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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 September 30, 2023
OR
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)
________________________________________________
Delaware82-4873189
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par value per shareGTXThe 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 October 18, 2023, the registrant had 242,419,764 shares of Common Stock, $0.001 par value per share, outstanding.



Table of Contents
  Page
 
 
 
 
 
 
1


PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
GARRETT MOTION INC.
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
(Dollars in millions, except per share amounts)
Net sales (Note 3)
$960 $945 $2,941 $2,705 
Cost of goods sold784 767 2,374 2,183 
Gross profit176 178 567 522 
Selling, general and administrative expenses59 57 178 164 
Other expense, net 1 1 3 2 
Interest expense50 18 108 61 
Loss on extinguishment of debt   5 
Non-operating income(4)(29)(1)(73)
Reorganization items, net   2 
Income before taxes70 131 279 361 
Tax expense (Note 5)
13 26 70 83 
Net income57 105 209 278 
Less: preferred stock dividends (Note 15)
 (40)(80)(117)
Less: preferred stock deemed dividends (Note 15)
  (232) 
Net income (loss) available for distribution$57 $65 $(103)$161 
 Earnings (loss) per common share
Basic$0.23 $0.21 $(0.73)$0.52 
Diluted0.23 0.21 (0.73)0.52 
Weighted average common shares outstanding
Basic250,888,716 64,820,887 141,745,701 64,834,298 
Diluted252,381,719 65,250,287 141,745,701 65,118,021 
The Notes to the Consolidated Interim Financial Statements are an integral part of this statement.
2



GARRETT MOTION INC.
CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2023202220232022
 (Dollars in millions)
Net income$57 $105 $209 $278 
Foreign exchange translation adjustment14 10 8 13 
Changes in fair value of effective cash flow hedges, net of tax (Note 16)
(2)9 (3)26 
Changes in fair value of net investment hedges, net of tax (Note 16)
20 45 18 87 
Total other comprehensive income, net of tax32 64 23 126 
Comprehensive income$89 $169 $232 $404 
The Notes to the Consolidated Interim Financial Statements are an integral part of this statement.
3



GARRETT MOTION INC.
CONSOLIDATED INTERIM BALANCE SHEETS
(Unaudited)
 September 30,
2023
December 31,
2022
 (Dollars in millions)
ASSETS  
Current assets:  
Cash and cash equivalents$162 $246 
Restricted cash1 2 
Accounts, notes and other receivables – net (Note 6)
860 803 
Inventories – net (Note 8)
294 270 
Other current assets73 110 
Total current assets1,390 1,431 
Investments and long-term receivables32 30 
Property, plant and equipment – net437 470 
Goodwill193 193 
Deferred income taxes225 232 
Other assets (Note 9)
255 281 
Total assets$2,532 $2,637 
LIABILITIES
Current liabilities:
Accounts payable$1,066 $1,048 
Current maturities of long-term debt (Note 14)
7 7 
Accrued liabilities (Note 11)
312 320 
Total current liabilities1,385 1,375 
Long-term debt (Note 14)
1,622 1,148 
Deferred income taxes21 25 
Other liabilities (Note 12)
196 205 
Total liabilities$3,224 $2,753 
COMMITMENTS AND CONTINGENCIES (Note 20)
EQUITY (DEFICIT)
Series A Preferred Stock, par value $0.001; zero and 245,089,671 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
$ $ 
Common Stock, par value $0.001; 1,000,000,000 and 1,000,000,000 shares authorized, 243,305,848 and 64,943,238 issued and 243,011,280 and 64,832,609 outstanding as of September 30, 2023 and December 31, 2022, respectively
  
Additional paid–in capital1,188 1,333 
Retained deficit
(1,939)(1,485)
Accumulated other comprehensive income (Note 17)
59 36 
Total deficit(692)(116)
Total liabilities and deficit$2,532 $2,637 
The Notes to the Consolidated Interim Financial Statements are an integral part of this statement.
4



GARRETT MOTION INC.
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(Unaudited)
 
  Nine Months Ended September 30,
20232022
 (Dollars in millions)
Cash flows from operating activities:  
Net income
$209 $278 
Adjustments to reconcile net income to net cash provided by operating activities
Deferred income taxes13 16 
Depreciation66 64 
Amortization of deferred issuance costs17 6 
Interest payments, net of debt discount accretion (19)
Loss on extinguishment of debt 5 
Loss on remeasurement of forward purchase contract13  
Foreign exchange loss 4 
Stock compensation expense12 8 
Pension expense
1  
Change in fair value of derivatives21 (54)
Other7 2 
Changes in assets and liabilities:
Accounts, notes and other receivables(76)(166)
Inventories(30)(80)
Other assets2 13 
Accounts payable57 180 
Accrued liabilities26 (2)
Other liabilities(8)(17)
Net cash provided by operating activities
$330 $238 
Cash flows from investing activities:
Expenditures for property, plant and equipment(57)(78)
Re-couponing of cross-currency swap contract
9 
Net cash used for investing activities
$(48)$(78)
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net of debt financing costs667  
Payments of long-term debt(205)(5)
Redemption of Series B Preferred Stock (381)
Repurchases of Series A Preferred Stock(580)(4)
Repurchases of Common Stock(178) 
Payments of Additional Amounts for conversion of Series A Preferred Stock(25) 
Payments for preference dividends(42)(42)
Payments for debt and revolving facility financing costs(2)(4)
Other(1) 
Net cash used for financing activities
$(366)$(436)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash(1)(27)
Net decrease in cash, cash equivalents and restricted cash
(85)(303)
Cash, cash equivalents and restricted cash at beginning of the period248 464 
Cash, cash equivalents and restricted cash at end of the period$163 $161 
Supplemental cash flow disclosure:
Income taxes paid (net of refunds)$38 $38 
Interest paid45 56 
    
The Notes to the Consolidated Interim Financial Statements are an integral part of this statement
5



GARRETT MOTION INC.
CONSOLIDATED INTERIM STATEMENTS OF EQUITY (DEFICIT)
(Unaudited)
Series A
Preferred Stock
Common StockAdditional
Paid-in
Capital
Retained
Deficit
Accumulated Other
Comprehensive Income
Total
Deficit
SharesAmountSharesAmount
(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, 2023246 $ 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 loss, net of tax— — — — — — (3)(3)
Issuance of Common Stock for preference dividends— — 26 — 209 (209)—  
Conversion of Series A Preferred Stock to Common Stock(176)— 176 — — (25)— (25)
Stock-based compensation— — — — 5 — — 5 
Balance at June 30, 2023 $ 264 $ $1,184 $(1,834)$27 $(623)
Net income— — — — — 57 — 57 
Repurchases of Common Stock— — (21)— — (161)— (161)
Excise tax on share repurchases— — — — — (1)— (1)
Other comprehensive loss, net of tax— — — — — — 32 32 
Stock-based compensation— — — — 4 — — 4 
Balance at September 30, 2023
 $ 243 $ $1,188 $(1,939)$59 $(692)
Series A
Preferred Stock
Common StockAdditional
Paid-in
Capital
Retained
Deficit
Accumulated Other
Comprehensive
(Loss)/Income
Total
Deficit
 SharesAmountSharesAmount
 (in millions)
Balance at December 31, 2021
246 $ 64 $ $1,326 $(1,790)$(4)$(468)
Net income— — — — — 88 — 88 
Repurchases of Series A Preferred Stock— — — — (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 
Repurchases of Series A Preferred Stock— — — — (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)
Net income— — — — — 105 — 105 
Repurchases of Series A Preferred Stock— — — — (1)— — (1)
Other comprehensive income, net of tax— — — — — — 64 64 
Dividends declared— — — — — (42)— (42)
Stock-based compensation— — — — 3 — — 3 
Balance at September 30, 2022246 $ 64 $ $1,331 $(1,555)$122 $(102)
The Notes to the Consolidated Interim Financial Statements are an integral part of this statement.
6



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, 2022 included in our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on February 14, 2023 (our “2022 Form 10-K”). The results of operations for the three and nine months ended September 30, 2023 and cash flows for the nine months ended September 30, 2023 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 September 30, 2022. Our actual closing date for the three months ended September 30, 2022 was October 1, 2022. There was no difference in actual closing date for the three months ended September 30, 2023.
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.
Capital Structure Transformation Transaction
On April 12, 2023, the Company entered into the Transaction (as defined in Note 15 below) to increase the attractiveness of the Company to investors, including simplifying the Company’s capital stock by converting all outstanding Series A Preferred Stock into a single class of Common Stock, subject to certain conditions.
In the Transaction, the Company repurchased and aggregate of 69,707,719 shares of Series A Preferred Stock from the C&O Investors (as defined below), and converted all remaining outstanding 175,337,712 shares of Series A Preferred Stock into an equivalent number of shares of Common Stock. The total amounts paid to holders of Series A Preferred Stock in connection with the Transaction included aggregate cash payments of $605 million and the issuance of an
7



additional 25,577,517 shares of Common Stock in settlement of accumulated and unpaid preference dividends on the Series A Preferred Stock through June 30, 2023. The Transaction was financed through a new Term Loan B for an aggregate principal amount of $700 million under the framework of the Company's existing credit agreement. See Note 15, Series A Preferred Stock.
The Company recorded the following amounts in the Consolidated Interim Financial Statements related to the repurchase and conversion of its Series A Preferred Stock:
Movements for the Nine Months Ended
September 30, 2023
Consolidated Interim Balance Sheet:(Dollars in millions)
Cash and cash equivalents$(605)
Preferred stock, Common stock and Additional Paid-in capital(157)
Retained earnings(441)
  Nine Months Ended September 30, 2023
Consolidated Interim Statement of Operations:(Dollars in millions)
Non-operating expenses$13 
The Company also incurred $9 million of Transaction-related costs for the nine months ended September 30, 2023, primarily for legal and advisory services that are included in Selling, general and administrative expenses in the Consolidated Interim Statement of Operations. See Note 14, Long-term Debt and Credit Agreement for discussion on the new Term Loan B and Note 15, Series A Preferred Stock for further discussion of the Transaction.

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, 2022 included in our 2022 Form 10-K.
Recently Adopted Accounting Pronouncements
In September 2022, the FASB issued ASU 2022-04, Disclosure of Supplier Finance Program Obligations (Topic 405-50): Disclosure of Supplier Finance Purchase Obligations. The amendment in this update requires companies to disclose key terms of supplier financing programs used in connection with the purchase of goods and services, along with information about their obligations under these programs including a rollforward of those obligations. The Company adopted the new guidance as of January 1, 2023. See Note 10, Supplier Financing for disclosure related to the Company's supplier financing program obligations.

8



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 September 30, 2023
Three Months Ended September 30, 2022
OEMAftermarketOtherTotalOEMAftermarketOtherTotal
(Dollars in millions)
United States$147 $54 $2 $203 $134 $54 $1 $189 
Europe382 45 9 436 381 41 6 428 
Asia287 13 5 305 288 14 6 308 
Other9 6 1 16 14 6  20 
$825 $118 $17 $960 $817 $115 $13 $945 
Nine Months Ended September 30, 2023
Nine Months Ended September 30, 2022
OEMAftermarketOtherTotalOEMAftermarketOtherTotal
(Dollars in millions)
United States$412 $150 $4 $566 $354 $159 $2 $515 
Europe1,265 136 26 1,427 1,181 117 21 1,319 
Asia846 38 12 896 765 34 18 817 
Other33 18 1 52 36 18  54 
$2,556 $342 $43 $2,941 $2,336 $328 $41 $2,705 
Contract Balances
The following table summarizes our contract assets and liabilities balances:
 20232022
 (Dollars in millions)
Contract assets—January 1$46 $63 
Contract assets—September 30
44 51 
Change in contract assets—(Decrease)/Increase$(2)$(12)
Contract liabilities—January 1$(8)$(5)
Contract liabilities—September 30
(12)(9)
Change in contract liabilities—(Increase)/Decrease$(4)$(4)

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:
9



Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
(Dollars in millions)
Research and development costs$42 $38 $128 $112 
Engineering-related expenses, net of customer (reimbursements) (1)
(3)4 (8)13 
$39 $42 $120 $125 
(1)    Engineering-related expenses include customer reimbursements of $10 million and $6 million for the three months ended September 30, 2023 and 2022, respectively, and $34 million and $15 million for the nine months ended September 30, 2023 and 2022, respectively.

Note 5. Income Taxes
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
(Dollars in millions)
Tax expense$13 $26 $70 $83 
Effective tax rate18.6 %19.8 %25.1 %23.0 %

The effective tax rate for the three months ended September 30, 2023 is lower than the effective rate for the three months ended September 30, 2022 primarily related to an increase in global research and development benefits, lower taxes on non-U.S. earnings partially offset by nondeductible expenses, and a prior year non-recurring decrease in withholding taxes on undistributed earnings.

The effective tax rate for the nine months ended September 30, 2023 is higher than the effective rate for the nine months ended September 30, 2022 primarily related to a prior year non-recurring decrease in withholding taxes on undistributed earnings and nondeductible expenses, partially offset by increase in global research and development benefit and lower taxes on non-U.S. earnings.

The effective tax rate for the three months ended September 30, 2023 was lower than the U.S. federal statutory rate of 21% primarily related to a decrease in the annual effective tax rate driven by lower taxes on international operations, partially offset by nondeductible transaction costs.

The effective tax rate for the nine months ended September 30, 2023 was higher than the U.S. federal statutory rate of 21% primarily related to nondeductible expenses and tax reserves, partially offset by lower taxes on non-U.S. earnings and global research and development benefits.
Note 6. Accounts, Notes and Other Receivables—Net

September 30,
2023
December 31,
2022
(Dollars in millions)
Trade receivables
$667 $619 
Notes receivable
111 105 
Other receivables
89 88 
867 812 
Less—Allowance for expected credit losses
(7)(9)
$860 $803 
10



Trade receivables include $44 million and $46 million of unbilled customer contract asset balances as of September 30, 2023 and December 31, 2022, 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 September 30,Nine Months Ended September 30,
2023202220232022
(Dollars in millions)
Eligible receivables sold without recourse$184$112$584$481
Guaranteed bank notes sold without recourse413541102
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. Such expenses amounted to $1 million and $3 million for the three and nine months ended September 30, 2023, respectively, and were immaterial for the three and nine months ended September 30, 2022.
September 30,
2023
December 31,
2022
(Dollars in millions)
Receivables sold but not yet collected by the bank from the customer$7 $5 
Guaranteed bank notes sold but not yet collected by the bank from the customer  
As of September 30, 2023 and December 31, 2022, the Company had no guaranteed bank notes pledged as collateral.

Note 8. Inventories—Net
September 30,
2023
December 31,
2022
(Dollars in millions)
Raw materials$197 $203 
Work in process24 18 
Finished products110 80 
 331 301 
Less—Reserves(37)(31)
$294 $270 

11



Note 9. Other Assets
September 30,
2023
December 31,
2022
(Dollars in millions)
Advanced discounts to customers, non-current$41 $51 
Operating right-of-use assets (Note 13)
40 44 
Income tax receivable22 22 
Pension and other employee related4 4 
Designated cross-currency swaps71 74 
Designated and undesignated derivatives66 76 
Other11 10 
$255 $281 

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.
September 30,
2023
December 31,
2022
(Dollars in millions)
Supplier financing obligations outstanding with financial institutions$67 $33 
Guaranteed bank notes outstanding172 171 
Note 11. Accrued Liabilities
September 30,
2023
December 31,
2022
(Dollars in millions)
Customer pricing reserve$64 $50 
Compensation, benefit and other employee related74 69 
Repositioning12 9 
Product warranties and performance guarantees - short-term (Note 20)17 18 
Income and other taxes55 39 
Advanced discounts from suppliers, current4 8 
Customer advances and deferred income (1)
18 29 
Accrued interest25 13 
Short-term lease liability (Note 13)
9 9 
Accrued freight13 9 
Dividends payable 42 
Designated and undesignated derivatives8 8 
Other (primarily operating expenses) (2)
13 17 
 312 320 
(1)Customer advances and deferred income include $12 million and $8 million of contract liabilities as of September 30, 2023 and December 31, 2022, respectively. See Note 3, Revenue Recognition and Contracts with Customers.
12



(2)Includes $3 million and $3 million of environmental liabilities as of September 30, 2023 and December 31, 2022, 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, 2022
$9 $ $9 
Charges13 2 15 
Usage—cash(10) (10)
Non-cash asset write-offs (2)(2)
Balance at September 30, 2023
$12 $ $12 
Severance Costs
Other Costs
Total
(Dollars in millions)
Balance at December 31, 2021
$10 $ $10 
Charges4  4 
Usage—cash(5) (5)
Balance at September 30, 2022
$9 $ $9 

Note 12. Other Liabilities
September 30,
2023
December 31,
2022
(Dollars in millions)
Income taxes$104 $99 
Pension and other employee related17 21 
Long-term lease liability (Note 13)
33 36 
Advanced discounts from suppliers3 6 
Product warranties and performance guarantees – long-term (Note 20)9 10 
Environmental remediation – long term12 14 
Long-term accounts payable7 8 
Other11 11 
196 205 

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
September 30,
Nine Months Ended
September 30,
2023202220232022
(Dollars in millions)
Operating lease cost$4$4$12$12
13



Supplemental cash flow information related to operating leases is as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
(Dollars in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases
$3 $3 $10 $9 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases 2 2 4 
Supplemental balance sheet information related to operating leases is as follows:
September 30,
2023
December 31,
2022
(Dollars in millions)
Other assets$40 $44 
Accrued liabilities9 9 
Other liabilities33 36 
 September 30,
2023
December 31, 2022
Weighted-average remaining lease term (in years)8.148.41
Weighted-average discount rate5.69 %5.61 %
Maturities of operating lease liabilities as of September 30, 2023 were as follows:
(Dollars in millions)
2023$3 
202410 
20258 
20266 
20275 
Thereafter20 
Total lease payments52 
Less imputed interest(11)
$41 

14



Note 14. Long-term Debt and Credit Agreements
The principal outstanding and carrying amounts of our long-term debt as of September 30, 2023 and December 31, 2022 are as follows:
 Due Interest Rate September 30,
2023
December 31,
2022
2021 Dollar Term Facility4/30/2028
SOFR plus 351 bps
$700 $706 
2023 Dollar Term Facility4/30/2028
SOFR plus 450 bps
500  
Euro Term Facility4/30/2028
EURIBOR plus 350 bps
477 480 
Total principal outstanding1,677 1,186 
Less: unamortized deferred financing costs(48)(31)
Less: current portion of long-term debt(7)(7)
Total long-term debt$1,622 $1,148 
Credit Facilities
On April 30, 2021, the Company entered into a credit agreement (as amended from time to time, the "Credit Agreement") providing for senior secured financing, consisting of a seven-year secured first-lien U.S. Dollar term loan facility initially in the amount of $715 million (the “2021 Dollar Term Facility”), a seven-year secured first-lien Euro term loan facility initially in the amount of €450 million (the “Euro Term Facility”) and a five-year senior secured first-lien revolving credit facility initially in the amount of $300 million providing for multi-currency revolving loans (the “Revolving Facility”). The maximum amount of borrowings available under the Revolving Facility was increased to $475 million in 2022.
On April 27, 2023, the Company entered into Amendment No. 3 (the "Third Amendment") to the Credit Agreement, which provided for additional financing consisting of a five-year secured first-lien U.S. Dollar term loan facility initially in the amount of $700 million (the “2023 Dollar Term Facility”, together with the 2021 Dollar Term Facility and Euro Term Facility, the "Term Loan Facilities", and together with the Revolving Facility, the "Credit Facilities"). The full amount of the 2023 Dollar Term Facility was drawn on June 6, 2023 (the "Closing Date"), and the proceeds were primarily used to finance the repurchases of the Series A Preferred Stock as part of the Transaction, and pay fees and expenses incurred in connection with the Third Amendment.
The 2023 Dollar Term Facility will mature on April 30, 2028. Prior to maturity, the 2023 Dollar Term Facility will be repaid quarterly in an amount equal to, during the first two years occurring after the Closing Date, 7.50% per annum of the aggregate principal amount, and thereafter, 10.00% per annum. The Term Borrowers may also prepay the 2023 Dollar Term Facility at any time in whole or in part without premium or penalty, subject to certain exceptions (including for (i) customary breakage and redeployment costs in the case of prepayment of term benchmark rate loans and (ii) 2023 Dollar Term Facility repricing events occurring during the period from the Closing Date to the date that is twelve months following the Closing Date).
The Third Amendment also provided for (i) an increase in the maximum borrowing amount under the Revolving Facility by $95 million (the “Incremental Revolving Commitment”) to an aggregate amount of $570 million; and (ii) an extension of the maturity date for the Revolving Facility by two years from April 30, 2026 to April 30, 2028 (or January 30, 2028 if any of the currently outstanding term loans or term loans under the 2023 Dollar Term Facility maturing as of April 30, 2028 remain outstanding as of such date). The Incremental Revolving Commitment has the same terms and is generally subject to the same conditions applicable to the existing revolving facility under the Credit Agreement, except for fees paid in connection with the arrangement of the increased amount.
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 Credit Agreement on terms and conditions customary for financings of this kind, which issuances reduce availability under the Revolving Facility. As of September 30, 2023, the Company had no loans outstanding under the Revolving Facility, no outstanding letters of credit, and available borrowing capacity of approximately $570 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 September 30, 2023, the Company had $12 million utilized and $3 million of remaining available capacity under such facility.
15



Minimum scheduled principal repayments of the Credit Facilities as of September 30, 2023 are as follow:
September 30,
2023
(Dollars in millions)
2023$2 
20247 
20257 
202617 
202777 
Thereafter1,567 
Total debt payments$1,677 
Interest Rate and Fees
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 3.51% in the case of SOFR loans and 2.25% in the case of ABR loans. The Euro Term Facility is subject to an interest rate equal to an adjusted EURIBOR rate (which shall not be less than zero) plus an applicable margin equal to 3.50%. Interest payments with respect to the 2021 Dollar and Euro Term Facilities are required either on a quarterly basis (for ABR loans) or at the end of each interest period (for SOFR and EURIBOR loans) or, if the duration of the applicable interest period exceeds three months, then every three months.
The 2023 Dollar Term Facility will bear interest, at the Term Borrowers’ election, at a rate per annum equal to (i) SOFR (subject to a 0.50% floor) plus the applicable margin or (ii) the base rate plus the applicable margin. The applicable margin for loans under the 2023 Dollar Term Facility is 4.50% for SOFR loans and 3.50% for base rate 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.
Prepayments
The Credit Agreement contains certain mandatory prepayment provisions in the event that we incur certain types of indebtedness, receive net cash proceeds from certain non-ordinary course asset sales or other dispositions of property, or have excess cash flow (calculated on an annual basis with the required prepayment equal to 50%, 25% or 0% of such excess cash flow, subject to compliance with certain leverage ratios), in each case subject to terms and conditions customary for financings of this kind.
On July 31, 2023, the Company made an early repayment in the amount of $200 million on the 2023 Dollar Term Facility. The early repayment resulted in incremental amortization on debt issuance cost in the amount of $9 million, included within Interest Expense in the Consolidated Interim Statement of Operations.
Certain Covenants
The 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 September 30, 2023, the Company was in compliance with all covenants.

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Note 15. Series A Preferred Stock
On April 12, 2023 (the “Transaction Date”), the Company entered into separate definitive agreements (the “Agreements”) with each of Centerbridge Partners, L.P. and funds managed by Oaktree Capital Management, L.P. (collectively, the “C&O Investors”) 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.
As part of the Agreements, the holders of a majority of the outstanding shares of the Series A Preferred Stock authorized and approved the amendment and restatement of the certificate of designations for the Series A Preferred Stock (as amended, the “Certificate of Designations”) to, among other things, require the conversion of all shares of Series A Preferred Stock into shares of the Company’s common stock (the “2023 Conversion”), subject to the repurchase by the Company of a portion of the shares of Series A Preferred Stock held by the C&O Investors (the “Series A Repurchase”).
Under the terms of the Agreements, the Company agreed to repurchase a total of $570 million (“Base Repurchase Price”) of shares of Series A Preferred Stock from the C&O Investors at a cash price of $8.10 per share which was subsequently adjusted to equal the volume-weighted average price of the Common Stock for the fifteen trading days following the announcement of the transactions (the “15 Days VWAP”), subject to a minimum price of $7.875 per share and a maximum price of $8.50 per share. The 15 Days VWAP was subsequently established at a value of $8.177 per share.
As part of the Transaction, all holders of Series A Preferred Stock, including the C&O Investors, received approximately 0.104379 shares of Common Stock, being an amount equal to $0.853509 per share of Series A Preferred Stock, valued at the 15 Days VWAP, representing accumulated and unpaid preference dividends on each share of Series A Preferred Stock through June 30, 2023 (the “Accumulated Dividends”), as well as $0.144375 per share of Series A Preferred Stock, representing the preference dividends that would have accrued on the Series A Preferred Stock through September 30, 2023 (the “Additional Amounts”).
As part of the Transaction, following the effectiveness of the Certificate of Designations which occurred on June 6, 2023, the Company completed all steps of the Transaction as follows:
The Company paid $580 million to the C&O Investors in connection with the repurchase of 69,707,719 shares of Series A Preferred Stock, comprising of the Base Repurchase Price as well as $10 million ($0.144375 for each repurchased share) in consideration of the Additional Amounts on the repurchased shares of Series A Preferred Stock.
The remaining 175,337,712 shares of Series A Preferred Stock outstanding following such repurchase were converted into 175,337,712 shares of Common Stock (in accordance with the customary procedures of the Company’s transfer agent, for shares held in registered form, and of the Depository Trust Company, for shares held in street name). Following the completion of the 2023 Conversion, trading of the Series A Preferred Stock on Nasdaq was suspended;
As part of the 2023 Conversion, the Company also paid $25 million ($0.144375 for each converted share) to the holders of Series A Preferred Stock in consideration of the Additional Amounts on the shares of Series A Preferred Stock that were converted; and
Issued 25,577,517 shares of Common Stock to all holders of Series A Preferred Stock (equal to $0.853509 per share, valued at the 15 Days VWAP, adjusted to avoid the issuance of fractional shares of Common Stock), in consideration of the Accumulated Dividends of an aggregate amount of $209 million. Cash payments for fractional shares were immaterial.
The Agreements were accounted for as freestanding physically settled forward purchase contracts. The Agreements were initially recorded at fair value and then remeasured through earnings until the establishment of the 15 Days VWAP, whereupon the Agreements were subsequently measured based on the amount of consideration to be paid at settlement. A Monte-Carlo simulation model was used to determine the Transaction Date fair value of the Agreements by simulating a range of possible future stock prices for the Company through the expected settlement date of the Agreements. The significant assumptions utilized in estimating the fair value of the Agreements include: (i) a dividend yield of 0.0%; (ii) an expected volatility of 40.0%; (iii) a risk-free interest rate of 4.23% based on observed interest rates from the Treasury Constant Maturity yield curve consistent with the simulation term; and (iv) a starting share price of $8.25 based on the market price of the Company’s common stock as of the Transaction Date.
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The initial fair value of the Agreements represented a forward purchase liability of $4 million. A loss of $13 million was recognized in Non-operating expense in the Consolidated Interim Statement of Operations to reflect the subsequent remeasurement of fair value of the Agreements due to changes in the market price of the Company’s Common Stock. The difference between the fair value of consideration transferred under the Agreements and the carrying value of the repurchased Series A Preferred Stock, amounting to $201 million, was recorded to Retained Deficit as a deemed dividend on the repurchase of shares of Series A Preferred Stock from the C&O Investors as part of the Transaction. A liability for excise tax, amounting to $6 million, was also recorded to Retained Deficit as a deemed dividend.
In connection with the 2023 Conversion, the Company also recognized a deemed dividend on the 2023 Conversion for $25 million, corresponding to the Additional Amounts paid to the holders of Series A Preferred Stock on the shares of Series A Preferred Stock that were converted.
As part of the Agreements, the C&O Investors have 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, as well as lock-up restrictions on their equity securities of the Company for up to twelve months, and certain limits on their ability to purchase additional equity securities of the Company and to voting limitations, in each case for a period of up to eighteen months.
On April 12, 2023, the Company also announced an increase in its share repurchase authorization to $250 million. Under the share repurchase program, the Company may repurchase shares of Common Stock in open market transactions, privately negotiated purchases and other transactions from time to time.
The following table summarizes the effects of the Transaction on the Consolidated Interim Balance Sheet as of September 30, 2023 and the Consolidated Interim Statement of Operations and Consolidated Interim Statement of Cash Flows for the nine months ended September 30, 2023:
Series A Repurchase2023 ConversionSettlement of Accumulated DividendsExcise tax on share repurchaseTotal
(Dollars in millions)
Consolidated Interim Balance Sheet - increase/(decrease):
Cash and cash equivalents$(580)$(25)$ $ $(605)
Accrued liabilities   6 6 
Preferred Stock     
Common Stock     
Additional Paid-in capital(366) 209  (157)
Retained earnings(201)(25)(209)(6)(441)
Consolidated Interim Statement of Operations:
Non-operating expenses13    13 
Consolidated Interim Statement of Cash Flows