SEC Filing | Garrett Motion

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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, 2022


☐			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, Rolle, Switzerland			1180
(Address of principal executive offices)			(Zip Code)

+41 21 695 30 00

(Registrant’s telephone number, including area code)

N/A

(Former Name, Former Address and Former Fiscal Year,

if Changed Since Last Report)

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
Series A Cumulative Convertible Preferred Stock, par value $0.001 per share	GTXAP	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 22, 2022, the registrant had 64,804,160 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	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37
PART II.	OTHER INFORMATION	38
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
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,
	2022		2021		2022		2021
	(Dollars in millions, except per share amounts)
Net sales (Note 3)	$	859	$	935	$	1,760	$	1,932
Cost of goods sold	690		742		1,416		1,543
Gross profit	169		193		344		389
Selling, general and administrative expenses	54		51		107		106
Other expense, net	—		—		1		1
Interest expense	20		24		43		45
Loss on extinguishment of debt	5		—		5		—
Non-operating income	(16)		(26)		(44)		—
Reorganization items, net (Note 1)	1		(295)		2		(121)
Income before taxes	105		439		230		358
Tax expense (Note 5)	20		30		57		54
Net income	85		409		173		304
Less: preferred stock dividend (Note 17)	(39)		(24)		(77)		(24)
Net income available for distribution	$	46	$	385	$	96	$	280

Earnings per common share
Basic	$	0.15	$	1.63	$	0.31	$	1.79
Diluted	$	0.15	$	1.29	$	0.31	$	0.95

Weighted average common shares outstanding
Basic	64,839,157		69,667,651		64,689,673		72,862,102
Diluted	65,102,162		317,436,613		64,907,289		320,631,084

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,
	2022		2021		2022		2021
	(Dollars in millions)
Net income	$	85	$	409	$	173	$	304
Foreign exchange translation adjustment	1		(67)		3		43

Changes in fair value of effective cash flow hedges, net of tax (Note 15)	9		4		17		5
Changes in fair value of net investment hedges, net of tax (Note 15)	29		15		42		15
Total other comprehensive income (loss), net of tax	39		(48)		62		63
Comprehensive income	$	124	$	361	$	235	$	367

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, 2022		December 31, 2021
	(Dollars in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	146	$	423
Restricted cash	33		41
Accounts, notes and other receivables – net (Note 6)	713		747
Inventories – net (Note 8)	284		244
Other current assets	81		56
Total current assets	1,257		1,511
Investments and long-term receivables	31		28
Property, plant and equipment – net	443		485
Goodwill	193		193
Deferred income taxes	266		289
Other assets (Note 9)	272		200
Total assets	$	2,462	$	2,706
LIABILITIES
Current liabilities:
Accounts payable	$	979	$	1,006

Current maturities of long-term debt (Note 13)	7		7

Mandatorily redeemable Series B Preferred Stock (Note 14)	—		200
Accrued liabilities (Note 10)	287		295
Total current liabilities	1,273		1,508
Long-term debt (Note 13)	1,139		1,181
Mandatorily redeemable Series B Preferred Stock – long-term (Note 14)	—		195
Deferred income taxes	21		21
Other liabilities (Note 11)	260		269


Total liabilities	$	2,693	$	3,174
COMMITMENTS AND CONTINGENCIES (Note 19)
EQUITY (DEFICIT)
Series A Preferred Stock, par value $0.001; 245,594,670 and 245,921,617 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	$	—	$	—
Common Stock, par value $0.001; 1,000,000,000 and 1,000,000,000 shares authorized, 64,906,270 and 64,570,950 issued and 64,804,051 and 64,570,950 outstanding as of June 30, 2022 and December 31, 2021, respectively	—		—
Additional paid–in capital	1,329		1,326
Retained deficit	(1,618)		(1,790)
Accumulated other comprehensive income (loss) (Note 16)	58		(4)
Total deficit	(231)		(468)
Total liabilities and deficit	$	2,462	$	2,706

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,
(Dollars in millions)	2022		2021

Cash flows from operating activities:
Net income	$	173	$	304
Adjustments to reconcile net income to net cash provided by (used for) operating activities
Reorganization items, net	—		(373)
Deferred income taxes	15		3
Depreciation	43		47
Amortization of deferred issuance costs	4		4
Interest payments, net of debt discount accretion	(19)		7
Loss on extinguishment of debt	5		—
Foreign exchange gain	2		9
Stock compensation expense	5		3
Pension expense	—		(1)
Change in fair value of derivatives	(35)		—
Other	(4)		(6)
Changes in assets and liabilities:
Accounts, notes and other receivables	(33)		17
Inventories	(64)		(51)
Other assets	1		58
Accounts payable	86		(52)
Accrued liabilities	2		(2)
Obligations payable to Honeywell	—		(375)
Other liabilities	(4)		17
Net cash provided by (used for) operating activities	$	177	$	(391)
Cash flows from investing activities:
Expenditures for property, plant and equipment	(52)		(40)
Other	—		1
Net cash used for investing activities	$	(52)	$	(39)
Cash flows from financing activities:
Proceeds from issuance of Series A Preferred Stock	—		1,301
Proceeds from issuance of long-term debt, net of deferred financing costs	—		1,221

Payments of long-term debt	(4)		(1,515)
Payments of revolving credit facility	—		(370)
Payments of debtor-in-possession financing	—		(200)
Redemption of Series B Preferred stock	(381)		—
Payments for Cash-Out election	—		(69)
Payments for share repurchases	(3)		—

Debt financing costs	(5)		(9)

Net cash (used for) provided by financing activities	$	(393)	$	359
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	(17)		(6)
Net decrease in cash, cash equivalents and restricted cash	(285)		(77)
Cash, cash equivalents and restricted cash at beginning of the period	464		693
Cash, cash equivalents and restricted cash at end of the period	$	179	$	616
Supplemental cash flow disclosure:
Income taxes paid (net of refunds)	$	24	$	32
Interest paid	47		57
Reorganization items paid	3		342
Supplemental disclosure of non-cash investing and financing activities:
Issuance of Series B Preferred Stock	—		577

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			Additional Paid-in Capital		Retained Deficit		Accumulated Other Comprehensive (Loss)/Income		Total Deficit
	Shares	Amount		Shares	Amount
	(in millions)
Balance at December 31, 2020	—	$	—	76	$	—	$	28	$	(2,207)	$	(129)	$	(2,308)
Net loss	—	—		—	—		—		(105)		—		(105)
Other comprehensive income, net of tax	—	—		—	—		—		—		111		111
Stock-based compensation	—	—		—	—		2		—		—		2
Balance at March 31, 2021	—	—		76	—		$	30	$	(2,312)	$	(18)	$	(2,300)
Net income	—	—		—	—		—		409		—		409
Cash-out election	—	—		(11)	—		—		(69)		—		(69)
Issuance of Series A Preferred Stock	248	—		—	—		1,301		—		—		1,301
Other comprehensive loss, net of tax	—	—		—	—		—		—		(48)		(48)
Stock-based compensation	—	—		—	—		1		—		—		1
Balance at June 30, 2021	248	$	—	65	$	—	$	1,332	$	(1,972)	$	(66)	$	(706)

	Series A Preferred Stock			Common Stock			Additional Paid-in Capital		Retained Deficit		Accumulated Other Comprehensive (Loss)/Income		Total Deficit
	Shares	Amount		Shares	Amount
	(in millions)
Balance at December 31, 2021	246	$	—	64	$	—	$	1,326	$	(1,790)	$	(4)	$	(468)
Net income	—	—		—	—		—		88		—		88
Share repurchases	—	—		—	—		(1)		(1)		—		(2)
Other comprehensive income, net of tax	—	—		—	—		—		—		23		23
Stock-based compensation	—	—		—	—		2		—		—		2
Balance at March 31, 2022	246	—		64	—		$	1,327	$	(1,703)	$	19	$	(357)
Net income	—	—		—	—		—		85		—		85
Share repurchases	—	—		—	—		(1)		—		—		(1)
Other comprehensive income, net of tax	—	—		—	—		—		—		39		39
Stock-based compensation	—	—		—	—		3		—		—		3
Balance at June 30, 2022	246	$	—	64	$	—	$	1,329	$	(1,618)	$	58	$	(231)

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”) designs, manufactures and sells highly engineered turbocharger and electric-boosting technologies for light and commercial vehicle original equipment manufacturers (“OEMs”) and the global vehicle independent aftermarket, as well as automotive software solutions. These OEMs in turn ship to consumers globally. We are a global technology leader with significant expertise in delivering products across gasoline, diesel, natural gas and electric (hybrid and fuel cell) power trains. These products are key enablers for fuel economy and emission standards compliance.

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, 2021 included in our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on February 14, 2022 (our “2021 Form 10-K”). The results of operations for the three and six months ended June 30, 2022 and cash flows for the six months ended June 30, 2022 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 have been adjusted for the three months ended June 30, 2022. Our actual closing dates for the three months ended June 30, 2022 and 2021 were July 2, 2022 and July 3, 2021, respectively.

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, including considerations for the impact of the outbreak of the COVID-19 pandemic on the Company's business due to various global macroeconomic, operational and supply-chain risks as a result of COVID-19. Actual results could differ from the original estimates, requiring adjustments to these balances in future periods.

Voluntary Filing Under Chapter 11

On September 20, 2020 (the “Petition Date”), the Company and certain of its subsidiaries (collectively, the “Debtors”) each filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). The Debtors’ chapter 11 cases (the “Chapter 11 Cases”) were jointly administered under the caption “In re: Garrett Motion Inc., 20-12212.” On April 20, 2021, the Debtors filed the Revised Amended Plan of Reorganization (the “Plan”). On April 26, 2021, the Bankruptcy Court entered an order among other things, confirming the Plan. On April 30, 2021 (the “Effective Date”), the conditions to the effectiveness of the Plan were satisfied or waived and the Company emerged from bankruptcy (“Emergence”).

Emergence from Chapter 11

Upon Emergence or shortly thereafter, amounts recorded as liabilities subject to compromise were either settled, or such amounts have been reinstated to current or non-current liabilities in the Consolidated Interim Balance Sheet, based upon management’s judgment as to the timing for settlement of such claims.

Reorganization items, net represent amounts incurred after the Petition Date as a direct result of the Chapter 11 Cases and are comprised of the following for the three and six months ended June 30, 2022 and 2021, respectively:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(Dollars in millions)
Gain on settlement of Honeywell claims(1)	$	—	$	(502)	$	—	$	(502)
Advisor fees	—		96		1		180
Bid termination and expense reimbursement	—		—		—		79
Director’s and officers insurance	—		39		—		39
Expenses related to Senior Notes(2)	—		28		—		28
Write off pre-petition debt issuance cost	—		25		—		25
Employee stock cash out	—		13		—		13
Debtor in Possession ("DIP") financing fees	—		—		—		1
Other	1		6		1		16
Total reorganization items, net	$	1	$	(295)	$	2	$	(121)

(1) The gain on settlement of Honeywell claims of $502 million is comprised of the pre-emergence Honeywell claims of $1,459 million, less the $375 million payment to Honeywell, less the Series B Preferred Stock issued to Honeywell which was recorded at $577 million, less a currency translation adjustment of $5 million.

(2) Includes $15 million in connection with a complaint in the Bankruptcy Court against the trustee of the indenture governing the Company's previously-issued 5.125% senior notes due 2026, and $13 million related to post-petition interest thereon. The obligations of the Debtors under the indenture were canceled at Emergence.

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, 2021 included in our 2021 Form 10-K.

Recently Adopted Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board (“FASB”) issued accounting standards update ("ASU") 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. The amendments in this update increase the transparency surrounding government assistance by requiring disclosure of 1) the types of assistance received, 2) an entity’s accounting for the assistance, and 3) the effect of the assistance on the entity’s financial statements. The update is effective for annual periods beginning after December 15, 2021. The Company adopted the new guidance as of January 1, 2022. The adoption did not have a material impact on our Consolidated Interim Financial Statements; however, the Company expects to increase its disclosures with respect to government assistance beginning with our Annual Report on Form 10-K for the year ended December 31, 2022.

Recently Issued Accounting Pronouncements

We consider the applicability and impact of all recent ASU’s issued by the FASB. For the three and six months ended June 30, 2022, there were no recently issued, but not yet adopted accounting pronouncements that 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, 2022								Three Months Ended June 30, 2021
	OEM		Aftermarket		Other		Total		OEM		Aftermarket		Other		Total
	(Dollars in millions)
United States	$	118	$	54	$	1	$	173	$	98	$	44	$	—	$	142
Europe	394		38		8		440		434		38		8		480
Asia	211		10		6		227		280		14		7		301
Other	13		6		—		19		6		6		—		12
	$	736	$	108	$	15	$	859	$	818	$	102	$	15	$	935

	Six Months Ended June 30, 2022								Six Months Ended June 30, 2021
	OEM		Aftermarket		Other		Total		OEM		Aftermarket		Other		Total
	(Dollars in millions)
United States	$	220	$	105	$	1	$	326	$	198	$	80	$	2	$	280
Europe	800		76		15		891		915		77		16		1,008
Asia	477		20		12		509		582		24		14		620
Other	22		12		—		34		12		12		—		24
	$	1,519	$	213	$	28	$	1,760	$	1,707	$	193	$	32	$	1,932

Contract Balances

The following table summarizes our contract assets and liabilities balances:


	2022		2021
	(Dollars in millions)
Contract assets—January 1	$	63	$	61
Contract assets—June 30	58		56
Change in contract assets—(Decrease)/Increase	$	(5)	$	(5)
Contract liabilities—January 1	$	(5)	$	(2)
Contract liabilities—June 30	(6)		(2)
Change in contract liabilities—(Increase)/Decrease	$	(1)	$	—

Note 4. Research, Development & 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,
	2022		2021		2022		2021
	(Dollars in millions)
Research and development costs	$	38	$	33	$	74	$	66
Engineering-related expenses	3		5		9		11
	$	41	$	38	$	83	$	77

Note 5. Income Taxes


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
	(Dollars in millions)
Tax expense	$	20		$	30		$	57		$	54
Effective tax rate	19.0		%	6.8		%	24.8		%	15.1		%

The increases in the effective tax rate for the three months and six months ended June 30, 2022 compared to the prior year periods are primarily related to the nontaxable gain on the settlement of the Honeywell claims recorded in the prior period. The effective tax rate for the six months ended June 30, 2022 also increased due to true-ups recorded in the first quarter of 2022 to prior year tax reserves.

The effective tax rate for the three months ended June 30, 2022 was lower than the U.S. federal statutory rate of 21% primarily due to a change in the Company's assertion to permanently reinvest a portion of its undistributed foreign earnings in China. The effective tax rate for the six months ended June 30, 2022 is higher than the U.S. federal statutory rate of 21% primarily due to withholding taxes and tax reserves, partially offset by lower taxes on non-U.S. earnings and the previously mentioned change in assertion to permanently reinvest a portion of its undistributed foreign earnings.

Historically, the Company has not made an assertion to permanently reinvest its undistributed foreign earnings. In the second quarter of 2022, the Company changed its assertion to permanently reinvest a portion (approximately $300 million) of its undistributed foreign earnings for China specific to the entity's investment in intellectual property.

The effective tax rate can vary from quarter to quarter due to changes in the Company’s global mix of earnings, the resolution of income tax audits, changes in tax laws (including updated guidance on U.S. tax reform), deductions related to employee share-based payments, internal restructurings and pension mark-to-market adjustments.

Note 6. Accounts, Notes and Other Receivables—Net


	June 30, 2022		December 31, 2021
	(Dollars in millions)
Trade receivables	$	552	$	553
Notes receivable	84		121
Other receivables	83		78
	719		752
Less—Allowance for expected credit losses	(6)		(5)
	$	713	$	747

Trade receivables include $58 million and $63 million of unbilled customer contract asset balances as of June 30, 2022 and December 31, 2021, 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 for further information.

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,
	2022		2021		2022		2021
	(Dollars in millions)
Eligible receivables sold without recourse	$	226	$	153	$	370	$	333
Guaranteed bank notes sold without recourse	38		—		66		—

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 immaterial for the three and six months ended June 30, 2022.


	June 30, 2022		December 31, 2021
	(Dollars in millions)
Receivables sold but not yet collected by the bank from the customer	$	77	$	26
Guaranteed bank notes sold but not yet collected by the bank from the customer	24		—

As of June 30, 2022 and December 31, 2021, the Company has pledged as collateral $1 million and $5 million of guaranteed bank notes, respectively, which have not been sold in order to be able to issue bank notes as payment to certain suppliers. Such pledged amounts are included as Notes receivable in our Consolidated Interim Balance Sheet.

Note 8. Inventories—Net


	June 30, 2022		December 31, 2021
	(Dollars in millions)
Raw materials	$	188	$	162
Work in process	19		19
Finished products	97		92
	304		273
Less—Reserves	(20)		(29)
	$	284	$	244

Note 9. Other Assets


	June 30, 2022		December 31, 2021
	(Dollars in millions)
Advanced discounts to customers, non-current	$	55	$	61
Operating right-of-use assets (Note 12)	47		51
Income tax receivable	27		27
Pension and other employee related	15		15
Designated cross-currency swaps	78		30
Designated and undesignated derivatives	41		7
Other	9		9
	$	272	$	200

Note 10. Accrued Liabilities


	June 30, 2022		December 31, 2021
	(Dollars in millions)
Customer pricing reserve	$	64	$	72
Compensation, benefit and other employee related	60		76
Repositioning	8		10
Product warranties and performance guarantees - short-term (Note 19)	20		21
Income and other taxes	34		25
Advanced discounts from suppliers, current	11		14
Customer advances and deferred income (1)	30		23
Accrued interest	8		8
Short-term lease liability (Note 12)	9		9
Accrued freight	16		11
Other (primarily operating expenses) (2)	27		26
	$	287	$	295

(1)Customer advances and deferred income include $6 million and $5 million of contract liabilities as of June 30, 2022 and December 31, 2021, respectively. See Note 3, Revenue Recognition and Contracts with Customers.

(2)Includes $4 million and $3 million of environmental liabilities as of June 30, 2022 and December 31, 2021, 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		Exit Costs		Total
	(Dollars in millions)
Balance at December 31, 2021	$	10	$	—	$	10
Charges	2		—		2
Usage—cash	(4)		—		(4)
Balance at June 30, 2022	$	8	$	—	$	8