SEC Filing | Garrett Motion

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gtx-10q_20210630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, 2021


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

For the transition period from _____ to ______

Commission File Number: 001-38636

Garrett Motion Inc.

(Exact Name of Registrant as Specified in its Charter)

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

La Pièce 16, Rolle, Switzerland	1180
(Address of principal executive offices)	(Zip Code)

+41 21 695 30 00

(Registrant’s telephone number, including area code)

N/A

(Former Name, Former Address and Former Fiscal Year,

if Changed Since Last Report)

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

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

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.

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

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

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

As of July 22, 2021, the registrant had 65,062,181 shares of Common Stock, $0.001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Interim Statements of Operations (Unaudited)	3
	Consolidated Interim Statements of Comprehensive Income (Loss) (Unaudited)	4
	Consolidated Interim Balance Sheets (Unaudited)	5
	Consolidated Interim Statements of Cash Flows (Unaudited)	6
	Consolidated Interim Statements of Equity (Deficit) (Unaudited)	7
	Notes to Unaudited Consolidated Interim Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	54
PART II.	OTHER INFORMATION	55
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 3.	Defaults Upon Senior Securities	68
Item 4.	Mine Safety Disclosures	68
Item 5.	Other Information	68
Item 6.	Exhibits	69
Signatures		71

BASIS OF PRESENTATION

Unless the context otherwise requires, references to “Garrett,” “we,” “us,” “our,” and “the Company” in this Quarterly Report on Form 10-Q refer to Garrett Motion Inc. and its subsidiaries.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

GARRETT MOTION INC.

CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2021			2020			2021			2020
	(Dollars in millions, except per share amounts)
Net sales (Note 4)	$	935		$	477		$	1,932		$	1,222
Cost of goods sold		742			397			1,543			1,004
Gross profit		193			80			389			218
Selling, general and administrative expenses		51			47			106			104
Other expense, net (Note 6)		—			15			1			31
Interest expense		24			20			45			36
Non-operating (income) expense		(26	)		(4	)		—			(8	)
Reorganization items, net (Note 2)		(295	)		—			(121	)		—
Income before taxes		439			2			358			55
Tax expense (Note 7)		30			11			54			12
Net income (loss)		409			(9	)		304			43
Less: preferred dividend (Note 18)		(24	)		—			(24	)		—
Net income (loss) available to common shareholders	$	385		$	(9	)	$	280		$	43

Earnings income (loss) per common share
Basic	$	5.53		$	(0.12	)	$	3.84		$	0.57
Diluted	$	1.73		$	(0.12	)	$	1.94		$	0.57

Weighted average common shares outstanding
Basic		69,667,651			75,595,991			72,862,102			75,316,827
Diluted		235,754,538			75,845,511			156,364,349			75,837,459

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

GARRETT MOTION INC.

CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2021			2020			2021		2020
	(Dollars in millions)
Net income (loss)	$	409		$	(9	)	$	304	$	43
Foreign exchange translation adjustment		(67	)		(50	)		43		(11	)
Changes in fair value of effective cash flow hedges, net of tax (Note 17)		4			(2	)		5		(2	)
Changes in fair value of net investment hedges, net of tax		15			—			15		—
Total other comprehensive (loss) income, net of tax		(48	)		(52	)		63		(13	)
Comprehensive income (loss)	$	361		$	(61	)	$	367	$	30

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

GARRETT MOTION INC.

CONSOLIDATED INTERIM BALANCE SHEETS

(Unaudited)

	June 30, 2021			December 31, 2020
	(Dollars in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	401		$	592
Restricted cash		215			101
Accounts, notes and other receivables – net (Note 8)		784			841
Inventories – net (Note 10)		275			235
Other current assets		59			110
Total current assets		1,734			1,879
Investments and long-term receivables		30			30
Property, plant and equipment – net		481			505
Goodwill		193			193
Deferred income taxes		261			275
Other assets (Note 11)		138			135
Total assets	$	2,837		$	3,017
LIABILITIES
Current liabilities:
Accounts payable	$	1,114		$	1,019
Borrowings under revolving credit facility (Note 2)		—			370
Current maturities of long-term debt (Note 15)		5			—
Debtor-in-possession Term Loan (Note 2)		—			200
Mandatorily redeemable Series B Preferred Stock (Note 16)		35			—
Accrued liabilities (Note 12)		338			248
Total current liabilities		1,492			1,837
Long-term debt (Note 15)		1,204			1,082
Mandatorily redeemable Series B Preferred Stock – long-term (Note 16)		550			—
Deferred income taxes		20			2
Other liabilities (Note 13)		277			114
Total liabilities not subject to compromise		3,543			3,035
Liabilities subject to compromise (Note 2)		—			2,290
Total liabilities	$	3,543		$	5,325
COMMITMENTS AND CONTINGENCIES (Note 22)
EQUITY (DEFICIT)
Series A Preferred Stock, par value $0.001; 247,768,962 shares issued and outstanding as of June 30, 2021 (Note 18)	$	—		$	—
Common Stock, par value $0.001; 1,000,000,000 and 400,000,000 shares authorized, 65,050,367 and 76,229,578 issued and 65,050,367 and 75,813,634 outstanding as of June 30, 2021 and December 31, 2020, respectively (Note 18)		—			—
Additional paid – in capital		1,332			28
Retained deficit		(1,972	)		(2,207	)
Accumulated other comprehensive loss (Note 19)		(66	)		(129	)
Total deficit		(706	)		(2,308	)
Total liabilities and deficit	$	2,837		$	3,017

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

GARRETT MOTION INC.

CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six Months Ended June 30,
	2021			2020
	(Dollars in millions)
Cash flows from operating activities:
Net income	$	304		$	43
Adjustments to reconcile net income to net cash provided by operating activities:
Reorganization items, net		(373	)		—
Deferred income taxes		3			(5	)
Depreciation		47			37
Amortization of deferred financing costs		4			3
Foreign exchange loss		9			3
Stock compensation expense		3			6
Pension expense		(1	)		—
Other		1			4
Changes in assets and liabilities:
Accounts, notes and other receivables		17			114
Inventories		(51	)		(23	)
Other assets		58			(11	)
Accounts payable		(52	)		(231	)
Accrued liabilities		(2	)		(16	)
Obligations payable to Honeywell		(375	)		(8	)
Other liabilities		17			(11	)
Net cash used for operating activities	$	(391	)	$	(95	)
Cash flows from investing activities:
Expenditures for property, plant and equipment		(40	)		(63	)
Other		1			(1	)
Net cash used for investing activities	$	(39	)	$	(64	)
Cash flows from financing activities:
Proceeds from issuance of Series A Preferred Stock		1,301			—
Proceeds from issuance of long-term debt, net of deferred financing costs		1,221			—
Proceeds from revolving credit facility		—			1,023
Payments of long-term debt		(1,515	)		(2	)
Payments of revolving credit facility		(370	)		(904	)
Payments of debtor-in-possession financing		(200	)		—
Payments for Cash-Out election		(69	)		—
Revolving facility financing costs		(8	)		—
Debtor-in-possession financing fees		(1	)		—
Other		—			(3	)
Net cash provided by financing activities	$	359		$	114
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash		(6	)		(3	)
Net decrease in cash, cash equivalents and restricted cash		(77	)		(48	)
Cash, cash equivalents and restricted cash at beginning of period		693			187
Cash, cash equivalents and restricted cash at end of period	$	616		$	139
Supplemental cash flow disclosure:
Income taxes paid (net of refunds)		32			7
Interest expense paid		57			30
Reorganization items paid		252			—
Supplemental disclosure of non-cash investing and financing activities:
Issuance of Mandatorily redeemable Series B Preferred Stock		577			—

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

GARRETT MOTION INC.

CONSOLIDATED INTERIM STATEMENTS OF EQUITY (DEFICIT)

(Unaudited)

															Accumulated
	Series A								Additional			Retained			Other
	Preferred Stock				Common Stock				Paid-in			(Deficit)			Comprehensive		Total
	Shares		Amount		Shares		Amount		Capital			Earnings			Income/(Loss)		Deficit
	(in millions)
Balance at December 31, 2019		—		—		75		—	$	19		$	(2,282	)	$	130	$	(2,133	)
Net income		—		—		—		—		—			52			—		52
Other comprehensive income, net of tax		—		—		—		—		—			—			39		39
Stock-based compensation		—		—		—		—		2			—			—		2
Tax withholding related to vesting of restricted stock units and other		—		—		—		—		(1	)		—			—		(1	)
Adoption impact of ASU 2016-13, Financial Instruments - Credit Losses		—		—		—		—		—			(5	)		—		(5	)
Balance at March 31, 2020