year-to-date results, such differences have been adjusted for the three months ended June 30, 2024. Our actual closing dates for the three months ended June 30, 2024 and 2023 were June 29, 2024 and July 1, 2023, respectively.

We evaluate segment reporting in accordance with ASC 280, Segment Reporting. We concluded that Garrett operates in a single operating segment and a single reportable segment based on the operating results available and evaluated regularly by the chief operating decision maker (“CODM”), which is our Chief Executive Officer, to make decisions about resource allocation and performance assessment. The CODM makes operational performance assessments and resource allocation decisions on a consolidated basis, inclusive of all of the Company’s products across channels and geographies.

The preparation of the financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases these estimates on assumptions that it believes to be reasonable under the circumstances. Actual results could differ from the original estimates, requiring adjustments to these balances in future periods.

Note 2. Summary of Significant Accounting Policies

The accounting policies of the Company are set forth in Note 3 to the Consolidated Financial Statements for the year ended December 31, 2023 included in our 2023 Form 10-K.

Accounting Standards Issued But Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued accounting standards update (“ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this update require companies with a single reportable segment to provide all existing segment disclosures, as well as requires incremental segment information to be disclosed. The guidance is effective for fiscal years beginning after December 15, 2023 on a retrospective basis, and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the guidance to determine the impact on its disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update increase the transparency around income tax information through improvements to disclosures primarily related to the rate reconciliation and income taxes paid information. The guidance is effective for fiscal years beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the guidance to determine the impact on its disclosures.

There are no other recently issued, but not yet adopted, accounting pronouncements which are expected to have a material impact on the Company's Consolidated Interim Financial Statements and related disclosures.

Note 3. Revenue Recognition and Contracts with Customers

Disaggregated Revenue

Net sales by region (determined based on country of shipment) and channel are as follows:


	Three Months Ended June 30, 2024								Three Months Ended June 30, 2023
	OEM		Aftermarket		Other		Total		OEM		Aftermarket		Other		Total
	(Dollars in millions)
United States	$	119	$	53	$	2	$	174	$	142	$	47	$	1	$	190
Europe	378		49		7		434		437		48		9		494
Asia	245		14		4		263		292		13		4		309
Other	14		5		—		19		12		6		—		18
	$	756	$	121	$	13	$	890	$	883	$	114	$	14	$	1,011

	Six Months Ended June 30, 2024								Six Months Ended June 30, 2023
	OEM		Aftermarket		Other		Total		OEM		Aftermarket		Other		Total
	(Dollars in millions)
United States	$	245	$	104	$	3	$	352	$	265	$	96	$	2	$	363
Europe	796		92		15		903		883		91		17		991
Asia	481		26		8		515		559		25		7		591
Other	24		11		—		35		24		12		—		36
	$	1,546	$	233	$	26	$	1,805	$	1,731	$	224	$	26	$	1,981

Contract Balances

The following table summarizes our contract assets and liabilities balances:


	2024		2023
	(Dollars in millions)
Contract assets—January 1	$	38	$	46
Contract assets—June 30	51		47
Change in contract assets—Increase/(Decrease)	$	13	$	1
Contract liabilities—January 1	$	(11)	$	(8)
Contract liabilities—June 30	(14)		(9)
Change in contract liabilities—Decrease/(Increase)	$	(3)	$	(1)

Note 4. Research, Development and Engineering

Garrett conducts research, development, and engineering (“RD&E”) activities, which consist primarily of the development of new products and product applications. RD&E costs are charged to expense as incurred unless the Company has a contractual guarantee for reimbursement from the customer. Customer reimbursements are netted against gross RD&E expenditures as they are considered a recovery of cost. Such costs are included in Cost of goods sold as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(Dollars in millions)
Research and development costs	$	46	$	46	$	89	$	86
Engineering-related expenses, net of customer (reimbursements) (1)	(5)		(4)		(4)		(5)
	$	41	$	42	$	85	$	81

(1) Engineering-related expenses include customer reimbursements of $16 million and $13 million for the three months ended June 30, 2024 and 2023, respectively, and $24 million and $24 million for the six months ended June 30, 2024 and 2023, respectively.

Certain engineering expenses related to long-term supply arrangements are capitalized when defined criteria, such as the existence of a contractual guarantee for reimbursement, are met. As of June 30, 2024 and December 31, 2023, $22 million and $12 million, respectively, of such contractually reimbursable costs were capitalized. These amounts are recorded within Other current assets in the Consolidated Interim Balance Sheet.

Note 5. Income Taxes


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
	(Dollars in millions)
Tax expense	$	23		$	30		$	38		$	57
Effective tax rate	26.4		%	29.7		%	22.6		%	27.3		%

The effective tax rates for the three months ended June 30, 2024 and 2023 were 26.4% and 29.7%, respectively. The effective tax rates for the six months ended June 30, 2024 and 2023 were 22.6% and 27.3%, respectively.

The change in the effective tax rate for the three months ended June 30, 2024 compared to the prior period is primarily related to lower U.S. taxes on international operations and lower non-deductible transaction costs, partially offset by tax related to the sale of an equity interest in an unconsolidated joint venture.

The change in the effective tax rate for the six months ended June 30, 2024 compared to the prior period is primarily related to reversal of tax reserves, lower U.S. taxes on international operations, and lower non-deductible transaction costs, partially offset by tax related to the sale of an equity interest in an unconsolidated joint venture.

The effective tax rate for the three months ended June 30, 2024 was higher than the U.S. federal statutory rate of 21% primarily because of U.S. taxes on international operations, withholding taxes, and tax related to sale of an equity interest in an unconsolidated joint venture, partially offset by lower taxes on non-U.S. earnings, and global research and development benefits.

The effective tax rate for the six months ended June 30, 2024 was higher than the U.S. federal statutory rate of 21% primarily because of U.S. taxes on international operations, withholding taxes, and tax related to sale of an equity interest in an unconsolidated joint venture, partially offset by reversals of tax reserves, lower taxes on non-U.S. earnings, and global research and development benefits.

Note 6. Accounts, Notes and Other Receivables—Net


	June 30, 2024		December 31, 2023
	(Dollars in millions)
Trade receivables	$	568	$	614
Notes receivable	91		101
Other receivables	84		99
	743		814
Less—Allowance for expected credit losses	(7)		(6)
	$	736	$	808

Trade receivables include $51 million and $38 million of unbilled customer contract asset balances as of June 30, 2024 and December 31, 2023, respectively. These amounts are billed in accordance with the terms of customer contracts to which they relate. See Note 3, Revenue Recognition and Contracts with Customers.

Notes receivable is related to guaranteed bank notes without recourse that the Company receives in settlement of accounts receivables, primarily in the Asia Pacific region. See Note 7, Factoring and Notes Receivable.

Other receivables includes VAT receivables of $62 million and $78 million as of June 30, 2024 and December 31, 2023, respectively.

Note 7. Factoring and Notes Receivable

The Company enters into arrangements with financial institutions to sell eligible trade receivables. The receivables are sold without recourse and the Company accounts for these arrangements as true sales. The Company also receives guaranteed bank notes without recourse, in settlement of accounts receivables, primarily in the Asia Pacific region. The Company can hold the bank notes until maturity, exchange them with suppliers to settle liabilities, or sell them to third-party financial institutions in exchange for cash. Bank notes sold to third-party financial institutions without recourse are likewise accounted for as true sales.


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(Dollars in millions)
Eligible receivables sold without recourse	$	240	$	218	$	402	$	400
Guaranteed bank notes sold without recourse	52		—		52		—

The expenses related to the sale of trade receivables and guaranteed bank notes are recognized within Other expense, net in the Consolidated Interim Statements of Operations, and were $1 million and $2 million for the three and six months ended June 30, 2024, respectively, and were immaterial for the three and six months ended June 30, 2023.


	June 30, 2024		December 31, 2023
	(Dollars in millions)
Receivables sold but not yet collected by the bank from the customer	$	63	$	7
Guaranteed bank notes sold but not yet collected by the bank from the customer	—		—

As of June 30, 2024 and December 31, 2023, the Company had no guaranteed bank notes pledged as collateral.

Note 8. Inventories—Net


	June 30, 2024		December 31, 2023
	(Dollars in millions)
Raw materials	$	194	$	198
Work in process	20		21
Finished products	99		85
	313		304
Less—Reserves	(41)		(41)
	$	272	$	263

Note 9. Other Assets


	June 30, 2024		December 31, 2023
	(Dollars in millions)
Advanced discounts to customers, non-current	$	36	$	41
Operating right-of-use assets (Note 13)	45		40
Income tax receivable	20		20
Pension and other employee related	11		11
Derivatives designated as net investment hedges	57		37
Designated and undesignated derivatives	19		46
Other	8		11
	$	196	$	206

Note 10. Supplier Financing

The Company has supplier financing arrangements with two third-party financial institutions under which certain suppliers may factor their receivables from Garrett. The Company also enters into arrangements with banking institutions to issue bankers acceptance drafts in settlement of accounts payables, primarily in the Asia Pacific region. The bankers acceptance drafts, or guaranteed bank notes, have a contractual maturity of six months or less, and may be held by suppliers until maturity, transferred to their suppliers, or discounted with financial institutions in exchange for cash. The supplier financing obligations and guaranteed bank notes outstanding are recorded within Accounts payable in our Consolidated Interim Balance Sheet.


	June 30, 2024		December 31, 2023
	(Dollars in millions)
Supplier financing obligations outstanding with financial institutions	$	63	$	68
Guaranteed bank notes outstanding	177		193

Note 11. Accrued Liabilities


	June 30, 2024		December 31, 2023
	(Dollars in millions)
Customer pricing reserve	$	83	$	57
Compensation, benefit and other employee related	65		80
Repositioning	9		9
Product warranties and performance guarantees - short-term (Note 19)	16		18
Income and other taxes	32		42

Customer advances and deferred income (1)	20		15


Accrued interest	14	26
Short-term lease liability (Note 13)	9	9
Accrued freight	8	9

Designated and undesignated derivatives	10	12
Other (primarily operating expenses) (2)	17	16
	283	293

(1)Customer advances and deferred income include $14 million and $9 million of contract liabilities as of June 30, 2024 and December 31, 2023, respectively. See Note 3, Revenue Recognition and Contracts with Customers.

(2)Includes $4 million and $5 million of environmental liabilities as of June 30, 2024 and December 31, 2023, respectively.

The Company accrues repositioning costs related to projects to optimize its product costs and right-size our organizational structure. Expenses related to the repositioning accruals are included in Cost of goods sold and Selling, general and administrative expenses in our Consolidated Interim Statements of Operations.


	Severance Costs		Other Costs		Total
	(Dollars in millions)
Balance at December 31, 2023	$	9	$	—	$	9
Charges	12		—		12
Usage—cash	(12)		—		(12)

Balance at June 30, 2024	$	9	$	—	$	9


	Severance Costs		Other Costs		Total
	(Dollars in millions)
Balance at December 31, 2022	$	9	$	—	$	9
Charges	7		2		9
Usage—cash	(4)		—		(4)
Non-cash asset write-offs	—		(2)		(2)
Balance at June 30, 2023	$	12	$	—	$	12

Note 12. Other Liabilities


	June 30, 2024		December 31, 2023
	(Dollars in millions)
Income taxes	$	96	$	99
Designated and undesignated derivatives	—		20
Pension and other employee related	20		23
Long-term lease liability (Note 13)	37		33
Advanced discounts from suppliers	3		3
Product warranties and performance guarantees – long-term (Note 19)	9		9
Environmental remediation – long term	12		13
Long-term accounts payable	5		7
Other	9		11
	191		218

Note 13. Leases

We have operating leases that primarily consist of real estate, machinery, and equipment. Our leases have remaining lease terms of up to 15 years, some of which include options to extend the leases for up to two years, and some of which include options to terminate the leases within the year.

The components of lease expense are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(Dollars in millions)
Operating lease cost	$	4	$	4	$	7	$	8

Supplemental cash flow information related to operating leases is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(Dollars in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	3	$	3	$	6	$	7
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	3		2		9		2

Supplemental balance sheet information related to operating leases is as follows:


	June 30, 2024		December 31, 2023
	(Dollars in millions)
Other assets	$	45	$	40
Accrued liabilities	9		9
Other liabilities	37		33


	June 30, 2024		December 31, 2023
Weighted-average remaining lease term (in years)	7.44		8.08
Weighted-average discount rate	5.98	%	5.69	%

Maturities of operating lease liabilities as of June 30, 2024 were as follows:


	(Dollars in millions)
2024	$	8
2025	10
2026	9
2027	8
2028	6
Thereafter	17
Total lease payments	58
Less imputed interest	(12)
	$	46

Note 14. Long-term Debt and Credit Agreements

Long Term Debt

Senior Notes

On May 21, 2024, Garrett Motion Holdings Inc. and Garrett LX I S.à.r.l. (the "Issuers"), wholly owned subsidiaries of the Company, completed an offering of $800 million in aggregate principal amount of 7.75% Senior Unsecured Notes due 2032 (the "2032 Senior Notes"). The 2032 Senior Notes mature on May 31, 2032. The Company incurred $12 million of debt issuance costs, which have been capitalized and will be amortized on a straight-line basis.

The 2032 Senior Notes are guaranteed by the Company and each of the Company's wholly owned subsidiaries that guarantee obligations under the existing Credit Agreement (as defined below), subject to certain exceptions. The proceeds from the sale of the 2032 Senior Notes, together with cash on hand, were used to repay approximately $800 million of term loan indebtedness, as described below, and to pay related fees and expenses.

Term Loans

On April 30, 2021, the Company entered into a credit agreement (as amended from time to time, the "Credit Agreement") with JPMorgan Chase Bank, N.A. as administrative agent. The Credit Agreement provided for the following long-term senior secured financing (collectively, the "Term Loan Facilities"):

•2021 Dollar Term Facility: a seven-year secured first-lien U.S. Dollar term loan facility for $715 million;

•2023 Dollar Term Facility: a five-year secured first-lien U.S. Dollar term loan facility for $500 million; and

•Euro Term Facility: a seven-year secured first-lien Euro term loan facility for €450 million.

In the three months ended June 30, 2024, we made early debt repayments totaling $985 million on our Euro Term Facility and our 2023 Dollar Term Facility. Both term loans were fully repaid as of June 30, 2024. The early repayments resulted in incremental amortization of debt issuance costs of $27 million, included within Interest expense in the Consolidated Interim Statement of Operations.

On May 21, 2024, in addition to the above transactions, the Company entered into Amendment No. 4 (the "Fourth Amendment") and Amendment No. 5 (the "Fifth Amendment" and, together with the Fourth Amendment, the "Amendments") to the Credit Agreement (as amended by the Amendments, the "Amended Credit Agreement"). The Fourth Amendment (i) removed the credit spread adjustment with respect to certain US dollar denominated term loan borrowings that are Term Benchmark Loans (as defined in the Amended Credit Agreement) and (ii) reduced the Applicable Rate (as defined in the Amended Credit Agreement) on certain US dollar denominated term loans to 2.75% for Term Benchmark Loans and 1.75% for ABR Loans (as defined in the Amended Credit Agreement).

The Fifth Amendment increased the amount of revolving loan commitments available to the Company under the Credit Agreement by $30 million ("Incremental Revolving Commitment") to an aggregate amount of $600 million, as discussed below. The Incremental Revolving Commitment has the same terms and is subject to the same conditions applicable to revolving loans generally under the Amended Credit Agreement.

The principal outstanding and carrying amounts of our long-term debt as of June 30, 2024 and December 31, 2023 are as follows:


	Due	Interest Rate	June 30, 2024		December 31, 2023
2021 Dollar Term Facility	4/30/2028	SOFR plus 275 bps	$	695	$	699
2023 Dollar Term Facility	4/30/2028	SOFR plus 450 bps	—		500
Euro Term Facility	4/30/2028	EURIBOR plus 350 bps	—		497
2032 Senior Notes	5/31/2032	7.75%	800		—
Other			2		—
Total principal outstanding			1,497		1,696
Less: unamortized deferred financing costs			(25)		(46)
Less: current portion of long-term debt			(7)		(7)
Total long-term debt			$	1,465	$	1,643

Revolving Facility and Letters of Credit

The Amended Credit Agreement also provides for a senior secured first-lien revolving credit facility providing for multi-currency revolving loans (the “Revolving Facility”). The Revolving Facility matures on April 30, 2028 and has a maximum borrowing amount available of $600 million.

Under the Revolving Facility, the Company may use up to $125 million for the issuance of letters of credit to its subsidiaries. Letters of credit are available for issuance under the Amended Credit Agreement on terms and conditions customary for financings of this kind, which issuances reduce availability under the Revolving Facility. As of June 30, 2024, the Company had no loans outstanding under the Revolving Facility, no outstanding letters of credit, and available borrowing capacity of $600 million.

Separate from the Revolving Facility, the Company has a bilateral letter of credit facility in the amount of $15 million, which matures on April 30, 2026. As of June 30, 2024, the Company had $12 million utilized and $3 million of remaining available capacity under such facility.

Minimum scheduled principal repayments of long-term debt as of June 30, 2024 are as follow:


	June 30, 2024
	(Dollars in millions)
2024	$	4
2025	7
2026	7
2027	7
2028	672
Thereafter	800
Total debt payments	$	1,497

Interest Rates and Fees

The 2032 Senior Notes bear interest at a rate of 7.75% per annum. Interest on the 2032 Senior Notes is payable semi-annually in arrears on May 31 and November 30 of each year, commencing on November 30, 2024.

The 2021 Dollar Term Facility is subject to an interest rate, at our option, of either (a) an alternate base rate (“ABR”) (which shall not be less than 1.50%) or (b) an adjusted SOFR rate (“SOFR”) (which shall not be less than 0.50%), in each case, plus an applicable margin equal to 2.75% in the case of SOFR loans and 1.75% in the case of ABR loans.

The Revolving Facility is subject to an interest rate comprised of an applicable benchmark rate as provided under the Credit Agreement (which shall not be less than 1.00% if such benchmark is the ABR rate and not less than 0.00% in the case of other applicable benchmark rates) that is selected based on the currency in which borrowings are outstanding thereunder, in each case, plus an applicable margin that may vary based on our leverage ratio.

In addition to paying interest on outstanding borrowings under the Revolving Facility, we are also required to pay a quarterly commitment fee based on the average daily unused portion of the Revolving Facility during such quarter, which is determined by our leverage ratio and ranges from 0.25% to 0.50% per annum.

Certain Covenants

2032 Senior Notes

The 2032 Senior Notes contain certain covenants that limit the ability of the Company and its restricted subsidiaries to incur certain additional debt, incur certain liens securing debt, pay certain dividends or make other restricted payments, make certain investments, make certain asset sales, and enter into certain transactions with affiliates. These covenants are subject to a number of exceptions, limitations, and qualifications as set forth in the 2032 Senior Notes indenture. Additionally, the indenture contains certain change of control provisions that, under certain conditions, would require the Company to make an offer to repurchase all of the outstanding 2032 Senior Notes at a price equal to 101% of the aggregate principal amount, plus accrued and unpaid interest. The indenture also contains customary events of default.

Term Loans

The Amended Credit Agreement contains certain affirmative and negative covenants customary for financings of this type. The Revolving Facility also contains a financial covenant requiring the maintenance of a consolidated total leverage ratio of not greater than 4.7 times as of the end of each fiscal quarter if, on the last day of any such fiscal quarter, the aggregate amount of loans and letters of credit (excluding backstopped or cash collateralized letters of credit and other letters of credit with an aggregate face amount not exceeding $30 million) outstanding under the Revolving Facility exceeds 35% of the aggregate commitments in effect thereunder on such date.

As of June 30, 2024, the Company was in compliance with all covenants under the 2032 Senior Notes indenture and Amended Credit Agreement.

Note 15. Equity

Preferred Stock

On April 12, 2023, the Company entered into separate definitive agreements with each of Centerbridge Partners, L.P. and funds managed by Oaktree Capital Management, L.P. to effect a series of integrated transactions (collectively, the “Transaction”) designed to increase the attractiveness of the Company to investors, including by simplifying the Company’s capital structure by converting all outstanding Series A Preferred Stock into a single class of Common Stock, subject to certain conditions.

On June 6, 2023, the Company completed all steps of the Transaction and had no remaining shares of Series A Preferred Stock outstanding as of that date. Please refer to Note 21, Equity, to the Consolidated Financial Statements for the year ended December 31, 2023 included in our 2023 Form 10-K.

Treasury Stock

Treasury stock represents shares of the Company's Common Stock that have been issued and subsequently repurchased by the Company or withheld to satisfy withholding tax obligations in connection with equity award vestings, and that have not been retired or cancelled. The Company accounts for treasury stock under the cost method and includes treasury stock as a component of Equity (Deficit) on the Consolidated Interim Balance Sheet. The Company accounts for the reissuance of treasury stock using the average cost method. The Company did not reissue or retire any shares of treasury stock during the three and six months ended June 30, 2024.

Share Repurchase Program

On February 12, 2024, the Board of Directors authorized a $350 million share repurchase program valid until December 31, 2024. The Company may repurchase shares from time to time under the program through various methods, including in open market transactions, block trades, privately negotiated transactions, and otherwise. The timing, as well as the number and value of shares repurchased under the program, will depend on a variety of factors. The Company is not obligated to purchase any shares under the repurchase program, and the program may be suspended, modified, or discontinued at any time without prior notice. During the six months ended June 30, 2024, the Company repurchased $174

million of Common Stock, and had $176 million remaining under the share repurchase program. The repurchased shares are held as treasury stock.

Note 16. Financial Instruments and Fair Value Measures

Our credit, market, and foreign currency risk management policies are described in Note 19, Financial Instruments and Fair Value Measures, to the Consolidated Financial Statements for the year ended December 31, 2023 included in our 2023 Form 10-K. As of June 30, 2024 and December 31, 2023, we had contracts with aggregate gross notional amounts of $1,165 million and $1,171 million, respectively, to hedge foreign currencies, principally the U.S. Dollar, Swiss Franc, British Pound, Euro, Chinese Yuan, Japanese Yen, Mexican Peso, New Romanian Leu, Czech Koruna, Australian Dollar, and Korean Won.

Fair Value of Financial Instruments

The FASB’s accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Financial and nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2024 and December 31, 2023:


					Fair Value
	Notional Amounts				Assets					Liabilities
	June 30, 2024		December 31, 2023		June 30, 2024		December 31, 2023			June 30, 2024		December 31, 2023
Designated instruments:
Designated forward currency exchange contracts	$	392	$	456	$	7	$	11	(a)	$	8	$	6	(c)
Designated cross-currency swaps	1,515		1,015		57		37		(b)	—		17		(d)
Designated interest-rate swaps	—		200		—		—			—		—
Total designated instruments	1,907		1,671		64		48			8		23
Undesignated instruments:
Undesignated interest rate swaps	481		917		19		46		(b)	—		3		(d)
Undesignated forward currency exchange contracts	773		715		6		1		(a)	2		6		(c)
Total undesignated instruments	1,254		1,632		25		47			2		9
Total designated and undesignated instruments	$	3,161	$	3,303	$	89	$	95		$	10	$	32

(a) Recorded within Other current assets

(b) Recorded within Other assets

(d) Recorded within Other liabilities

Cash Flow Hedges

During 2023, the Company entered into float-to-fixed interest rate swap contracts with an aggregate notional amount of $200 million and maturities in July 2024 and October 2024. The Company also entered into a float-to-fixed cross-currency swap contract comprised of an amortizing swap with an aggregate notional amount of €280 million ($300 million) and notional exchanges in June 2026, June 2027, and June 2028. The interest rate swap and cross-currency swap contracts were early settled in 2024, resulting in net gains of $18 million recorded to Interest expense and a $4 million loss recorded to Non-operating expense in the Consolidated Interim Statement of Operations.

The Company also has outstanding forward currency exchange contracts with maturities up to 18 months and an aggregate notional amount of $392 million and $456 million as of June 30, 2024 and December 31, 2023, respectively. These forward currency exchange contracts have been designated as cash flow hedges to mitigate foreign currency

exposures primarily on our inventory purchases and manufacturing costs. The gains and losses on the forward currency exchange contracts are recorded in Accumulated Other Comprehensive Income ("AOCI") and reclassified to Cost of goods sold in the Consolidated Interim Statement of Operations when the underlying transactions are recognized in earnings.

In order to mitigate foreign currency risk on its 2032 Senior Notes, the Company entered into fixed-to-fixed cross-currency swap contracts with an aggregate notional amount of €507 million ($550 million) and notional exchanges in May 2027, May 2028, May 2029, and May 2030. Changes in the fair value of the cross-currency swap contracts are recognized in AOCI and reclassified to Non-operating (income) expense in the Consolidated Interim Statement of Operations, based upon changes in the spot rate remeasurement of the underlying debt. The net interest settlements on the cross-currency swap contracts are recorded in Interest expense in the Consolidated Interim Statements of Operations.

All of the Company's cash flow hedges are assessed as highly effective. For the three months ended June 30, 2024 and 2023, the Company recorded a loss of $2 million, net of tax, and a gain of $2 million, net of tax, respectively, in Other comprehensive income. For the six months ended June 30, 2024 and 2023, the Company recorded a gain of $1 million, net of tax, and a loss of $1 million, net of tax, respectively, in Other comprehensive income.

Net Investment Hedges

The Company has designated float-to-float cross-currency swaps with aggregate notional amounts of €858 million ($965 million) and €615 million ($715 million) as of June 30, 2024 and December 31, 2023, respectively, as net investment hedges of its Euro-denominated operations. In April 2024, the Company re-couponed the cross-currency swap contracts which have been designated as net investment hedges and received a cash settlement of $13 million. The fair values of the net investment hedges were net assets of $57 million and $37 million as of June 30, 2024 and December 31, 2023, respectively. Our Consolidated Interim Statements of Comprehensive Income include Changes in fair value of net investment hedges, net of tax, of a $8 million gain and a $3 million gain for the three months ended June 30, 2024 and 2023, respectively, and of a $27 million gain and a $2 million loss for the six months ended June 30, 2024 and 2023, respectively. No ineffectiveness has been recorded on the net investment hedges.

Non-Designated Derivatives

As of June 30, 2024 and December 31, 2023, the Company has outstanding float-to-fixed interest rate swap contracts with an aggregate notional amount of €450 million ($481 million) and €830 million ($917 million), respectively, and maturities of July 2024, October 2024, April 2025, April 2026, April 2027, and April 2028. Changes in the fair value of the undesignated interest rate swap contracts are recorded in Interest expense in the Consolidated Interim Statements of Operations.

The Company also has outstanding forward currency exchange contracts with maturities generally up to 3 months and an aggregate notional amount of $773 million and $715 million as of June 30, 2024 and December 31, 2023, respectively. These derivatives are not designated as hedging instruments and are adjusted to fair value through Non-operating (income) expense in the Consolidated Interim Statements of Operations.

Fair Value Measurement

The foreign currency exchange, interest rate swap and cross-currency swap contracts are valued using market observable inputs. As such, these derivative instruments are classified within Level 2. The assumptions used in measuring the fair value of the cross-currency swap are considered Level 2 inputs, which are based upon market-observable interest rate curves, cross-currency basis curves, credit default swap curves, and foreign exchange rates.

The carrying value of Cash, cash equivalents, and restricted cash, Account receivables and Notes and Other receivables contained in the Consolidated Interim Balance Sheet approximates fair value.

The following table sets forth the Company’s financial assets and liabilities that were not carried at fair value:


	June 30, 2024				December 31, 2023
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(Dollars in millions)
Term Loan Facilities	$	682	$	696	$	1,650	$	1,692
2032 Senior Notes	789		812		—		—

The Company determined the fair value of its Term Loan Facilities and related current maturities utilizing transactions in the listed markets for similar liabilities. As such, the fair value of the Term Loan Facilities and related current maturities is considered Level 2. The fair value of the 2032 Senior

Garrett Motion Inc. [GTX] Filings
10-Q	[2024-07-25]
10-Q	[2024-04-25]
10-K	[2024-02-15]
10-Q	[2023-10-24]
10-Q	[2023-07-27]
10-Q	[2023-04-24]
10-K	[2023-02-14]
10-Q	[2022-10-26]
10-Q	[2022-07-28]
10-Q	[2022-04-28]
10-K	[2022-02-14]
10-Q	[2021-10-28]
10-Q	[2021-07-29]
S-1	[2021-05-28]
10-Q	[2021-04-29]
10-K	[2021-02-16]
10-Q	[2020-11-02]
10-Q	[2020-07-30]
10-Q	[2020-05-11]
10-K	[2020-02-27]
10-Q	[2019-11-08]
10-Q	[2019-07-30]
10-Q	[2019-05-08]
10-K	[2019-03-01]
10-Q	[2018-11-06]