Document

Filed pursuant to Rule 424(b)(3)
Registration No. 333-256659
 
PROSPECTUS SUPPLEMENT No. 12
(To Prospectus Dated April 20, 2023)
 
https://cdn.kscope.io/fff6847e49f296a78fb987fb8abc6657-image_0a.jpg 
 
Garrett Motion Inc.
 
203,166,024 Shares of Common Stock

This prospectus supplement no. 1 supplements the prospectus dated April 20, 2023 (the “Prospectus”) filed pursuant to the Securities Act of 1933, as amended, by Garrett Motion Inc. Pursuant to the Prospectus, this prospectus supplement relates to the offer and sale by the selling security holders identified in the Prospectus of up to 203,166,024 shares of our common stock, par value $0.001 per share (the “Common Stock”), including 165,485,821 shares of our Common Stock issued upon conversion of our Series A Cumulative Convertible Preferred Stock, par value $0.001 per share.

This prospectus supplement incorporates into the Prospectus the information contained in our attached:
 
·Quarterly Report on Form 10-Q, which was filed with the Securities and Exchange Commission (“SEC”) on October 24, 2023.
 
You should read this prospectus supplement in conjunction with the Prospectus, including any supplements and amendments thereto. This prospectus supplement is qualified by reference to the Prospectus except to the extent that the information in this prospectus supplement supersedes the information contained in the Prospectus.

This prospectus supplement is not complete without, and may not be delivered or utilized except in connection with, the Prospectus.

Our Common Stock is quoted on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “GTX.”.

Investing in our Securities involves risks. Please see “Risk Factors” beginning on page 6 of the Prospectus.

Neither the SEC nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus supplement is October 24, 2023.








Document

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
Interest expense50 18 108 61 
Loss on extinguishment of debt— — — 
Non-operating income(4)(29)(1)(73)
Reorganization items, net— — — 
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 13 
Changes in fair value of effective cash flow hedges, net of tax (Note 16)
(2)(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 cash
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)
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 
Interest payments, net of debt discount accretion— (19)
Loss on extinguishment of debt— 
Loss on remeasurement of forward purchase contract13 — 
Foreign exchange loss— 
Stock compensation expense12 
Pension expense
— 
Change in fair value of derivatives21 (54)
Other
Changes in assets and liabilities:
Accounts, notes and other receivables(76)(166)
Inventories(30)(80)
Other assets13 
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— — — — — — 
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— — — — — — 
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— — — — — — 
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— — — — — — 
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— — — — — — 
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— — — — — — 
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 $$203 $134 $54 $$189 
Europe382 45 436 381 41 428 
Asia287 13 305 288 14 308 
Other16 14 — 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 $$566 $354 $159 $$515 
Europe1,265 136 26 1,427 1,181 117 21 1,319 
Asia846 38 12 896 765 34 18 817 
Other33 18 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)(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 
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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$$
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 

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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 related
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 
Product warranties and performance guarantees - short-term (Note 20)17 18 
Income and other taxes55 39 
Advanced discounts from suppliers, current
Customer advances and deferred income (1)
18 29 
Accrued interest25 13 
Short-term lease liability (Note 13)
Accrued freight13 
Dividends payable— 42 
Designated and undesignated derivatives
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
$$— $
Charges13 15 
Usage—cash(10)— (10)
Non-cash asset write-offs— (2)(2)
Balance at September 30, 2023
$12 $— $12 
Severance Costs
Other Costs
Total
(Dollars in millions)
Balance at December 31, 2021
$10 $— $10 
Charges— 
Usage—cash(5)— (5)
Balance at September 30, 2022
$$— $

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 suppliers
Product warranties and performance guarantees – long-term (Note 20)10 
Environmental remediation – long term12 14 
Long-term accounts payable
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
$$$10 $
Right-of-use assets obtained in exchange for lease obligations:
Operating leases— 
Supplemental balance sheet information related to operating leases is as follows:
September 30,
2023
December 31,
2022
(Dollars in millions)
Other assets$40 $44 
Accrued liabilities
Other liabilities33 36 
 September 30,
2023
December 31, 2022
Weighted-average remaining lease term (in years)8.148.41
Weighted-average discount rate5.69 %5.61 %
Maturities of operating lease liabilities as of September 30, 2023 were as follows:
(Dollars in millions)
2023$
202410 
2025
2026
2027
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$
2024
2025
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.

16



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.
17



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 
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
Repurchases of Series A Preferred Stock(580)— — — (580)
Payments for Additional Amounts for conversion of Series A Preferred Stock— (25)— — (25)
The Company has 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.

Note 16. Financial Instruments and Fair Value Measures
Our credit, market and foreign currency risk management policies are described in Note 19, Financial Instruments and Fair Value Measures, to the Consolidated Financial Statements for the year ended December 31, 2022 included in our 2022 Form 10-K. As of September 30, 2023 and December 31, 2022, we had contracts with aggregate gross notional amounts of $2,884 million and $2,621 million, respectively, to hedge interest rates and foreign currencies, principally the U.S. Dollar, Swiss Franc, British Pound, Euro, Chinese Yuan, Japanese Yen, Mexican Peso, New Romanian Leu, Czech Koruna, Australian Dollar and Korean Won.
18



Fair Value of Financial Instruments
The FASB’s accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Financial and nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2023 and December 31, 2022:
Fair Value
Notional AmountsAssetsLiabilities
September 30,
2023
December 31, 2022
September 30,
2023
December 31, 2022
September 30,
2023
December 31, 2022
Designated instruments:
Designated forward currency exchange contracts$449 $565 $15 $22 (a)$$(c)
Designated cross-currency swaps1,015 715 71 74 (b)— — 
Designated interest-rate swaps200 — — (b)— — 
Total designated instruments1,664 1,280 87 96 
Undesignated instruments:
Undesignated interest rate swaps879 1,024 65 76 (b)— — 
Undesignated forward currency exchange contracts341 317 (a)(c)
Total undesignated instruments1,220 1,341 68 80 
Total designated and undesignated instruments$2,884 $2,621 $155 $176 $$
(a) Recorded within Other current assets
(b) Recorded within Other assets
(c) Recorded within Accrued liabilities
As of September 30, 2023, the Company had outstanding interest rate swaps with aggregate notional amounts of €830 million ($879 million based on September 30, 2023 foreign exchange rates) and $200 million, with maturities of April 2024, July 2024, October 2024, April 2025, April 2026, April 2027 and April 2028. The Company uses interest rate swaps specifically to mitigate variable interest risk exposure on its long-term debt portfolio. The $200 million interest rate swaps have been designated as cash flow hedges. The designated interest rate swaps' fair value were net assets of $1 million as of September 30, 2023.
The Company executed cross-currency swaps which have been designated as net investment hedges of its Euro-denominated operations and cash flow hedges to hedge the foreign currency exposure from foreign currency-denominated debt. In May 2023, the Company re-couponed the cross-currency swap contracts which have been designated as net investment hedges and received a cash settlement of $9 million. As of September 30, 2023, an aggregate notional amount of €615 million was designated as net investment hedges of the Company’s investment in Euro-denominated operations and €280 million was designated as cash flow hedges. The cross-currency swaps’ fair values were net assets of $71 million as of September 30, 2023. Our Consolidated Interim Statements of Comprehensive Income include Changes in fair value of net investment hedges and cash flow hedges, net of tax, of $20 million and $18 million, during the three and nine months ended September 30, 2023, respectively, related to these designated cross-currency swaps. No ineffectiveness has been recorded on the designated cross-currency hedges.
The Company's forward currency exchange contract under our cash flow hedging program are assessed as highly effective and are designated as cash flow hedges. Gains and losses on derivatives qualifying as cash flow hedges are recorded in Accumulated other comprehensive income until the underlying transactions are recognized in earnings.
The foreign currency exchange, interest rate swap and cross-currency swap contracts are valued using market observable inputs. As such, these derivative instruments are classified within Level 2. The assumptions used in measuring the fair value of the cross-currency swap are considered Level 2 inputs, which are based upon market-observable interest rate curves, cross-currency basis curves, credit default swap curves, and foreign exchange rates.
19



The carrying value of Cash, cash equivalents and restricted cash, Account receivables and Notes and Other receivables contained in the Consolidated Interim Balance Sheet approximates fair value.
The following table sets forth the Company’s financial assets and liabilities that were not carried at fair value:
September 30, 2023
December 31, 2022
Carrying ValueFair ValueCarrying ValueFair Value
(Dollars in millions)
Term Loan Facilities
$1,629 $1,671 $1,156 $1,151 
The Company determined the fair value of certain of its long-term debt and related current maturities utilizing transactions in the listed markets for similar liabilities. As such, the fair value of the long-term debt and related current maturities is considered Level 2.

Note 17. Accumulated Other Comprehensive Income
The changes in Accumulated Other Comprehensive Income by component are set forth below:
Foreign
Exchange
Translation
Adjustment
Changes in
Fair Value of
Effective
Cash Flow
Hedges
Changes in Fair Value of
Net Investment Hedges
Pension
Adjustments
Total Accumulated
Other
Comprehensive
Income
(Dollars in millions)
Balance at December 31, 2022
$(44)$13 $85 $(18)$36 
Other comprehensive income before reclassifications
17 18 — 43 
Amounts reclassified from accumulated other comprehensive income
— (20)— — (20)
Net current period other comprehensive income(3)18 — 23 
Balance at September 30, 2023
$(36)$10 $103 $(18)$59 
Foreign
Exchange
Translation
Adjustment
Changes in
Fair Value of
Effective
Cash Flow
Hedges
Changes in Fair Value of
Net Investment Hedges
Pension
Adjustments
Total Accumulated
Other
Comprehensive
Income
(Dollars in millions)
Balance at December 31, 2021
$(43)$$41 $(9)$(4)
Other comprehensive income before reclassifications
13 43 87 — 143 
Amounts reclassified from accumulated other comprehensive income
— (17)— — (17)
Net current period other comprehensive income13 26 87 — 126 
Balance at September 30, 2022
$(30)$33 $128 $(9)$122 

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Note 18. Earnings Per Share
For the three months ended September 30, 2023, basic earnings per share ("EPS") is computed using the weighted-average number of common shares outstanding during the period.
For the nine months ended September 30, 2023 as well as the three and nine months ended September 30, 2022, basic earnings per share is calculated using the two-class method as our Series A Preferred Stock, which was converted into Common Stock pursuant to the Transaction, was considered a participating security. The two-class method requires an allocation of earnings to all securities that participate in dividends with common shares, such as our Series A Preferred Stock, to the extent that each security may share in the entity’s earnings. Basic earnings per share are then calculated by dividing undistributed earnings allocated to common stock by the weighted average number of common shares outstanding for the period. The Series A Preferred Stock was not included in the computation of basic earnings per share in periods in which we have a net loss, as the Series A Preferred Stock was not contractually obligated to share in our net losses.
Diluted earnings per share for the three months ended September 30, 2023 is calculated based on the weighted-average number of common shares outstanding for the period plus the dilutive effect of common stock equivalents using the treasury stock method. Diluted earnings per share for the nine months ended September 30, 2023 as well as the three and nine months ended September 30, 2022 is calculated using the more dilutive of the two-class or if-converted methods. The two-class method uses net income available to common shareholders and assumes conversion of all potential shares other than the participating securities. The if-converted method uses net income and assumes conversion of all potential shares including the participating securities.
The details of the EPS calculations for the three and nine months ended September 30, 2023 and 2022 are as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
(Dollars in millions except per share)
Basic earnings per share:
Net income$57 $105 $209 $278 
Less: preferred stock dividend— (40)(80)(117)
Less: preferred stock deemed dividends— — (232)— 
Net (loss) income available for distribution
57 65 (103)161 
Less: earnings allocated to participating securities— (51)— (127)
     Net (loss) income available to common shareholders
$57 $14 $(103)$34 
Weighted average common shares outstanding - Basic250,888,716 64,820,887 141,745,701 64,834,298 
EPS – Basic$0.23 $0.21 $(0.73)$0.52 
Diluted earnings per share:
Method used:
Two-classTwo-classTwo-class
Weighted average common shares outstanding - Basic250,888,716 64,820,887 141,745,701 64,834,298 
Dilutive effect of unvested RSUs and other contingently issuable shares
1,493,003 429,400 — 283,723 
Weighted average common shares outstanding – Diluted252,381,719 65,250,287 141,745,701 65,118,021 
EPS – Diluted$0.23 $0.21 $(0.73)$0.52 
For the periods where a net loss attributable to common shareholders is present, dilutive securities have been excluded from the calculation of diluted net loss per share attributable to common stockholders as including them would have been anti-dilutive. For the nine months ended September 30, 2023, the weighted-average number of unvested RSUs and other contingently issuable shares excluded from the computations was 1,349,442 shares.

21



Note 19. Related Party Transactions
We lease certain facilities and receive property maintenance services from Honeywell International Inc. (“Honeywell”), which is a holder of our Common Stock and was also a holder of our Series A Preferred Stock prior to the 2023 Conversion as discussed below and in Note 15, Series A Preferred Stock. We also contract with Honeywell for the occasional purchase of certain goods and services. Lease and service agreements were made at commercial terms prevalent in the market at the time they were executed. Honeywell is not considered a related party subsequent to the 2023 Conversion.
Our payments under the agreements with Honeywell during the period that Honeywell was considered a related party are as follow:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
(Dollars in millions)
Payments under agreements with Honeywell
$— $$$
Our payments under the agreements with Honeywell are included in Cost of goods sold and Selling, general and administrative expenses in our Consolidated Interim Statements of Operations. Related to the agreements with Honeywell, our Consolidated Balance Sheet at December 31, 2022 includes liabilities of $10 million. Liability balances are primarily related to lease contracts of $7 million as of December 31, 2022.
As discussed in Note 15, Series A Preferred Stock, in order to effect the Transaction, on April 12, 2023, the Company entered into separate definitive agreements with each of Centerbridge Partners, L.P. (“Centerbridge”) and funds managed by Oaktree Capital Management, L.P. (“Oaktree”), each of which is a holder of our Common Stock and appoints a director to our Board of Directors. Additionally, Mr. Kevin Mahony, who serves as a Managing Director of Centerbridge, and Mr. Steven Tesoriere, who serves as a Managing Director of Oaktree, have been appointed to our Board of Directors as designees of Centerbridge and Oaktree, respectively. As described more fully in Note 15, Series A Preferred Stock, in connection with the Transaction, we paid to Centerbridge and Oaktree an aggregate of approximately $570 million for the repurchase of shares of Series A Preferred Stock, plus an aggregate of approximately $10 million and 7,276,036 shares of Common Stock representing the Additional Amounts and Accumulated Dividends in respect of the repurchased shares of Series A Preferred Stock. Additionally, in connection with the conversion of the Series A Preferred Stock, we issued to Centerbridge and Oaktree an aggregate of 65,334,277 shares of Common Stock, plus Additional Amounts and Accumulated Dividends of approximately $9 million and 6,819,540 shares of Common Stock.
In connection with the conversion of our Series A Preferred Stock, we issued to Honeywell, as a holder of our Series A Preferred Stock, 4,196,330 shares of Common Stock upon the conversion of an equivalent number of shares of Series A Preferred Stock, plus Additional Amounts and Accumulated Dividends of approximately $1 million and 438,009 shares of Common Stock.
Additionally, Mr. John Petry, a director on our Board, serves as Managing Member of Sessa Capital (Master), L.P., which indirectly held shares of our Series A Preferred Stock prior to the conversion. In connection with the conversion of our Series A Preferred Stock, we issued to Sessa Capital and its affiliates, as holder of our Series A Preferred Stock, 16,592,384 shares of Common Stock upon the conversion of an equivalent number of shares of Series A Preferred Stock, plus Additional Amounts and Accumulated Dividends of approximately $2 million and 1,731,900 shares of Common Stock.

Note 20. Commitments and Contingencies
Securities Litigation
On September 25, 2020, a putative securities class action complaint was filed against Garrett Motion Inc. and certain current and former Garrett officers and directors in the United States District Court for the Southern District of New York. The case bears the caption: Steven Husson, Individually and On Behalf of All Others Similarly Situated, v. Garrett Motion Inc., Olivier Rabiller, Alessandro Gili, Peter Bracke, Sean Deason, and Su Ping Lu, Case No. 1:20-cv-07992-JPC (SDNY) (the “Husson Action”). The Husson Action asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 as amended (the "Exchange Act"), for securities fraud and control person liability. On September 28, 2020, the
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plaintiff sought to voluntarily dismiss his claim against Garrett Motion Inc. in light of the Company’s bankruptcy; this request was granted.
On October 5, 2020, another putative securities class action complaint was filed against certain current and former Garrett officers and directors in the United States District Court for the Southern District of New York. This case bears the caption: The Gabelli Asset Fund, The Gabelli Dividend & Income Trust, The Gabelli Value 25 Fund Inc., The Gabelli Equity Trust Inc., SM Investors LP and SM Investors II LP, on behalf of themselves and all others similarly situated, v. Su Ping Lu, Olivier Rabiller, Alessandro Gili, Peter Bracke, Sean Deason, Craig Balis, Thierry Mabru, Russell James, Carlos M. Cardoso, Maura J. Clark, Courtney M. Enghauser, Susan L. Main, Carsten Reinhardt, and Scott A. Tozier, Case No. 1:20-cv-08296-JPC (SDNY) (the “Gabelli Action”). The Gabelli Action also asserted claims under Sections 10(b) and 20(a) of the Exchange Act.
On November 5, 2020, another putative securities class action complaint was filed against certain current and former Garrett officers and directors in the United States District Court for the Southern District of New York. This case bears the caption: Joseph Froehlich, Individually and On Behalf of All Others Similarly Situated, v. Olivier Rabiller, Allesandro Gili, Peter Bracke, Sean Deason, and Su Ping Lu, Case No. 1:20-cv-09279-JPC (SDNY) (the “Froehlich Action”). The Froehlich Action also asserted claims under Sections 10(b) and 20(a) of the Exchange Act.
The actions were assigned to Judge John P. Cronan. On November 24, 2020, competing motions were filed seeking the appointment of lead plaintiff and lead counsel and the consolidation of the Husson, Gabelli, and Froehlich Actions.
On December 8, 2020, counsel for the plaintiffs in the Gabelli Action — the Entwistle & Cappucci law firm — filed an unopposed stipulation and proposed order that would (1) appoint the plaintiffs in the Gabelli Action — the “Gabelli Entities” — the lead plaintiffs; (2) would appoint Entwistle & Cappucci as lead counsel for the plaintiff class; and (3) consolidate the Gabelli Action, the Husson Action, and the Froehlich Action (the “Consolidated D&O Action”). On January 21, 2021, the Court granted the motion to consolidate the actions and granted the Gabelli Entities’ motions for appointment as lead plaintiff and for selection of lead counsel. On February 25, 2021, plaintiffs filed a Consolidated Amended Complaint.
The Company’s insurer, AIG, has accepted the defense, subject to the customary reservation of rights.
The Company agreed with the Gabelli Entities and their lead counsel to permit a class claim to be recognized in the bankruptcy court and to have securities claims against the Company to be litigated in the district court alongside the Consolidated D&O Action. The Gabelli Entities have agreed that any recoveries against Garrett Motion Inc. on account of securities claims litigated through the class claim are limited to available insurance policy proceeds. On July 2, 2021, the bankruptcy court entered an order approving the joint request from the Company and the Gabelli Entities to handle the securities claims against Garrett Motion Inc. in this manner.
The Gabelli Entities were authorized and, on July 22, 2021, filed a second amended complaint to add claims against Garrett Motion Inc. On August 11, 2021, Garrett Motion Inc., Olivier Rabiller, Alessandro Gili, Peter Bracke, Sean Deason, Russell James, Carlos Cardoso, Maura Clark, Courtney Enghauser, Susan Main, Carsten Reinhardt, and Scott Tozier filed a motion to dismiss with respect to claims asserted against them. On the same day, Su Ping Lu, who is represented separately, filed a motion to dismiss with respect to the claims asserted against her. Lead plaintiffs’ opposition to the motions to dismiss was filed on October 26, 2021, and the defendant's reply briefs were filed on or before December 8, 2021. On March 31, 2022, the judge dismissed the complaints entirely - Su Ping Lu's motion to dismiss was granted with prejudice while the court granted the plaintiffs 30 days to file a third amended complaint against the Company and the other defendants.
On May 2, 2022, the plaintiffs filed a Third Amended Complaint (“TAC”) against all of the foregoing Defendants apart from Alessandro Gili and Su Ping Lu. On June 24, 2022, defendants moved to dismiss the TAC in its entirety, with prejudice. Plaintiffs filed their opposition on August 16, 2022, and defendants filed their reply brief on September 23, 2022. On September 22, 2022, the action was reassigned from Judge John P. Cronan to Judge Jennifer L. Rochon, who was recently appointed. On March 31, 2023, the action was dismissed with prejudice. The plaintiffs filed an appeal and the defendants' opposition is due on October 31, 2023.
Brazilian Tax Matter
In September 2020, the Brazilian tax authorities issued an infraction notice against Garrett Motion Industria Automotiva Brasil Ltda, challenging the use of certain tax credits (“Befiex Credits”) between January 2017 and February 2020. The infraction notice results in a loss contingency that may or may not ultimately be incurred by the Company. The
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estimated total amount of the contingency as of September 30, 2023 was $37 million including penalties and interest. The Company believes, based on management’s assessment and the advice of external legal counsel, that it has meritorious arguments in connection with the infraction notice and any liability for the infraction notice is currently not probable. Accordingly, no accrual is required at this time.
Warranties and Guarantees
In the normal course of business, we issue product warranties and product performance guarantees. We accrue for the estimated cost of product warranties and performance guarantees based on contract terms and historical experience at the time of sale to the customer. Adjustments to initial obligations for warranties and guarantees are made as changes to the obligations become reasonably estimable. Product warranties and product performance guarantees are included in Accrued Liabilities and Other Liabilities. The following table summarizes information concerning our recorded obligations for product warranties and product performance guarantees.

Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
(Dollars in millions)
Warranty and product performance guarantees at beginning of period$27 $30 $28 $32 
Accruals for warranties/guarantees issued during the year
10 
Settlement of warranty/guarantee claims
(2)(2)(9)(10)
Foreign currency translation(1)(2)(1)(3)
Warranty and product performance guarantees at end of period
$26 $29 $26 $29 
Other Commitments and Contingencies
We are subject to other lawsuits, investigations and disputes arising out of the conduct of our business, including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employee benefit plans, intellectual property and environmental, health and safety matters. We recognize a liability for any contingency that is probable of occurring and reasonably estimable. We continually assess the likelihood of adverse judgments of outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts.
Note 21. Pension Benefits
We sponsor several funded U.S. and non-U.S. defined benefit pension plans. Significant plans outside the U.S. are in Switzerland and Ireland. Other pension plans outside the U.S. are not material to the Company, either individually or in the aggregate.
Our general funding policy for qualified defined benefit pension plans is to contribute amounts at least sufficient to satisfy regulatory funding standards. We are not required to make any contributions to our U.S. pension plan in 2023. We expect to make contributions of cash and/or marketable securities of approximately $7 million to our non-U.S. pension plans to satisfy regulatory funding standards in 2023, of which $6 million has been contributed as of September 30, 2023.
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Net periodic benefit costs for our significant defined benefit plans include the following components:
Three Months Ended September 30,Nine Months Ended September 30,
U.S. Plans Non-U.S. Plan U.S. Plans Non-U.S. Plan
20232022202320222023202220232022
(Dollars in millions)
Service cost$— $— $$$— $$$
Interest cost— 
Expected return on plan assets(2)(2)(2)(2)(6)(6)(6)(5)
Amortization of prior service (credit)— — — — — — (1)— 
 $— $(1)$— $— $— $(1)$$
For both our U.S. and non-U.S. defined benefit pension plans, we estimate the service and interest cost components of net periodic benefit (income) cost by utilizing a full yield curve approach in the estimation of these cost components by applying the specific spot rates along the yield curve used in the determination of the pension benefit obligation to their underlying projected cash flows. This approach provides a more precise measurement of service and interest costs by improving the correlation between projected cash flows and their corresponding spot rates.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations, which we refer to as our “MD&A,” should be read in conjunction with our Consolidated Interim Financial Statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q as well as the audited annual Consolidated Financial Statements 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”). Some of the information contained in this MD&A or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many important factors, including those set forth in the “Risk Factors” section of our 2022 Form 10-K and this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in, or implied, by these forward-looking statements.
The following MD&A is intended to help you understand the results of operations and financial condition of Garrett Motion Inc., for the three and nine months ended September 30, 2023.
Executive Summary
For the three months ended September 30, 2023, net sales were $960 million, an increase compared to prior year of $15 million or 2%, including a favorable impact of $21 million or 3% from foreign currency translation. The increase was driven by ramp up of new products in small gasoline engine applications, offset by unfavorable product mix dynamics from demand softness for diesel and commercial vehicle applications due to global macro economic conditions.
Light vehicle product sales (which were comprised of diesel and gasoline products, including products for passenger cars, SUVs, light trucks, and other products) accounted for approximately 70% of our revenues. Commercial vehicle product sales (products for on- and off- highway trucks, construction, agriculture and power-generation machines) accounted for 16% of our revenues, while aftermarket and other products contributed 14% of our revenues. Approximately 45% of our revenues came from sales to customers located in Europe, 32% from sales to customers located in Asia, 21% from sales to customers in North America, and 2% from sales to customers in other international markets.
For the three months ended September 30, 2023, we repurchased $161 million of Common Stock in connection with our share repurchase program. As of September 30, 2023, we had $72 million of the authorized repurchase value remaining under our share repurchase program.
On July 31, 2023, we made an early debt repayment in the amount of $200 million on our 2023 Dollar Term Facility.
Disaggregated Revenue
The following tables show our revenues by geographic region and product line for the three and nine months ended September 30, 2023 and 2022, respectively.
By Region
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
(Dollars in millions)
United States
$203 21%$189 20%$566 19%$515 19%
Europe
436 45%428 45%1,427 49%1,319 49%
Asia
305 32%308 33%896 30%817 30%
Other
16 2%20 2%52 2%54 2%
Total
$960 $945 $2,941 $2,705 

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By Product Line
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
(Dollars in millions)
Diesel$229 24%$238 25%$751 26%$729 27%
Gas441 46%401 43%1,299 44%1,109 41%
Commercial Vehicle156 16%178 19%507 17%498 18%
Aftermarket118 12%115 12%342 12%328 12%
Other16 2%13 1%42 1%41 2%
Total$960 $945 $2,941 $2,705 


Results of Operations for the Three and Nine Months Ended September 30, 2023
Net Sales
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2023202220232022
 (Dollars in millions)
Net sales$960 $945 $2,941 $2,705 
% change compared with prior period1.6 %8.7 %
https://cdn.kscope.io/fff6847e49f296a78fb987fb8abc6657-revenuebridgeq32023002a.gif
For the three months ended September 30, 2023, net sales increased compared to prior year by $15 million or 2%, including a favorable impact of $21 million or 3% due to foreign currency translation driven by higher Euro-to-US dollar exchange rates and partially offset by lower Chinese yuan-to-US dollar exchange rates. The increase was driven by ramp up of new products in small gasoline engine applications, offset by unfavorable product mix from demand softness for diesel and commercial vehicle applications due to global macro economic conditions.
Gasoline product sales increased by $40 million or 10% (including a favorable impact of $3 million or 1% due to foreign currency translation), primarily due to strong performance in Asia and North America related to product ramp-ups.
Diesel product sales decreased by $9 million or 4% (including a favorable impact of $12 million or 5% due to foreign currency translation), primarily driven by demand softness in India and China, due to program phase out and the negative impact of macro economic dynamics, respectively.
Commercial vehicle sales decreased by $22 million or 13% (including a favorable impact of $2 million or 1% due to foreign currency translation), primarily driven by demand softness influenced by the global economic environment combined with inventory build-up by some customers during prior quarters.
Aftermarket sales improved by $3 million or 3% (including a favorable impact of $3 million or 3% due to foreign currency translation), primarily due to favorable aftermarket conditions and demand for replacement parts in Europe and Asia Pacific, offset by softer sales in North America and Brazil.
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https://cdn.kscope.io/fff6847e49f296a78fb987fb8abc6657-revenuebridgeytd2023002a.gif
For the nine months ended September 30, 2023, net sales increased compared to prior year by $236 million or 9%, including an unfavorable impact of $32 million or 1% due to foreign currency translation driven by lower Chinese yuan-to-US dollar and lower Euro-to-US dollar exchange rates. This increase was driven by higher volumes as markets recovered from the semiconductor shortages experienced in the prior year coupled with strong demand for new product launches and ramp ups, and inflation recoveries net of pricing across all product lines.
Gasoline product sales increased by $190 million or 17% (including an unfavorable impact of $25 million or 2% due to foreign currency translation), primarily driven by the industry recovery from prior year’s global semiconductor shortages and COVID-related lockdown measures in China combined with new product launches and ramp ups across all regions.
Diesel product sales increased by $22 million or 3% (including a favorable impact of $1 million or 0% due to foreign currency translation), driven by performance in Europe where diesel is essential to meet fleet CO2 regulations targets coupled with light commercial vehicle sales on incumbent platforms.
Commercial vehicle sales increased by $9 million or 2% (including an unfavorable impact of $8 million or 1% due to foreign currency translation), primarily driven by performance in North America and Europe on new product launches and combined with favorable global product mix dynamics.
Aftermarket sales improved by $14 million or 4%, primarily on strong demand in Europe and Asia Pacific related to favorable aftermarket conditions including the continued high demand for replacement parts. Recovery in China from the end of the Chinese government's zero COVID-19 policy as well as new product introductions and favorable pricing impact also contributed to the growth.
Cost of Goods Sold and Gross Profit
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2023202220232022
 (Dollars in millions)
Cost of goods sold$784 $767 $2,374 $2,183 
% change compared with prior period2.2 %8.7 %
Gross profit percentage18.3 %18.8 %19.3 %19.3 %
Cost of Goods SoldGross Profit
 (Dollars in millions)
Cost of Goods Sold / Gross Profit for the three months ended September 30, 2022
$767 $178 
Increase/(decrease) due to:
Volume12 
Product mix(23)
Price, net of inflation pass-through— (5)
Productivity, net(12)12 
Research & development(2)
Foreign exchange rate impacts10 11 
Cost of Goods Sold / Gross Profit for the three months ended September 30, 2023
$784 784$176 
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For the three months ended September 30, 2023, cost of goods sold increased by $17 million, primarily driven by higher sales volumes and an unfavorable product mix which contributed to increases of $12 million and $5 million, respectively. Cost of goods sold further increased by $2 million related to Research and development ("R&D") costs reflecting the continued commitment to investment in new technologies and $10 million from foreign currency impacts from transactional, translational and hedging effects. Our continued focus on productivity, net of labor inflation and repositioning costs, contributed to a decrease in cost of goods sold of $12 million.
Gross profit decreased by $2 million, mainly driven by $23 million of unfavorable product mix from the decline of high margin products, $5 million of pricing net of inflation recovery from customer pass-through agreements, and $2 million of higher R&D costs as discussed above. These decreases were partially offset by $12 million of higher productivity net of labor inflation and repositioning costs, coupled with higher sales volumes of $5 million. Furthermore, foreign currency impacts from transactional, translational and hedging effects also contributed to increases in gross profit of $11 million.
Cost of Goods SoldGross Profit
 (Dollars in millions)
Cost of Goods Sold / Gross Profit for the nine months ended September 30, 2022
$2,183 $522 
Increase/(decrease) due to:
Volume162 69 
Product mix40 (46)
Inflation pass-through, net of price— 46 
Commodity, transportation & energy inflation42 (42)
Productivity, net(29)27 
Research & development12 (12)
Foreign exchange rate impacts(36)
Cost of Goods Sold / Gross Profit for the nine months ended September 30, 2023
$2,374 2374$567 
For the nine months ended September 30, 2023, cost of goods sold increased by $191 million, primarily driven by our higher sales volumes and unfavorable product mix which contributed to increases of $162 million and $40 million, respectively. Cost of goods sold further increased $42 million from inflation of commodities, energy and transportation and $12 million from increased R&D costs which reflects the continued investment in new technologies and headcount year-over-year. Our focus on productivity, net of labor inflation, one-time expenses and higher repositioning costs, contributed to a decrease in cost of goods sold of $29 million. Foreign currency impacts from transactional, translational and hedging effects reduced cost of goods sold by $36 million.
Gross profit increased by $45 million, mainly driven by the higher sales volumes of $69 million and $46 million of inflation recovery from customer pass-through agreements net of pricing reductions. Furthermore, gross profit increased $27 million from higher productivity net of labor inflation, one-time expenses and higher repositioning costs as discussed above, and $3 million from foreign currency impacts from transactional, translational and hedging effects. These increases were partially offset by $42 million inflation on commodities, energy costs and transportation, as discussed above, $46 million of unfavorable product mix and a $12 million increase in R&D costs.
Selling, General and Administrative Expenses
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2023 202220232022
 (Dollars in millions)
Selling, general and administrative expense$59 $57 $178 $164 
% of sales6.1 %6.0 %6.1 %6.1 %
Selling, general and administrative (“SG&A”) expenses for the three months ended September 30, 2023 increased by $2 million compared with the prior year primarily driven by a $2 million increase in legal and advisory fees following the completion of our Transaction and $1 million of labor inflation impact.
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SG&A expenses for the nine months ended September 30, 2023 increased by $14 million compared with the prior year, primarily driven by $9 million of legal and advisory fees related to our T