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Item 1. Financial Statements

2022-07-28 compared with 2022-04-28 · 187 added, 100 removed, 530 unchanged (35% of the section changed)

3 unchanged sentences

Three Months Ended

Six Months Ended

2022 2021 2022 2021

(Dollars in millions, except per share amounts)

Net sales (Note 3)

$ 859 $ 935 $ 1,760 $ 1,932

Cost of goods sold 690 742 1,416 1,543

3 unchanged sentences

Interest expense 20 24 43 45

Non-operating (income) expense

Loss on extinguishment of debt 5 — 5 —

Non-operating income

( 16 ) ( 26 ) ( 44 ) —

Reorganization items, net (Note 1)

Income (loss) before taxes

1 ( 295 ) 2 ( 121 )

Income before taxes

105 439 230 358

Tax expense (Note 5)

Net income (loss)

85 409 173 304

preferred stock dividend (Note 17)

Net income (loss) available for distribution

( 39 ) ( 24 ) ( 77 ) ( 24 )

Earnings (loss) per common share

Net income available for distribution

$ 46 $ 385 $ 96 $ 280

Earnings per common share

Basic $ 0.15 $ 1.63 $ 0.31 $ 1.79

7 unchanged sentences

Three Months Ended

Six Months Ended

2022 2021 2022 2021

(Dollars in millions)

Net income (loss)

$ 85 $ 409 $ 173 $ 304

2 unchanged sentences

Changes in fair value of net investment hedges, net of tax (Note 15)

Total other comprehensive income, net of tax

Total other comprehensive income (loss), net of tax

39 ( 48 ) 62 63

Comprehensive income

$ 124 $ 361 $ 235 $ 367

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

30 unchanged sentences

Series A Preferred Stock, par value $ 0.001 ;

245,715,735 and 245,921,617 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

245,594,670 and 245,921,617 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Common Stock, par value $ 0.001 ;

1,000,000,000 and 1,000,000,000 shares authorized, 64,506,104 and 64,570,950 issued and 64,506,104 and 64,570,950 outstanding as of March 31, 2022 and December 31, 2021, respectively

1,000,000,000 and 1,000,000,000 shares authorized, 64,906,270 and 64,570,950 issued and 64,804,051 and 64,570,950 outstanding as of June 30, 2022 and December 31, 2021, respectively

Additional paid–in capital 1,329 1,326

7 unchanged sentences

CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (Unaudited)

Three Months Ended March 31,

Six Months Ended June 30,

(Dollars in millions) 2022 2021

Cash flows from operating activities:

Net income (loss)

$ 88 $ ( 105 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities

Adjustments to reconcile net income to net cash provided by (used for) operating activities

Reorganization items, net — ( 373 )

3 unchanged sentences

Interest payments, net of debt discount accretion ( 19 ) 7

Foreign exchange (gain) loss

Loss on extinguishment of debt 5 —

Foreign exchange gain

Stock compensation expense 5 3

Pension expense

Change in fair value of derivatives ( 35 ) —

Other ( 4 ) ( 6 )

5 unchanged sentences

Accrued liabilities 2 ( 2 )

Obligations payable to Honeywell — ( 375 )

Other liabilities ( 4 ) 17

Net cash provided by operating activities

Net cash provided by (used for) operating activities

$ 177 $ ( 391 )

Cash flows from investing activities:

3 unchanged sentences

Cash flows from financing activities:

Proceeds from issuance of Series A Preferred Stock — 1,301

Proceeds from issuance of long-term debt, net of deferred financing costs — 1,221

Payments of long-term debt ( 4 ) ( 1,515 )

Payments of revolving credit facility — ( 370 )

Payments of debtor-in-possession financing — ( 200 )

Redemption of Series B Preferred stock ( 381 ) —

Payments for Cash-Out election — ( 69 )

Payments for share repurchases ( 3 ) —

Debt financing costs ( 5 ) ( 9 )

Net cash used for financing activities

Net cash (used for) provided by financing activities

$ ( 393 ) $ 359

8 unchanged sentences

Reorganization items paid 3 342

Supplemental disclosure of non-cash investing and financing activities:

Issuance of Series B Preferred Stock — 577

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

15 unchanged sentences

— — 76 — $ 30 $ ( 2,312 ) $ ( 18 ) $ ( 2,300 )

Net income — — — — — 409 — 409

Cash-out election — — ( 11 ) — — ( 69 ) — ( 69 )

Issuance of Series A Preferred Stock 248 — — — 1,301 — — 1,301

Other comprehensive loss, net of tax — — — — — — ( 48 ) ( 48 )

Stock-based compensation — — — — 1 — — 1

Balance at June 30, 2021

248 $ — 65 $ — $ 1,332 $ ( 1,972 ) $ ( 66 ) $ ( 706 )

Preferred Stock Common Stock Additional

Capital Retained

Deficit Accumulated Other

Comprehensive

(Loss)/Income Total

Shares Amount Shares Amount

(in millions)

Balance at December 31, 2021

7 unchanged sentences

246 — 64 — $ 1,327 $ ( 1,703 ) $ 19 $ ( 357 )

— — — — — 85 — 85

Share repurchases — — — — ( 1 ) — — ( 1 )

Other comprehensive income, net of tax

— — — — — — 39 39

Stock-based compensation — — — — 3 — — 3

Balance at June 30, 2022

246 $ — 64 $ — $ 1,329 $ ( 1,618 ) $ 58 $ ( 231 )

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

11 unchanged sentences

The unaudited Consolidated Interim Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and accompanying notes for the year ended December 31, 2021 included in our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on February 14, 2022 (our “2021 Form 10-K”).

The results of operations and cash flows for the three months ended March 31, 2022 should not necessarily be taken as indicative of the entire year.

The results of operations for the three and six months ended June 30, 2022 and cash flows for the six months ended June 30, 2022 should not necessarily be taken as indicative of the entire year.

All amounts presented are in millions, except per share amounts.

2 unchanged sentences

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.

The effects of this practice are generally not significant to reported results for any quarter and only exist within a reporting year.

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 March 31, 2022.

Our actual closing dates for the three months ended March 31, 2022 and 2021 were April 2, 2022 and April 3, 2021, respectively.

For differences in actual closing dates that are material to year-over-year comparisons of quarterly or year-to-date results have been adjusted for the three months ended June 30, 2022.

Our actual closing dates for the three months ended June 30, 2022 and 2021 were July 2, 2022 and July 3, 2021 , respectively.

The preparation of the financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

9 unchanged sentences

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

Reorganization items, net represent amounts incurred after the Petition Date as a direct result of the Chapter 11 Cases and are comprised of the following for the three months ended March 31, 2022 and March 31, 2021, respectively:

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

Three Months Ended

Six Months Ended

2022 2021 2022 2021

(Dollars in millions)

Gain on settlement of Honeywell claims (1)

$ — $ ( 502 ) $ — $ ( 502 )

Advisor fees — 96 1 180

Bid termination and expense reimbursement — — — 79

Director’s and officers insurance — 39 — 39

Expenses related to Senior Notes (2)

Write off pre-petition debt issuance cost — 25 — 25

Employee stock cash out — 13 — 13

Debtor in Possession ("DIP") financing fees — — — 1

Other 1 6 1 16

Total reorganization items, net $ 1 $ ( 295 ) $ 2 $ ( 121 )

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

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

The obligations of the Debtors under the indenture were canceled at Emergence.

Summary of Significant Accounting Policies

10 unchanged sentences

We consider the applicability and impact of all recent ASU’s issued by the FASB.

For the three months ended March 31, 2022, there were no recently issued, but not yet adopted accounting pronouncements that are expected to have a material impact on the Company’s Consolidated Interim Financial Statements and related disclosures.

For the three and six months ended June 30, 2022, there were no recently issued, but not yet adopted accounting pronouncements that are expected to have a material impact on the Company’s Consolidated Interim Financial Statements and related disclosures.

Revenue Recognition and Contracts with Customers

1 unchanged sentence

Net sales by region (determined based on country of shipment) and channel are as follows:

Three Months Ended March 31, 2022

OEM Aftermarket Other Total

Three Months Ended June 30, 2022

Three Months Ended June 30, 2021

OEM Aftermarket Other Total OEM Aftermarket Other Total

(Dollars in millions)

2 unchanged sentences

Asia 211 10 6 227 280 14 7 301

Other International 9 6 — 15

Other 13 6 — 19 6 6 — 12

$ 736 $ 108 $ 15 $ 859 $ 818 $ 102 $ 15 $ 935

Three Months Ended March 31, 2021

OEM Aftermarket Other Total

Six Months Ended June 30, 2022

Six Months Ended June 30, 2021

OEM Aftermarket Other Total OEM Aftermarket Other Total

(Dollars in millions)

2 unchanged sentences

Asia 477 20 12 509 582 24 14 620

Other International 6 6 — 12

Other 22 12 — 34 12 12 — 24

$ 1,519 $ 213 $ 28 $ 1,760 $ 1,707 $ 193 $ 32 $ 1,932

3 unchanged sentences

Contract assets—January 1 $ 63 $ 61

Contract assets—March 31

Contract assets—June 30

Change in contract assets—(Decrease)/Increase $ ( 5 ) $ ( 5 )

Contract liabilities—January 1 $ ( 5 ) $ ( 2 )

Contract liabilities—March 31

Contract liabilities—June 30

Change in contract liabilities—(Increase)/Decrease $ ( 1 ) $ —

5 unchanged sentences

Three Months Ended

Six Months Ended

2022 2021 2022 2021

(Dollars in millions)

1 unchanged sentence

Engineering-related expenses 3 5 9 11

$ 41 $ 38 $ 83 $ 77

Three Months Ended

Six Months Ended

2022 2021 2022 2021

(Dollars in millions)

1 unchanged sentence

Effective tax rate 19.0 % 6.8 % 24.8 % 15.1 %

The effective tax rates for the three months ended March 31, 2022 and 2021 were 29.6 % an d ( 29.6 )%, respectively.

The effective tax rate for the three months ended March 31, 2022 was higher than the U.S.

federal statutory rate of 21 % primarily because of withholding taxes and tax reserves, partially offset by lower taxes on non-U.S.

The negative effective tax rate for three months ended March 31, 2021 reflects a tax expense in a period of an overall pre-tax loss.

The change in the effective tax rate for the three months ended March 31, 2022 compared to the prior period is primarily related to the decrease of nondeductible bankruptcy costs, partially offset by true ups to prior year tax reserves.

The increases in the effective tax rate for the three months and six months ended June 30, 2022 compared to the prior year periods are primarily related to the nontaxable gain on the settlement of the Honeywell claims recorded in the prior period.

The effective tax rate for the six months ended June 30, 2022 also increased due to true-ups recorded in the first quarter of 2022 to prior year tax reserves.

The effective tax rate for the three months ended June 30, 2022 was lower than the U.S.

federal statutory rate of 21% primarily due to a change in the Company's assertion to permanently reinvest a portion of its undistributed foreign earnings in China.

The effective tax rate for the six months ended June 30, 2022 is higher than the U.S.

federal statutory rate of 21% primarily due to withholding taxes and tax reserves, partially offset by lower taxes on non-U.S.

earnings and the previously mentioned change in assertion to permanently reinvest a portion of its undistributed foreign earnings.

Historically, the Company has not made an assertion to permanently reinvest its undistributed foreign earnings.

In the second quarter of 2022, the Company changed its assertion to permanently reinvest a portion (approximately $ 300 million) of its undistributed foreign earnings for China specific to the entity's investment in intellectual property.

The effective tax rate can vary from quarter to quarter due to changes in the Company’s global mix of earnings, the resolution of income tax audits, changes in tax laws (including updated guidance on U.S.

7 unchanged sentences

Less—Allowance for expected credit losses

Trade receivables include $ 60 million and $ 63 million of unbilled customer contract asset balances as of March 31, 2022 and December 31, 2021, respectively.

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

These amounts are billed in accordance with the terms of customer contracts to which they relate.

3 unchanged sentences

Factoring and Notes Receivable

The Company entered into arrangements with financial institutions to sell eligible trade receivables.

During the three months ended March 31, 2022 and 2021, the Company sold $ 143 million and $ 180 million of eligible receivables, respectively, without recourse, and accounted for these arrangements as true sales.

Expense of less than $ 1 million was recognized within Other expense, net for both the three months ended March 31, 2022 and 2021.

As of March 31, 2022 and 2021, the amount of accounts receivable sold but not yet collected by the bank from the customer was $ 23 million and $ 64 million, respectively.

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.

During the three months ended March 31, 2022, the Company sold $ 28 million of bank notes without recourse and accounted for these as true sales.

No bank notes

were sold during the three months ended March 31, 2021.

Expense of less than $ 1 million was recognized within Other expense, net for the three months ended March 31, 2022.

As of March 31, 2022, the amount of bank notes receivable sold but not yet collected by the bank from the customer was $ 15 million.

As of March 31, 2021, there were no bank notes receivable sold which had not yet been collected by the bank from the customer.

As of March 31, 2022 and December 31, 2021, the Company has pledged as collateral $ 31 million and $ 5 million of guaranteed bank notes, respectively, which have not been sold in order to be able to issue bank notes as payment to certain suppliers.

The Company can hold the bank notes until maturity, exchange them with suppliers to settle liabilities, or sell them to third-

party financial institutions in exchange for cash.

Bank notes sold to third-party financial institutions without recourse are likewise accounted for as true sales.

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

(Dollars in millions)

Eligible receivables sold without recourse $ 226 $ 153 $ 370 $ 333

Guaranteed bank notes sold without recourse 38 — 66 —

The expenses related to the sale of trade receivables and guaranteed bank notes are recognized within Other expense, net in the consolidated interim statements of operations, and were immaterial for the three and six months ended June 30, 2022.

2022 December 31,

(Dollars in millions)

Receivables sold but not yet collected by the bank from the customer $ 77 $ 26

Guaranteed bank notes sold but not yet collected by the bank from the customer 24 —

As of June 30, 2022 and December 31, 2021, the Company has pledged as collateral $ 1 million and $ 5 million of guaranteed bank notes, respectively, which have not been sold in order to be able to issue bank notes as payment to certain suppliers.

Such pledged amounts are included as Notes receivable in our Consolidated Interim Balance Sheet.

26 unchanged sentences

Short-term lease liability (Note 12)

Accrued freight 16 11

Other (primarily operating expenses) (2)

(1) Customer advances and deferred income include $ 9 million and $ 5 million of contract liabilities as of March 31, 2022 and December 31, 2021, respectively.

(1) Customer advances and deferred income include $ 6 million and $ 5 million of contract liabilities as of June 30, 2022 and December 31, 2021, respectively.

See Note 3, Revenue Recognition and Contracts with Customers .

(2) Includes $ 4 million and $ 3 million of environmental liabilities as of March 31, 2022 and December 31, 2021, respectively.

The Company accrued 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 in our Consolidated Interim Statements of Operations.

(2) Includes $ 4 million and $ 3 million of environmental liabilities as of June 30, 2022 and December 31, 2021, respectively.

The Company accrues repositioning costs related to projects to optimize its product costs and right-size our organizational structure.

Expenses related to the repositioning accruals are included in Cost of goods sold and Selling, general and administrative expenses in our Consolidated Interim Statements of Operations.

Severance Costs Exit Costs

4 unchanged sentences

Usage—cash ( 4 ) — ( 4 )

Balance at March 31, 2022

Balance at June 30, 2022

Severance Costs Exit Costs

3 unchanged sentences

Usage—cash ( 4 ) — ( 4 )

Balance at March 31, 2021

Balance at June 30, 2021

$ 14 $ — $ 14

12 unchanged sentences

Three Months Ended

Six Months Ended

2022 2021 2022 2021

(Dollars in millions)

2 unchanged sentences

Three Months Ended

Six Months Ended

2022 2021 2022 2021

(Dollars in millions)

1 unchanged sentence

Operating cash outflows from operating leases

$ 3 $ 3 $ 6 $ 6

Right-of-use assets obtained in exchange for lease obligations:

9 unchanged sentences

Weighted-average discount rate 5.59 % 5.65 %

Maturities of operating lease liabilities as of March 31, 2022 were as follows:

Maturities of operating lease liabilities as of June 30, 2022 were as follows:

(Dollars in millions)

3 unchanged sentences

Long-term Debt and Credit Agreements

The principal outstanding and carrying amounts of our long-term debt as of March 31, 2022 are as follows:

Due Interest Rate March 31, 2022

The principal outstanding and carrying amounts of our long-term debt as of June 30, 2022 are as follows:

Due Interest Rate June 30, 2022

Dollar Facility 4/30/2028 4.49 % $ 710

18 unchanged sentences

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 March 31, 2022 the Company had no loans outstanding under the Revolving Facility, $ 2 million of outstanding letters of credit, and available borrowing capacity of approximately $ 473 million.

As of June 30, 2022 the Company had no loans outstanding under the Revolving Facility, no outstanding letters of credit, and available borrowing capacity of approximately $ 475 million.

Separate from the Revolving Facility, the Company has a $ 35 million bilateral letter of credit facility, which also matures on April 30, 2026.

As of March 31, 2022, the Company had $ 10 million utilized and $ 25 million of remaining available capacity under such facility.

As of June 30, 2022, the Company had $ 13 million utilized and $ 22 million of remaining available capacity under such facility.

Interest Rate and Fees

1 unchanged sentence

The Euro Term Facility is subject to an interest rate equal to an adjusted EURIBOR rate (“EURIBOR”) (which shall not be less than zero ) plus an applicable margin equal to 3.50 %.

Interest payments with respect to the Dollar and Euro Term Facilities

are required either on a quarterly basis (for ABR loans) or at the end of each interest period (for LIBOR and EURIBOR loans) or, if the duration of the applicable interest period exceeds three months, then every three months .

Interest payments with respect to the Dollar and Euro Term Facilities are required either on a quarterly basis (for ABR loans) or at the end of each interest period (for LIBOR and EURIBOR loans) or, if the duration of the applicable interest period exceeds three months, then every three months .

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.

4 unchanged sentences

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 March 31, 2022, the Company was in compliance with all covenants.

As of June 30, 2022, the Company was in compliance with all covenants.

The Credit Agreement also contained certain restrictions on the Company’s ability to pay cash dividends on or to redeem or otherwise acquire for cash the Series A Preferred Stock unless a ratable payment (on an as-converted basis) was made to holders of our common equity and such payments would otherwise be permitted under the terms of the Credit Agreement.

1 unchanged sentence

The Company's ability to pay cash dividends on shares of Common Stock is also subject to conditions set forth in the Certificate of Designations for the Series A Cumulative Convertible Preferred Stock (the "Series A Certificate of Designations") as described in Note 21, Equity , of the Consolidated Financial Statements and accompanying notes for the year ended December 31, 2021 included in our 2021 Form 10-K.

On March 3, 2022, the terms of the Series A Certificate of Designations were further amended to (i) expand the scope of permitted Distributions on Dividend Junior Stock (each as defined in the Series A Certificate of Designations) to include purchases by the Company of shares of Dividend Junior Stock in individually negotiated transactions, (ii) remove the requirement that dividends or Distributions on Dividend Junior Stock must occur on or prior to December 31, 2022, and (iii) expressly permit the purchase, redemption or other acquisition for cash by the Company of shares of Dividend Junior Stock without requiring ratable participation by holders of Series A Preferred Stock.

Junior Stock must occur on or prior to December 31, 2022, and (iii) expressly permit the purchase, redemption or other acquisition for cash by the Company of shares of Dividend Junior Stock without requiring ratable participation by holders of Series A Preferred Stock.

Mandatorily Redeemable Series B Preferred Stock

On February 18, 2022, Garrett completed a second planned partial early redemption of its Series B Preferred Stock.

Under this partial early redemption, the Company redeemed 217,183,244 shares of its Series B Preferred Stock for an aggregate price of $ 197 million.

As of March 31, 2022, the remaining scheduled redemptions were $ 18 million, $ 100 million, $ 100 million and $ 54 million for April 30, 2024, 2025, 2026 and 2027, respectively, totaling $ 272 million.

The net present value of the remaining scheduled redemptions as of March 31, 2022 is $ 204 million which reflects an effective interest rate of 7.71 % and is classified as a long-term liability on the Consolidated Interim Balance Sheet.

On June 28, 2022, the Company completed the early redemption of its remaining outstanding Series B Preferred Stock.

Under this final early redemption, the Company redeemed 271,628,259 shares of its Series B Preferred Stock for an aggregate price of $ 212 million.

The Company recognized a loss on extinguishment of debt of $ 5 million within the Condensed Interim Statement of Operations related to the early redemption.

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, 2021 included in our 2021 Form 10-K.

As of March 31, 2022 and December 31, 2021, we had contracts with aggregate gross notional amounts of $ 2,553 million and $ 2,788 million, respectively, to hedge interest rates and foreign currencies, principally the U.S.

As of June 30, 2022 and December 31, 2021, we had contracts with aggregate gross notional amounts of $ 2,616 million and $ 2,788 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.

2 unchanged sentences

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 March 31, 2022 and December 31, 2021:

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 June 30, 2022 and December 31, 2021:

Notional Amounts Assets Liabilities

14 unchanged sentences

As of March 31, 2022, the Company had outstanding interest rate swaps with an aggregate notional amount of € 830 million, with maturities of April 2023, April 2024, April 2025, April 2026 and April 2027.

As of June 30, 2022, the Company had outstanding interest rate swaps with an aggregate notional amount of € 830 million, with maturities of April 2023, April 2024, April 2025, April 2026 and April 2027.

The Company uses interest rate swaps specifically to mitigate variable interest risk exposure on its long-term debt portfolio and has not designated them as hedging instruments for accounting purposes.

The cross-currency swaps have been designated as net investment hedges of its Euro-denominated operations.

As of March 31, 2022, an aggregate notional amount of € 606 million was designated as net investment hedges of the Company’s investment in Euro-denominated operations.

The cross-currency swaps’ fair values were net assets of $ 44 million at March 31, 2022.

Our Consolidated Interim Statements of Comprehensive Income include Changes in fair value of net investment hedges, net of tax of $ 13 million, during the three months ended March 31, 2022, related to these net investment hedges.

As of June 30, 2022, an aggregate notional amount of € 606 million was designated as net investment hedges of the Company’s investment in Euro-denominated operations.

The cross-currency swaps’ fair values were net assets of $ 78 million at June 30, 2022.

Our Consolidated Interim Statements of Comprehensive Income include Changes in fair value of net investment hedges, net of tax, of $ 29 million and $ 42 million, during the three and six months ended June 30, 2022, respectively, related to these net investment hedges.

No ineffectiveness has been recorded on the net investment hedges.

3 unchanged sentences

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.

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.

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:

March 31, 2022 December 31, 2021

June 30, 2022

December 31, 2021

Carrying Value Fair Value Carrying Value Fair Value

16 unchanged sentences

Other comprehensive income before reclassifications

110 — — — 110

Amounts reclassified from accumulated other comprehensive income

Net current period other comprehensive income 43 5 15 — 63

Balance at March 31, 2021

Balance at June 30, 2021

$ ( 38 ) $ 2 $ 15 $ ( 45 ) $ ( 66 )

12 unchanged sentences

Net current period other comprehensive income 3 17 42 — 62

Balance at March 31, 2022

Balance at June 30, 2022

$ ( 40 ) $ 24 $ 83 $ ( 9 ) $ 58

5 unchanged sentences

The Series A Preferred Stock is 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 is not contractually obligated to share in our net losses.

Diluted earnings per share for the three months ended March 31, 2022 is calculated using the more dilutive of the two-class or if-converted methods.

Diluted earnings per share for the three and six months ended June 30, 2022 and 2021 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.

Diluted earnings per share for the three months ended March 31, 2021 is computed based upon the weighted average number of common shares outstanding and all dilutive potential common shares outstanding and all potentially issuable performance stock units at the end of the period (if any) based on the number of shares issuable if it were the end of the vesting period using the treasury stock method and the average market price of our Common Stock for the year.

The details of the EPS calculations for the three months ended March 31, 2022 and 2021 are as follows:

The details of the EPS calculations for the three and six months ended June 30, 2022 and 2021 are as follows:

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

(Dollars in millions except per share)

Basic earnings per share:

Net income (loss)

$ 85 $ 409 $ 173 $ 304

1 unchanged sentence

Net income available for distribution

46 385 96 280

earnings allocated to participating securities ( 36 ) ( 271 ) ( 76 ) ( 150 )

Net income (loss) available to common shareholders

Net income available to common shareholders

$ 10 $ 114 $ 20 $ 130

2 unchanged sentences

Diluted earnings per share:

Two-class If-converted Two-class If-converted

Weighted average common shares outstanding - Basic 64,839,157 69,667,651 64,689,673 72,862,102

Dilutive effect of unvested RSUs and other contingently issuable shares

263,005 — 217,616 —

Dilutive effect of participating securities — 247,768,962 — 247,768,982

Weighted average common shares outstanding – Diluted 65,102,162 317,436,613 64,907,289 320,631,084

1 unchanged sentence

The diluted earnings per share calculations exclude the effect of stock options when the options’ assumed proceeds exceed the average market price of the common shares during the period.

There were no options outstanding as of or during the three months ended March 31, 2022.

For the three months ended March 31, 2021, the weighted average number of stock options excluded from the computation was 399,489 .

There were no options outstanding as of or during the three and six months ended June 30, 2022.

For the three and six months ended June 30, 2021, the weighted average number of stock options excluded from the computations was 128,499 and 263,245 , respectively.

Related Party Transactions

We lease certain facilities and receive property maintenance services from Honeywell, which is the owner of our Series B Preferred Stock and appoints a director to our board of directors (the “Board”).

We lease certain facilities and receive property maintenance services from Honeywell, which was the owner of our Series B Preferred Stock and appoints a director to our board of directors (the “Board”).

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.

Our payments under the agreements with Honeywell were $ 2 million for the three months ended March 31, 2022, and were included in Cost of goods sold and Selling, general and

administrative expenses in our Consolidated Interim Statements of Operations.

For the three months ended March 31, 2021, Honeywell was not considered a related party.

Related to the agreements with Honeywell, our Consolidated Interim Balance Sheet at March 31, 2022 and our Consolidated Balance Sheet at December 31, 2021, includes liabilities of $ 11 million and $ 15 million, respectively.

Liability balances are primarily related to lease contracts of $ 8 million and $ 12 million as of March 31, 2022 and December 31, 2021, respectively.

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

(Dollars in millions)

Payments under agreements with Honeywell

$ 2 $ 2 $ 4 $ 4

Our payments under the agreements with Honeywell were 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 Interim Balance Sheet at June 30, 2022 and our Consolidated Balance Sheet at December 31, 2021 includes liabilities of $ 10 million and $ 15 million, respectively.

Liability balances are primarily related to lease contracts of $ 7 million and $ 12 million as of June 30, 2022 and December 31, 2021, respectively.

Commitments and Contingencies

44 unchanged sentences

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.

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.

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.

1 unchanged sentence

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, and briefing on the defendants’ motion is expected to be complete in September 2022.

Brazilian Tax Matter

1 unchanged sentence

The infraction notice results in a loss contingency that may or may not ultimately be incurred by the Company.

The estimated total amount of the contingency as of March 31, 2022 was $ 34 million, including penalties and interest.

The estimated total amount of the contingency as of June 30, 2022 was $ 32 million, including penalties and interest.

The Company appealed the infraction notice on October 23, 2020.

11 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

(Dollars in millions)

Balance at December 31 $ 32 $ 14

Warranty and product performance guarantees at beginning of period $ 32 $ 32 $ 32 $ 14

Accruals for warranties/guarantees issued during the year

Settlement of warranty/guarantee claims

( 5 ) ( 5 ) ( 8 ) ( 9 )

Amounts reclassified from Liabilities subject to compromise

Balance at March 31

Foreign currency translation ( 1 ) — ( 1 ) —

Warranty and product performance guarantees at end of period

$ 30 $ 32 $ 30 $ 32

Other Commitments and Contingencies

13 unchanged sentences

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 2022, of which $ 1 million has been contributed as of March 31, 2022.

pension plans to satisfy regulatory funding standards in 2022, of which $ 3 million has been contributed as of June 30, 2022.

Net periodic benefit costs for our significant defined benefit plans include the following components:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Plans Non-U.S.

2022 2021 2022 2021 2022 2021 2022 2021

8 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements