UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 13, 2023
(Exact name of Registrant as specified in its Charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) | ||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
Registrant’s telephone number, including area code: +41 21 695 30 00
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | ||||||||
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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
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. ☐
| Item 7.01 | Regulation FD Disclosure | ||||
On April 13, 2023, Garrett Motion Inc. (the “Company”), issued a press release to announce that it has entered into definitive agreements (the “Agreements”) with Centerbridge Partners, L.P. (“Centerbridge”) and with funds managed by Oaktree Capital Management, L.P. (“Oaktree”) to simplify the Company’s capital structure by converting all outstanding Series A Preferred Stock into a single class of Common Stock. The Agreements contemplate the repurchase of approximately $285 million of Series A Preferred Stock from each of Centerbridge and Oaktree, and provide for a reduction in investor and governance rights, as well as lock-up agreements with respect to each party’s remaining equity securities. The Company also announced an increase of the Company's share repurchase authorization to $250 million. The full text of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1. Additionally, the Company posted an investor presentation relating to the transactions (the “Presentation”) to its website at https://investors.garrettmotion.com/. A copy of the Presentation is attached as Exhibit 99.2.
The information in Exhibit 99.1 and Exhibit 99.2 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing
| Item 9.01. | Financial Statements and Exhibits. | ||||
(d) Exhibits.
| 99.1* | ||||||||
| 99.2* | ||||||||
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. | |||||||
| * | Furnished herewith. | ||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: April 13, 2023 | Garrett Motion Inc. | |||||||||||||||||||
| By: | /s/ Sean Deason | |||||||||||||||||||
| Sean Deason | ||||||||||||||||||||
| Senior Vice President and Chief Financial Officer | ||||||||||||||||||||
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Garrett Motion Reaches Agreements with Centerbridge and Oaktree to Transform Capital Structure
•Series A Preferred Stock amended to automatically convert into Common Stock on or about July 3, 2023
•Conversion would result in a single class of Common Stock with greater liquidity and a multi-billion dollar equity market capitalization
•Eliminates 11% Series A Preferred dividend, providing over $100 million in annual cash flow benefits
•Repurchase of $570 million of Series A Preferred Shares from Centerbridge and Oaktree
•Board authorizes increase in general stock buyback program to $250 million
•Centerbridge and Oaktree will reduce their governance rights and lock up their remaining shares, while remaining the company’s largest shareholders and maintaining one board seat each
ROLLE, Switzerland, April 13, 2023 – Garrett Motion Inc. (Nasdaq: GTX, GTXAP), a leading differentiated automotive technology provider, today announced that it has entered into definitive agreements (the “Agreements”) with Centerbridge Partners, L.P. (“Centerbridge”) and funds managed by Oaktree Capital Management, L.P. (“Oaktree”) to simplify the Company’s capital structure by converting all outstanding Series A Preferred Stock into a single class of Common Stock, on or about July 3, 2023, subject to certain conditions. The agreements contemplate the repurchase of approximately $285 million of Series A Preferred Stock from each of Centerbridge and Oaktree at a market-based price, without premium, and provide for a reduction in governance rights, as well as lock-up and other agreements.
“I am pleased we have reached agreements with Centerbridge and Oaktree to simplify our capital structure. Garrett is an extremely successful and profitable company. However, the limited liquidity in our preferred and common stock has made it difficult for large investors to invest in Garrett. By converting to a single class of common stock, with much greater market capitalization and liquidity, we expect to broaden and diversify our shareholder base and engage more effectively with the investment community. The Board strongly believes that this will provide more financial flexibility to Garrett in the future and benefit all shareholders. Centerbridge and Oaktree have been great partners to Garrett and its management team. I am grateful for their support and faith in our company and look forward to their continued contributions as large shareholders of Garrett,” said Daniel Ninivaggi, Chairman of Garrett’s Board of Directors.
“The simplification of our capital structure at this time is enabled by the great performance of Garrett and highlights its ability to generate strong free cash flow while continuing to invest for the future in both its core turbo business as well as in new differentiated technologies for zero emission mobility. In addition, the elimination of the Series A Preferred dividend adds over $100 million of incremental annual net cash flow to support these investments, delever the balance sheet and return capital to shareholders. This transaction is clearly a testament to our progress over the last few years and I am excited about the long-term prospects of our business,” said Garrett President and CEO, Olivier Rabiller.
“We continue to be impressed with Garrett Motion’s high quality business model, growing end-market demand, and management team. We’re excited to continue as significant investors and support the culture of innovation. This transaction provides Garrett with additional flexibility to pursue a broad range of capital allocation options,” said Kevin Mahony, Managing Director at Centerbridge.
Steven Tesoriere, Managing Director and Co-Portfolio Manager at Oaktree said: “We continue to believe Garrett Motion remains well positioned for long-term success, given its market leading franchise, blue-chip customer base, and long history of R&D and reliability. We remain committed to supporting the Company, and firmly believe this transaction furthers Garrett’s position as a differentiated technology leader.”
Transaction Overview
Pursuant to the Agreements and subject to the completion of the debt financing described below, the Company’s Series A Cumulative Convertible Preferred Stock (“Series A Preferred Stock”) will convert into shares of the Company’s Common Stock on or about July 3, 2023, in a manner similar to the conversion procedures of an Automatic Conversion Event set forth in the existing Certificate of Designations for the Series A Preferred Stock. The conversion will occur pursuant to an amendment and restatement of the Certificate of Designations for the Series A Preferred Stock, which has been approved
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by the Board of Directors and consented to by Centerbridge and Oaktree as the holders of a majority of the Series A Preferred Stock. Following the conversion, Garrett will have one class of shares outstanding, the Common Stock, and an enhanced cash flow profile from the elimination of the 11% Series A Preferred Stock dividend, partially offset by the incremental interest expense.
The Company has agreed to repurchase approximately $280 million of Series A Preferred Stock from Centerbridge and approximately $290 million of Series A Preferred Stock from Oaktree for a total of $570 million, reducing Centerbridge’s ownership from 22% to 15% and Oaktree’s ownership from 23% to 15%, each on an as-converted basis.1 Centerbridge and Oaktree will be paid a cash purchase price of $8.10, plus the amounts below, per repurchased share. The $8.10 purchase price will be adjusted to equal the volume-weighted average price of the Common Stock for the fifteen trading days following the announcement of the transactions, subject to a minimum price of $7.875 per share and a maximum price of $8.50 per share.
As part of the transactions, all holders of Series A Preferred Stock will receive an amount equal to:
•$0.17 per share, the preference dividends that will accrue on the Series A Preferred Stock through June 30, 2023;
•Approximately $0.6835 per share, the accrued and unpaid preference dividends on the Series A Preferred Stock as of June 30, 2023; and
•$0.144375 per share, the preference dividends that would have accrued through September 30, 2023.
Other than the preference dividend that would have accrued through September 30, 2023, which will be paid in cash, these amounts may be paid to all holders in cash, stock, or a combination of cash and stock, at the election of the Company, and any stock issued will be valued at the adjusted purchase price paid to Centerbridge and Oaktree.
The repurchases are subject to obtaining funding of approximately $700 million of new debt, which is expected to be in the form of a new term loan B under the Company’s existing credit agreement, subject to certain modifications related to the transaction, which is expected to be consummated in Q2 2023.
Garrett has also announced an increase in the Company’s share repurchase authorization to $250 million. Under the share repurchase program, the Company may repurchase shares of Series A Preferred Stock or Common Stock in open market transactions, privately negotiated purchases and other transactions from time to time.
Centerbridge and Oaktree have also agreed with the Company to certain changes to their governance rights under the Company’s governance documents, including a reduction of their existing board nomination rights to no more than one (1) director each, down from three (3) each at current ownership levels. The foregoing board nomination rights will terminate for each of Centerbridge or Oaktree if its ownership falls below 10% of the outstanding shares of Common Stock (on an as-converted basis). Centerbridge and Oaktree have also agreed to lock-up restrictions on their equity securities of Garrett, including lock-up restrictions for 50% of shares for six (6) months and remaining shares for twelve (12) months, from the earlier of the closing of the repurchases from Centerbridge and Oaktree and the 45th day after the execution of the Agreements. Centerbridge and Oaktree have also agreed with the Company to certain limits on their ability to purchase additional equity securities, and voting limitations, for a period of up to eighteen months.
The purchase of the shares Series A Preferred Stock from Centerbridge and Oaktree pursuant to the Agreements is subject to the completion of the debt financing, the effectiveness of the amended and restated Certificate of Designations for the Series A Preferred Stock, and certain other customary conditions. The conversion of the Series A Preferred Stock into shares of Common Stock pursuant to the amended and restated Certificate of Designations for the Series A Preferred Stock is subject to the completion of the repurchases from Centerbridge and Oaktree.
1 Excludes impact of dilutive securities and any payment of aggregate accumulated dividend.
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Other Governance Highlights
Additionally, the Board announced the establishment of a Finance Committee, consisting of five members, to assist the full Board in reviewing and making recommendations on the Company’s capital structure, material financing and offering transactions, material business combinations and the Company’s investor relations strategies.
The transactions were determined to be fair to and in the best interests of the Company and the holders of Common Stock by an independent and disinterested Board committee consisting of members of the Board who are disinterested with respect to the Series A Preferred Stock (the “Preferred Conversion Committee”), and by the full Board. In connection with the transactions, the Preferred Conversion Committee has been assisted with respect to corporate finance matters by J.P. Morgan Securities LLC acting as advisor and with respect to legal matters by Morris, Nichols, Arsht & Tunnell LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP, and the Company has been assisted with respect to corporate finance matters by Morgan Stanley & Co. LLC acting as financial advisor.
Conference Call
Garrett will host a conference call on Wednesday, April 13, 2023 at 8:30 am Eastern Time / 2:30 pm Central European Time to introduce the next chapter of Garrett Motion, both in terms of capital structure and strategic agenda.
The conference call will be broadcast over the Internet and include a slide presentation. To access the webcast and supporting materials, please visit the investor relations section of Garrett’s website at http://investors.garrettmotion.com/.
To participate, dial 1-877-883-0383 (US) or 1-412-902-6506 (international) and use the passcode 2505476.
A replay of the of the conference call will be available by dialing 1-877-344-7529 (US) or 1-412-317-0088 (international) using the access code 3087147. The webcast will be archived on Garrett’s website for replay.
About Garrett Motion Inc.
Garrett Motion is a differentiated technology leader, serving customers worldwide for more than 65 years with passenger vehicle, commercial vehicle, aftermarket replacement and performance enhancement solutions. Garrett’s cutting-edge technology enables vehicles to become safer, more connected, efficient and environmentally friendly. Our portfolio of turbocharging, electric boosting and automotive software solutions empowers the transportation industry to redefine and further advance motion. For more information, please visit www.garrettmotion.com.
Forward Looking Statements
This release contains “forward-looking statements” within the Private Securities Litigation Reform Act of 1995. All statements, other than statements of fact, that address activities, events or developments that we or our management intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements including without limitation our statements regarding inflationary pressures on Garrett's business and management's inflation mitigation strategies, financial results and financial conditions, industry trends and anticipated demand for our products, Garrett’s strategy, anticipated supply constraints, including with respect to semiconductors, anticipated developments in emissions standards, trends including with respect to production volatility and volume, Garrett's capital structure, anticipated new product development and capital deployment plans for the future including expected R&D expenditures, anticipated impacts of partnerships with third parties, Garrett's outlook for 2023, the capital structure transactions described herein, potential repurchases of shares of Common Stock and Series A Preferred Stock under Garrett’s share repurchase program, and the planned debt financing in connection with the transactions described herein. Although we believe the forward-looking statements are based upon reasonable assumptions, such statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results or performance of Garrett to be materially different from any future results or performance expressed or implied by such forward-looking statements. Such risks and uncertainties include but are not limited to the Company’s ability to complete the transactions described herein, including on the timelines the Company anticipates, the anticipated impacts to the Company of the transactions, including on the
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Company’s stock price, cash flows and anticipated future investments, the availability of debt financing in amounts and on terms acceptable to the Company, risks relating to potential purchases by the Company of shares of common stock and Series A preferred stock under the Company’s share repurchase program, and risk factors described in our annual report on Form 10-K for the year ended December 31, 2022, as well as our other filings with the Securities and Exchange Commission, under the headings “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. Forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by our forward-looking statements.
| Contacts: | ||||||||
MEDIA | INVESTOR RELATIONS | |||||||
| Maria Santiago Enchandi | Eric Birge | |||||||
| 1.734.386.6593 | 1.734.228.9529 | |||||||
Maria.SantiagoEnchandi@garrettmotion.com | Eric.Birge@garrettmotion.com | |||||||
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THE NEXT STEP IN OUR TRANSFORMATION JOURNEY APRIL 13, 2023
Forward Looking Statements This presentation contains “forward-looking statements” within the Private Securities Litigation Reform Act of 1995. All statements, other than statements of fact, that address activities, events or developments that we or our management intend, expect, project, believe or anticipate will or may occur in the future are forward- looking statements including without limitation our statements regarding inflationary pressures on Garrett's business and man agement's inflation mitigation strategies, financial results and financial conditions, industry trends and anticipated demand for our products, Garrett’s st rategy, anticipated supply constraints, including with respect to semiconductors, anticipated developments in emissions standards, trends including with respect to p roduction volatility and volume, Garrett's capital structure, anticipated new product development and capital deployment plans for the future including expect ed R&D expenditures, anticipated impacts of partnerships with third parties, Garrett's outlook for 2023, the capital structure transactions described herein, potential repurchases of shares of Common Stock and Series A Preferred Stock under Garrett’s share repurchase program, and the planned debt financing in connect ion with the transactions described herein. Although we believe forward-looking statements are based upon reasonable assumptions, such statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results or performance of Garrett to be materially different fro m any future results or performance expressed or implied by such forward-looking statements. Such risks and uncertainties include but are not limited to the Company ’s ability to complete the transactions described herein, including on the timelines the Company anticipates, the anticipated impacts to the Company of the transactions, including on the Company’s stock price, cash flows and anticipated future investments, the availability of debt financing in amounts and on te rms acceptable to the Company, risks relating to potential purchases by the Company of shares of common stock and Series A preferred stock under the Company’s sha re repurchase program, and risk factors described in our annual report on Form 10-K for the year ended December 31, 2022, as well as our other filings with the Securities and Exchange Commission, under the headings “Risk Factors” and “Cautionary Note Regarding Forward -Looking Statements.” You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. Forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by our forward-looking statements. Non-GAAP Financial Measures This presentation includes the following Non-GAAP financial measures which are not calculated in accordance with generally accepted accounting principles in the United States (“GAAP”): constant currency net sales growth, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Consolidated EBITDA, Adjusted Free Cash Flow, Adjusted Free Cash Flow Conversion, Adjusted EBITDA – Capex Conversion, EBIT, Liquidity, Debt, and Debt to Consolidated EBITDA. The Non-GAAP financial measures provided herein are adjusted for certain items as presented in the Appendix containing Non -GAAP Reconciliations and may not be directly comparable to similar measures used by other companies in our industry, as other companies may define such measures different ly. Management believes that, when considered together with reported amounts, these measures are useful to investors and management in understanding our on going operations and analysis of ongoing operating trends. Garrett believes that the Non-GAAP measures presented herein are important indicators of operating performance because they exclude the effects of certain items, therefore making them more closely reflect our operational performance. These metrics s hould be considered in addition to, and not as replacements for, the most comparable GAAP measure. For additional information with respect to our Non -GAAP financial measures, see the Appendix to this presentation and our annual report on Form 10-K for the year ended December 31, 2022.
Today’s Presenters Olivier Rabiller President & CEO (Since 2016) 21 Years at Garrett / Honeywell 28 Years Industry Experience Sean Deason CFO (Since 2020) 3 Years at Garrett 23 Years Industry Experience
Transaction Overview Key Updates & Transaction Rationale • Garrett has consistently delivered strong performance over the past two years, through a volatile macroeconomic environment ‒ Redeemed ~$620M of Series B Preferred Stock (“Series B”) rapidly over three quarters ‒ Initiated Series A Preferred Stock (“Series A”) cash dividend in Q3 2022 • With continued strong performance in Q1 2023, Garrett is closer to achieving the remaining milestones that cause the Series A Automatic Conversion to Common Stock • Garrett is focused on ensuring such conversion is effectuated optimally; for over a year, Garrett has been exploring ways to further normalize the Company’s capital structure and ultimately formed a committee of disinterested directors (the “Preferred Conversion Committee”) to explore such alternatives, including this Transaction • This Transaction simplifies Garrett’s capital structure by converting all Series A to Common Stock in a structured, organized fashion; eliminates uncertainty around timing of the conversion; and reduces investor rights of large shareholders Transaction Overview • All Series A is expected to convert into Common Stock on or about July 3, 2023, after which date Garrett’s capital structure will consist of a single equity class ‒ Conversion will no longer be subject to meeting certain financial / stock price milestones • Garrett has reached agreements to repurchase approximately $280M of Series A from Centerbridge and approximately $290M of Series A from Oaktree (together with the Series A amendment and conversion, the “Transaction”) ‒ As part of the Transaction, Centerbridge and Oaktree will reduce their governance rights and lock up their remaining shares ▪ Centerbridge and Oaktree are highly supportive, value-added shareholders and Board members. Both will continue to be significant shareholders with collective ~30%1 pro forma ownership and will have Board representation going forward ‒ Centerbridge and Oaktree today own 27% and 28% of Series A, respectively, and will consent to the Series A amendment Financing, Timing & Other Considerations • Series A repurchase to be funded via $700M incremental Term Loan B ‒ Incremental Term Loan B expected to close in Q2 2023 ‒ Results in limited increase in leverage • Garrett’s Board of Directors has approved an increase in our existing share repurchase authorization to $250M ‒ Immediate capacity for Series A and Common Stock repurchases through Term Loan B proceeds and cash on-hand, plus future support from improved cash flow generation 1 Excludes impact of dilutive securities and any payment of aggregate accumulated dividend. On an as-converted basis
Reduces Ownership Concentration and Investor Rights of Large Shareholders • Reduced concentration, moving toward an equity base more typical of a public company • Centerbridge and Oaktree will continue to be significant holders with strong conviction in Garrett; they will collectively own ~30% of the Company, remain on the Board of Directors with one Director each, and have agreed to staggered lock-ups Simplified Capital Structure and Attractive Investment Opportunity • Greater liquidity with a single class of shares • Removes uncertainty around the timing of Series A conversion Key Transaction Benefits 1 2 4 5 Multi-Billion Dollar Common Stock Market Capitalization • Facilitates transition to diversified shareholder base with meaningful long-term institutional ownership • May broaden index membership and increase related weightings Enhances Garrett’s Ability to Return Capital to Shareholders and Invest in Organic & Inorganic Growth • Enhanced cash flow generation provides greater flexibility for future share repurchases and potential dividends • Incremental cash flow to invest in technology development and portfolio enhancement Significantly Accretive to Already Robust Cash Flow Generation; ~$100M+ Annual Net Cash Flow Benefit • Eliminates annual Series A cash dividend • Robust cash flow generation profile provides enhanced ability to de-lever in the short-term 3 1 1 Excludes impact of dilutive securities and any payment of aggregate accumulated dividend. On an as-converted basis
Repurchase and Investor Rights Summary Repurchase Price • $8.10 per share in cash, which will be adjusted to equal the volume-weighted average price of the Common Stock for the fifteen trading days following announcement, subject to a minimum price of $7.875 per share and a maximum price of $8.50 per share Share Repurchase • Approximately $280M of Series A from Centerbridge and approximately $290M of Series A from Oaktree, for a total of $570M Lock-Up • Centerbridge & Oaktree have agreed to staggered lock-ups: ‒ 6-month lock-up for 50% of shares; ~30%1 of pro forma market capitalization under lock-up for 6 months ‒ 12-month lock-up for 50% of shares; ~15%1 of pro forma market capitalization under lock-up for 12 months • Lock-ups apply to all of Garrett’s equity securities beneficially owned by Centerbridge and Oaktree and their affiliates Governance • Centerbridge and Oaktree to reduce their investor rights from designating three directors each to the Board of Directors to no more than one designee each • The foregoing Board nomination rights will terminate for Centerbridge or Oaktree if their ownership falls below 10% (each) Share Repurchase Authorization • In addition to the repurchase from Centerbridge and Oaktree, Garrett will increase its existing share repurchase authorization to $250M ‒ Supported by Term Loan B proceeds, ample cash on-hand, and future free cash flow generation Additional Payment • As part of the Transactions, all holders of Series A Preferred Stock will receive an amount equal to: ‒ $0.17 per share, the preference dividends that will accrue on the Series A Preferred Stock through June 30, 2023; ‒ Approximately $0.6835 per share, the accrued and unpaid preference dividends on the Series A Preferred Stock as of June 30, 2023; and ‒ $0.144375 per share, the preference dividends that would have accrued through September 30, 2023 • Other than the preference dividend that would have accrued through September 30, 2023, which will be paid in cash, these amounts may be paid to all holders in cash, stock, or a combination of cash and stock, at the election of the Company, and any stock issued will be valued at the adjusted purchase price paid to Centerbridge and Oaktree 1 Excludes impact of dilutive securities and any payment of aggregate accumulated dividend. On an as-converted basis
Centerbridge 15% Oaktree 15% Others 70% Common 100% % Outstanding Shares Transformation of Capitalization and Cash Flows Share Classes Ownership Series A Dividend Obligation Today Pro Forma for Transaction Two classes of equity: Series A Preferred Stock Common Stock Substantial concentration of ownership in largest Series A investors Common 21% Series A 79% Centerbridge 22% Oaktree 23% Others 54% Series A Preferred Stock 11.0% annual dividend One class of equity: Common Stock Enables Greater Trading Liquidity Diversifies shareholding; no individual holder with greater than ~15% 2 ownership No Series A dividend; unlocks additional cash flow to pursue share repurchases, dividends, and M&A % Outstanding Shares % Ownership1,2 ~($160M) Annual Series A Dividend ~$100M+ Annual Net Cash Flow Benefit Capitalization Liquidity Strong liquidity position and no debt maturities until 2028 1 Percentages may not sum to 100 due to rounding 2 Excludes impact of dilutive securities and any payment of aggregate accumulated dividend. On an as-converted basis 3 See Appendix for reconciliations of the Non-GAAP measures 4 Reflects share prices as of April 12, 2023 ($9.15 Series A share price, $8.25 Common Stock share price). Pro forma share count subject to change Continued strong liquidity position and no debt maturities until 2028 Debt ($M)3 $1,186 Series A Market Cap ($M)4 $2,243 Common Market Cap ($M)4 $535 Debt ($M) $1,886 Series A Market Cap ($M) -- Common Market Cap ($M)4 $1,976 % Ownership2 ~$770M Pro Forma Q4 2022 Liquidity $721M Q4 2022 Liquidity3 ~ ~ ~
$367 $313 $300 - $400 2021 2022 2023 Proven Ability to Generate Cash and Rapidly De-Lever Adjusted Free Cash Flow1 Over Time $M 1 See Appendix for reconciliations of the Non-GAAP measures 2 Includes Series B 3 Negatively impacted ($28M) by interest payment due to early, full redemption of Series B 4 Excludes interest expense from incremental Term Loan B. For Adjusted Free Cash Flow Conversion, reflects midpoint of Adjusted Free Cash Flow and Adjusted EBITDA 2023 outlook 60% 55%3 60%4 Adj. Free Cash Flow Conversion1 ✓ Demonstrated track record of consistent, robust adjusted free cash flow generation ✓ Consistently ~60% Adjusted Free Cash Flow Conversion1 ✓ Redeemed ~$620M of Series B rapidly over 3 quarters ✓ Net de-leveraging of ~0.7x over the last 6 quarters2 Outlook ✓ Targeting to return to 2.0x net leverage 3 4 Transaction Eliminates ~$160M Annual Series A Dividend Paid from Adjusted Free Cash Flow1 ✓ Consistently >80% Adjusted EBITDA – Capex Conversion1 ✓ $440M of Adjusted EBITDA1 and $128M of Adjusted Free Cash Flow1 in 2020, despite COVID-19 headwinds ✓ Series A conversion to yield ~$100M+ annual net cash flow benefit
• Garrett expects to achieve financial results in the upper end of the full year 2023 outlook published on February 14, 2023 • Full year 2023 outlook will be updated during Garrett’s next earnings conference call • Year to date, better than expected financial performance has been primarily driven by: ✓ Strong industry volumes in key regions ✓ The successful ramp-up of new programs ✓ Operational excellence ✓ Favorable foreign exchange 2023 Outlook Net Sales • $3.55B to $3.85B Net Sales Growth at Constant Currency1 • +1% to +6% Net Income • $255M to $300M Adjusted EBITDA1 • $555M to $615M Net Cash Provided By Operating Activities • $390M to $490M Adjusted Free Cash Flow1 • $300M to $400M 1 See Appendix for reconciliations of the Non-GAAP measures
GARRETT MOTION THE NEXT CHAPTER
26% 41% 19% 12% 2% Technologies Offering2022 Revenue Breakdown Garrett Snapshot Key Statistics 13 State-of-the-art Manufacturing Facilities ~1,250 Engineers 40+ OEMs Served Globally 1,600+ Patents Issued or Pending North America Diesel Gas Aftermarket By Geography 19% 31% 48% 2% Asia Europe Other By Product Line Commercial Vehicle Other 1 Includes approximately 7,300 permanent employees and 2,000 temporary and contract workers globally as of 12/31/2022 5 R&D Centers ~9,300 Employees 120M+ Garrett Turbos In Use Globally $90M+ Annual R&D Spent on Electrification 1 E-Cooling Two Stage Double Axle VNT Variable Nozzle Turbine (VNT) Free-Float E-Powertrain Turbo- Compounding Wastegate Fuel Cell Compressor E-Turbo E-Compressor E m is s io n R e d u c ti o n Z e ro E m is s io n
Leader in a Consolidating Industry with Exceptional Cash Flow Generation A Unique Company at the Forefront of Innovation 1 2 3 4 Strong Earnings Visibility and Resilience Optimized Capital Allocation to Enable Share Repurchases, Potential Future Dividends, and M&A Technology Innovator and Targeted Investments in Zero Emission Technologies
#1 Position Achieved and Strengthened by >50% Average New Business Win Rate Trusted Partner to Customers Globally Leader in a Consolidating Industry with Exceptional Cash Flow Generation Expanding Leadership Across Turbo Verticals Served Attractive Financial Profile 1 2018 Rank 2023 Rank1 LV Diesel #1 #1 CV #1* #1* #4 #1 LV Gas (*) On OEM addressable industry, excluding in-house 1 Source: Management Estimate 2 See Appendix for reconciliations of the Non-GAAP measures 3 Excludes interest expense from incremental Term Loan B. Reflects midpoint of Adjusted Free Cash Flow and Adjusted EBITDA 2023 outlook Average Annual Adjusted Free Cash Flow2 Last 2 Years$340M Midpoint 2023 Outlook Adjusted Free Cash Flow Conversion2,360% Variable Cost Structure~80% Capex as % of Net Sales Required <3% 15.8% 2022A Adj. EBITDA Margin2 Pre- Development 4 Years 2 Years 3 – 5 Years 10 – 15 Years Product Development Vehicle Production Aftermarket Long-Term Co-Development Spans Full Life of Engine 20+ Year Cycle Of Production in Low-Cost Regions85% ✓ Turbos are highly specialized and are the most expensive engine component ✓ Deeply embedded development process drives customer loyalty ✓ Longstanding customer relationships with major LV and CV OEMs ✓ Garrett is the choice turbo supplier in a consolidating industry High Degree of Customer Stickiness with OEMs Given Co-Development 13.5% 2022A Adj. EBIT Margin2
Strong Earnings Visibility and Resilience 80% of OEM Revenue Awarded 4 Years in Advance Meaningful Contribution from High-Margin, Resilient Non-Light Vehicle Verticals 2 Awarded Non-awarded 99% 95% 88% 80% 1% 5% 12% 20% 2023 2024 2025 2026 OEM Revenue Awarded for Future % CV, Industrial & AM 31% Other 69% Revenue Contribution (2022A) 82 85 88 91 54% 55% 57% 58% 2022 2023 2024 2025 ✓ Stable Earnings Stream ✓ High OE Stickiness 1 Source: S&P Mobility (IHS), February 2023. Turbo Penetration calculated on all ICE vehicles, including gasoline and diesel Commercial Vehicle, Industrial, and Aftermarket Products Are Higher Margin and Contribute to Earnings on an Outsized Basis ✓ Long Lifespan Projects ✓ Sticky Revenues: High Switching Costs ✓ Predictable Revenues: Revenue Streams Over Life of Platform ✓ Aftermarket Revenues: Services Throughout Life of Engine / Platform Turbo Penetration Increasing Globally Global Light Vehicle Production and Internal Combustion Engine Turbo Penetration1 M Units / % Light Vehicle Production, M Units Turbo Penetration on ICE, % >50% Win Rate in the Past 5 Years and Growing Turbo Penetration Position Garrett for Sustained Growth
400 Engineers Dedicated to Electrification Today Successful Innovation Shift to Technologies for Electrified Vehicles, Leveraging Core Competencies Core Competencies Enabling Advanced Electrification Solutions 3 2015 2016 2017 2018 2019 2020 2021 2022 >50% Of Engineering Investment In-House Design High-Speed Motors, Inverters, Software Overview of Electrification Hiring and Organization Headcount Over Time Engineers hired & re-trained in past 5 years, now focused on new electrification technologies ~400 <75 Best-in-Class R&D Culture and Unique Capabilities in Electrical Machinery Attracting Industry-Leading Engineers in Electrification Turbomachines for Air Compression High precision design & assembly, high speed balancing, and ability to operate in harsh environments across multiple use cases Withstands temperatures up to 1,200 degrees Celsius High-Speed Motors Best-in-class power density, producing the same amount of power in a smaller, more compact form Garrett E-Turbo e-motor can rotate in excess of 200,000 RPM, operating at 10x typical automotive speeds High precision component design & assembly, hi speed balancing High-power density and high- switching speed, up to 30,000 Hz Power Electronics Unique, compact design for high speed / high power motor control, operating in harsh environments (vibration, temperature) High voltage 400-800V electronics at industry- leading 30kHz switching frequency Control Software Use on-board digital twins to optimize energy efficiency of all vehicle types in real-time Up to 30x smaller memory footprint and up to 6x faster execution time vs. closest competitor $90M+ Annual R&D Spent on Electrification
Zero Emission Technology Gains Relevance in Portfolio, Delivered with Attractive Profitability Strong Zero Emission Vehicle Technology Pipeline and Active Customer Engagement Zero Emission Technology Targets 3 Margin Impact of New Zero Emission Vehicle ContractsAccretive Already Awarded Lifetime Revenue of Zero Emission Vehicle Contracts ~$350M 3 Series Production Contracts Won with OEMs in ’22 (1 in NA, 1 in CN, 1 in EU) ~200 Prototypes Delivered 15+ Customers Engaged Fuel Cell E-Powertrain ✓ Step change in cooling and heating power for ZEV thermal management ✓ Reduced power consumption enables vehicle range increase / reduces battery size ✓ Reduced noise levels ✓ In-house design E-Cooling Why Garrett Wins Key Achievements 1st Pre-development Contract Won 10+ Customers Engaged Engaging Advanced Development Teams for Prototyping Early Customer Engagement ✓ Best-in-class power density reduces product weight and use of rare minerals ✓ Small packaging leaves more room for battery and / or cabin space ✓ In-house design ✓ Best-in-class packaging and energy efficiency ✓ Leadership in power density and durability ✓ 3rd generation; technology more mature versus competitors ✓ In-house design 2030E Zero Emission Vehicle Revenue~$1B
Optimized Capital Allocation to Enable Share Repurchases, Potential Future Dividends, and M&A 4 ✓ Ability to rapidly de-lever with robust cash flow generation further enhanced by elimination of Series A dividend ✓ De-lever to 2.0x target net leverage following the Transaction Net Leverage ✓ Potential to allocate capital to dividends in the future ✓ Increase in share repurchase authorization to $250M Return of Capital ✓ Increase targeted investment in R&D focusing on electrification technologies✓ Continue to invest in differentiated technologies and capabilities in the consolidating turbo industryDisciplined Organic Re-investment M&A ✓ Bolt-on acquisitions and select inorganic growth to unlock synergies and enhance portfolio S u p p o rt e d b y $ 3 0 0 M – $ 4 0 0 M A d ju s te d F re e C a s h F lo w 1 O u tl o o k S u p p o rt e d b y $ 6 0 0 M + A d j. E B IT D A 1 ,2 O u tl o o k 1 See Appendix for reconciliations of the Non-GAAP measures 2 Reflects the midpoint of the upper range of the outlook, calculated as the midpoint of $585M – $615M
Key Takeaways Milestone Transaction Simplifies and Normalizes Garrett’s Capital Structure ✓ Builds upon Garrett’s ongoing strategy and multi-year initiative to normalize its capital structure ✓ Broadens addressable investor base through a larger market capitalization and enhanced liquidity ✓ Improves already robust cash flow generation, driving ~$100M+ annual net cash flow benefit ✓ Reduces ownership concentration and select Series A holders’ investor rights Positions Garrett for the Next Chapter ✓ Long and decorated history of innovation and leadership across verticals ✓ Longstanding relationships with global OEMs and continued focus on best-in-class customer experience ✓ Removal of Series A dividend outflow provides additional capital to further invest in cutting-edge innovation ✓ Continue to offer electrification technologies with a focus on differentiated solutions for zero emission vehicles Demonstrated Track Record of Superior Company Performance Across Cycles ✓ Strong visibility on future sales given winning track record with OEMs ✓ High-margin, high-value products with complex and advanced engineering ✓ Operational excellence and variable cost base translate to robust bottom line ✓ Generated $128MM of Adjusted Free Cash Flow 1 in 2020, despite COVID-19 headwinds to the auto industry 1 See Appendix for reconciliations of the Non-GAAP measures
Appendices Investors Eric Birge +1 (734) 228-9529 Eric.Birge@garrettmotion.com Media Christophe Mathy +41 78 643 7194 Christophe.Mathy@garrettmotion.com
84% 60% 77% 48% 58% NasdaqGS:GTX PV Powertrain Focused Median CV Powertrain Focused Median Diversified with PT Exposure Median Non-PT Supply Median 13% 7% 8% 4% 8% NasdaqGS:GTX PV Powertrain Focused Median CV Powertrain Focused Median Diversified with PT Exposure Median Non-PT Supply Median (Adjusted EBITDA1 – Capex) / Adjusted EBITDA1 2022A Garrett Delivers Best-in-Class Profitability and Free Cash Flow Source: Company Materials Note: For IFRS peers, (a) Adjusted EBITDA and Adjusted EBIT are burdened by lease expense and capitalized R&D and (b) capex excludes capitalized R&D. For US GAAP peers with finance leases, Adjusted EBITDA and Adjusted EBIT are burdened by finance lease expense 1 See Appendix for reconciliations of the Non-GAAP measures 2 Represents cumulative 2021A – 2022A 3 PV Powertrain Focused Peers include BorgWarner, Linamar, Schaeffler, and Vitesco Technologies 4 CV Powertrain Focused Peers include Dana, Cummins, American Axle & Manufacturing, and Allison Transmission 5 Diversified with PT Exposure Peers include Magna, Valeo, Faurecia, and Compagnie Plastic Omnium 6 Non-PT Supply Peers include NORMA, Continental, Brembo, Autoliv, Stabilus, Gestamp, Visteon, and Aptiv 2022A Adjusted EBIT Margin1 3 4 5 6 2021A – 2022A Average2: 86% 2021A – 2022A Average2: 14% 3 4 5 6
($ in millions) FY 2022 FY 2021 FY 2020 Net income - GAAP $390 $495 $80 Interest expense, net of interest income 6 82 76 Tax (benefit) expense 106 43 39 Depreciation 84 92 86 EBITDA (Non-GAAP) $586 $712 $281 Reorganization items, net 3 (125) 73 Stock compensation expense 11 7 10 Repositioning costs 4 16 10 Foreign exchange loss on debt, net of related hedging loss - 9 (38) Loss on extinguishment of debt 5 - - Other expense, net 2 - 45 Other non-operating income (41) (12) 5 Professional service costs - - 52 Capital tax expense - - 2 Adjusted EBITDA (Non-GAAP) $570 $607 $440 Less: Depreciation (84) (92) Adjusted EBIT (Non-GAAP) $486 $515 Net Sales $3,603 $3,633 $3,034 Net income margin 10.8% 13.6% 2.6% Adjusted EBITDA margin 15.8% 16.7% 14.5% Adjusted EBIT margin 13.5% 14.2% Reconciliation of Net Income (Loss) to Adjusted EBITDA and Adjusted EBIT
($ in millions) FY 2022 FY 2021 FY 2020 Net cash provided by (used for) operating activities (GAAP) $375 ($310) $25 Expenditures for property, plant and equipment (91) (72) (80) Net cash provided by (used for) operating activities less expenditures for property, plant and equipment (Non-GAAP) $284 ($382) ($55) Honeywell Indemnity Agreement expenses - - 43 Stalking horse termination reimbursement - 79 - Chapter 11 Professional service costs 5 220 101 Honeywell Settlement as per Emergence Agreement - 375 - Chapter 11 related cash interests - 41 - Stock compensation cash - 10 - Repositioning cash 4 14 5 Factoring and P-notes 20 10 34 Adjusted free cash flow (Non-GAAP) $313 $367 $128 Net income - GAAP $390 $495 $80 Operating cash flow conversion 96% (63%) 31% Adjusted EBITDA (Non-GAAP) $570 $607 $440 Adjusted free cash flow conversion 55% 60% 29% Adjusted EBITDA - Capex (Non-GAAP) $479 $535 Adjusted EBITDA - Capex conversion 84% 88% Reconciliation of Cash Flow from Operations to Adjusted Free Cash Flow and Related Ratios
($ in millions) Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q4 2022 Q2 2021 Net income - GAAP $11 $26 ($105) $409 $63 $128 $88 $85 $105 $112 $390 $341 Interest expense, net of interest income 19 23 20 23 24 15 (4) 8 (9) 11 6 85 Tax (benefit) expense (1) 28 24 30 28 (39) 37 20 26 23 106 81 Depreciation 23 26 23 24 23 22 22 21 21 20 84 96 EBITDA (Non-GAAP) $52 $103 ($38) $486 $138 $126 $143 $134 $143 $166 $586 $603 Reorganization items, net 4 69 174 (295) (9) 5 1 1 - 1 3 (48) Stock compensation expense 2 2 2 1 2 2 2 3 3 3 11 7 Repositioning costs 2 2 8 3 3 2 1 2 1 - 4 15 Foreign exchange loss on debt, net of related hedging loss 5 (42) 33 (24) - - - - - - 0 (28) Loss on extinguishment of debt - - - - - - - 5 - - 5 0 Other expense, net 14 1 - - - - 1 - 1 - 2 15 Other non-operating (income) expense (3) 13 (3) (3) (3) (3) (2) (7) (2) (30) (41) 4 Professional service costs 44 (1) - - 1 (1) - - - - - 43 Capital tax expense - 2 - - 2 (2) - - - - - 2 Adjusted EBITDA (Non-GAAP) $120 $149 $176 $168 $134 $129 $146 $138 $146 $140 $570 $613 Unrealized foreign exchange gain - - (2) 2 3 (1) (1) (1) 1 (3) (4) - Interest Income - - 1 1 1 1 2 3 1 2 8 2 Other expenses (2) - - - - - - 3 4 6 5 18 - Consolidated EBITDA $120 $149 $175 $171 $138 $129 $150 $144 $154 $144 $592 $615 Last Twelve Months (LTM) Reconciliation of Net Income (Loss) to Adjusted EBITDA and Consolidated EBITDA1 1 As defined in our credit agreement 2 Relates to qualifying expenses such as costs of public company registration, listing and compliance, facility start-up and transition costs and other non-recurring expenses as defined under our credit agreement
($ in millions) Q4 2022 Q2 2021 Cash and cash equivalents $246 $401 Undrawn revolver credit facility 475 261 Total Liquidity (Non-GAAP) $721 $662 Long-term term debt $1,148 $1,204 Short-term term debt 7 5 Deferred financing costs 31 38 Gross Debt $1,186 $1,247 Series B Preferred Stock - 585 Less: Cash and cash equivalents (246) (401) Net Debt Including Series B Preferred Stock $940 $1,431 Consolidated EBITDA LTM (Non-GAAP) $592 $615 Net Debt to Consolidated EBITDA LTM (Non-GAAP) 1.59x 2.33x Reconciliation of Liquidity, Long-Term Debt to Net Debt, and Related Ratios 1 1 As defined in our credit agreement
2023 Full Year Low End 2023 Full Year High End Reported net sales (% change) (1%) 7% Foreign currency translation (2%) 1% Net Sales Growth at Constant Currency (Non-GAAP) 1% 6% Full Year 2023 Outlook Reconciliation of Net Sales Growth to Net Sales Growth at Constant Currency
($ in millions) 2023 Full Year Low End 2023 Full Year High End Net Income (GAAP) $255 $300 Net interest expense 103 103 Tax expense 80 95 Depreciation 89 89 EBITDA (Non-GAAP) $527 $587 Non-operating income 1 1 Stock compensation expense 19 19 Repositioning charges 8 8 Adjusted EBITDA (Non-GAAP) $555 $615 Full Year 2023 Outlook Reconciliation of Net Income to Adjusted EBITDA
($ in millions) 2023 Full Year Low End 2023 Full Year High End Net cash provided by operating activities (GAAP) $390 $490 Expenditures for property, plant and equipment (90) (90) Adjusted free cash flow (Non-GAAP) $300 $400 Operating cash flow conversion 153% 163% Adjusted free cash flow conversion 54% 65% Full Year 2023 Outlook Reconciliation of Cash Flow from Operations to Adjusted Free Cash Flow
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