What changed in this filing

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Item 1. Financial Statements

2022-10-26 compared with 2022-07-28 · 149 added, 85 removed, 632 unchanged (27% of the section changed)

3 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

2022 2021 2022 2021

30 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

2022 2021 2022 2021

4 unchanged sentences

Changes in fair value of net investment hedges, net of tax (Note 16)

Total other comprehensive income (loss), net of tax

39 ( 48 ) 62 63

Total other comprehensive income, net of tax

Comprehensive income

3 unchanged sentences

CONSOLIDATED INTERIM BALANCE SHEETS

September 30,

2022 December 31,

27 unchanged sentences

Series A Preferred Stock, par value $ 0.001 ;

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

245,390,067 and 245,921,617 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

Common Stock, par value $ 0.001 ;

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

1,000,000,000 and 1,000,000,000 shares authorized, 64,925,058 and 64,570,950 issued and 64,818,324 and 64,570,950 outstanding as of September 30, 2022 and December 31, 2021, respectively

Additional paid–in capital 1,331 1,326

7 unchanged sentences

CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (Unaudited)

Six Months Ended June 30,

Nine Months Ended September 30,

(Dollars in millions) 2022 2021

7 unchanged sentences

Loss on extinguishment of debt 5 —

Foreign exchange gain

Foreign exchange loss

Stock compensation expense 8 5

25 unchanged sentences

Payments for share repurchases ( 4 ) —

Payments for dividends ( 42 ) —

Debt financing costs ( 4 ) ( 8 )

36 unchanged sentences

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

Net income — — — — — 63 — 63

Other comprehensive income, net of tax — — — — — — 8 8

Stock-based compensation — — — — 2 — — 2

Balance at September 30, 2021

248 $ — 65 $ — $ 1,334 $ ( 1,909 ) $ ( 58 ) $ ( 633 )

Preferred Stock Common Stock Additional

21 unchanged sentences

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

— — — — — 105 — 105

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

Other comprehensive income, net of tax

— — — — — — 64 64

Dividends declared — — — — — ( 42 ) — ( 42 )

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

Balance at September 30, 2022

246 $ — 64 $ — $ 1,331 $ ( 1,555 ) $ 122 $ ( 102 )

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 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.

The results of operations for the three and nine months ended September 30, 2022 and cash flows for the nine months ended September 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.

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.

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 September 30, 2022.

Our actual closing dates for the three months ended September 30, 2022 and 2021 were October 1, 2022 and October 2, 2021 , respectively.

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.

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 and six months ended June 30, 2022 and 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 nine months ended September 30, 2022 and 2021, respectively:

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

2022 2021 2022 2021

25 unchanged sentences

Recently Issued Accounting Pronouncements

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

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.

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 guidance is effective for fiscal years beginning after December 15, 2022 on a retrospective basis, including interim periods within those fiscal years, except for the requirement to disclose rollforward information, which is effective on a prospective basis for

fiscal years beginning after December 15, 2023.

Early adoption is permitted.

The Company is currently evaluating the guidance to determine the impact on its 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 June 30, 2022

Three Months Ended June 30, 2021

Three Months Ended September 30, 2022

Three Months Ended September 30, 2021

OEM Aftermarket Other Total OEM Aftermarket Other Total

5 unchanged sentences

$ 817 $ 115 $ 13 $ 945 $ 719 $ 107 $ 13 $ 839

Six Months Ended June 30, 2022

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2022

Nine Months Ended September 30, 2021

OEM Aftermarket Other Total OEM Aftermarket Other Total

9 unchanged sentences

Contract assets—January 1 $ 63 $ 61

Contract assets—June 30

Contract assets—September 30

Change in contract assets—(Decrease)/Increase $ ( 12 ) $ ( 5 )

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

Contract liabilities—June 30

Contract liabilities—September 30

Change in contract liabilities—(Increase)/Decrease $ ( 4 ) $ ( 2 )

5 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

2022 2021 2022 2021

4 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

2022 2021 2022 2021

2 unchanged sentences

Effective tax rate 19.8 % 30.8 % 23.0 % 18.3 %

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 for the three months ended September 30, 2022 is lower than the effective tax rate for the three months ended September 30, 2021 primarily related to lower nondeductible expenses in addition to a decrease in withholding taxes on undistributed earnings.

The effective tax rate for the nine months ended September 30, 2022 is higher than the effective rate for the nine months ended September 30, 2021 primarily related to the nontaxable gain recognized in 2021 on the settlement of the Honeywell claims partially offset by nondeductible expenses recorded in the prior period and a decrease in withholding taxes on undistributed earnings.

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

federal statutory rate of 21% primarily due to a decrease in the withholding taxes on undistributed earnings.

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

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

earnings and the previously mentioned decrease in withholding taxes on undistributed earnings.

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.

1 unchanged sentence

Accounts, Notes and Other Receivables—Net

September 30,

2022 December 31,

4 unchanged sentences

Less—Allowance for expected credit losses

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

Trade receivables include $ 51 million and $ 63 million of unbilled customer contract asset balances as of September 30, 2022 and December 31, 2021, respectively.

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

6 unchanged sentences

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.

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,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

2 unchanged sentences

Guaranteed bank notes sold without recourse 35 — 102 —

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.

September 30,

2022 December 31,

2 unchanged sentences

Guaranteed bank notes sold but not yet collected by the bank from the customer 1 —

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.

As of September 30, 2022 the Company has no guaranteed bank notes pledged as collateral and at December 31, 2021, the Company has pledged as collateral $ 5 million of guaranteed bank notes, 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.

Inventories—Net

September 30,

2022 December 31,

4 unchanged sentences

Less—Reserves ( 29 ) ( 29 )

September 30,

2022 December 31,

7 unchanged sentences

Accrued Liabilities

September 30,

2022 December 31,

10 unchanged sentences

Accrued freight 9 11

Dividends payable (Note 14) 42 —

Other (primarily operating expenses) (2)

(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.

(1) Customer advances and deferred income include $ 9 million and $ 5 million of contract liabilities as of September 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 June 30, 2022 and December 31, 2021, respectively.

(2) Includes $ 4 million and $ 3 million of environmental liabilities as of September 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.

6 unchanged sentences

Usage—cash ( 5 ) — ( 5 )

Balance at June 30, 2022

Balance at September 30, 2022

Severance Costs Exit Costs

3 unchanged sentences

Usage—cash ( 7 ) — ( 7 )

Balance at June 30, 2021

Balance at September 30, 2021

$ 14 $ — $ 14

Other Liabilities

September 30,

2022 December 31,

10 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

2022 2021 2022 2021

3 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

2022 2021 2022 2021

6 unchanged sentences

Supplemental balance sheet information related to operating leases is as follows:

September 30,

2022 December 31,

3 unchanged sentences

Other liabilities 36 42

September 30,

2022 December 31, 2021

1 unchanged sentence

Weighted-average discount rate 5.61 % 5.65 %

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

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

Due Interest Rate June 30, 2022

Dollar Facility 4/30/2028 4.49 % $ 710

Euro Facility 4/30/2028 3.50 % 470

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

Due Interest Rate September 30, 2022

Dollar Facility 4/30/2028 LIBOR plus 325 bps $ 708

Euro Facility 4/30/2028 EURIBOR plus 350 bps 438

Total principal outstanding 1,146

8 unchanged sentences

The maturity date of the Revolving Facility remains unchanged at April 30, 2026, with certain extension rights at the discretion of each lender.

Under the first amendment, LIBOR was replaced as an available rate at which borrowings under the Revolving Facility could accrue with, for loans borrowed in U.S.

Under the first amendment, London Inter-bank Offered Rate ("LIBOR") was replaced as an available rate at which borrowings under the Revolving Facility could accrue with, for loans borrowed in U.S.

Dollars, the daily overnight secured financing rate (“SOFR”) published by the Federal Reserve Bank of New York and for loans borrowed in Australian Dollars, the average bid reference rate administered by ASX Benchmarks Pty Limited.

The Term Loan Facilities under the Credit Agreement continue to be able to accrue interest under the London Inter-bank Offered Rate (“LIBOR”), but will switch to an alternative benchmark rate upon the cessation of LIBOR after June 30, 2023.

The Term Loan Facilities under the Credit Agreement continue to be able to accrue interest under the LIBOR, but will switch to an alternative benchmark rate upon the cessation of LIBOR after June 30, 2023.

The Euro Facilities under the Credit Agreement continue to accrue interest under the Euro Interbank Offered Rate (“EURIBOR”).

The second amendment also removed the requirement that payments made in cash for the benefit of holders of the Series A Preferred Stock on or before December 31, 2022 be made on a ratable basis to the holders of the Common Stock, and made additional clarifying amendments to certain provisions.

The second amendment also removed the requirement that payments made in cash for the benefit of holders of shares of the Company's Series A Preferred Stock, par value $ 0.001 per share (the "Series A Preferred Stock") on or before December 31, 2022 be made on a ratable basis to the holders of the Common Stock, and made additional clarifying amendments to certain provisions.

The amendments to our Credit Agreement as described above were accounted under ASC 470-50, Debt Modifications and Extinguishments as a debt modification that did not result in an extinguishment or have a material impact on our Consolidated Interim Financial Statements.

1 unchanged sentence

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

As of September 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 bilateral letter of credit facility, which also matures on April 30, 2026.

On September 14, 2022, the Company amended the bilateral letter of credit agreement to reduce the available capacity from $ 35 million to $ 15 million.

The maturity date and other terms of the amended agreement remained the same.

As of September 30, 2022, the Company had $ 12 million utilized and $ 3 million of remaining available capacity under such facility.

Interest Rate and Fees

The 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 LIBOR rate (“LIBOR”) (which shall not be less than 0.50 %), in each case, plus an applicable margin equal to 3.25 % in the case of LIBOR 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 (“EURIBOR”) (which shall not be less than zero ) plus an applicable margin equal to 3.50 %.

each case, plus an applicable margin equal to 3.25 % in the case of LIBOR 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 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 .

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

As of September 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.

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.

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.

Series A Preferred Stock

On September 8, 2022, the Disinterested Directors Committee of the board of directors (the "Board") of the Company declared a cash divide nd of $ 0.17 per share on the Company's Series A Preferred Stock.

As of the record date of September 23, 2022, a total of 245,413,317 shares of Series A Preferred Stock were outstanding, resulting in an aggregate dividend amount of $ 42 million.

Cash was transferred on Septe mber 28, 2022, to the transfer agent for the Series A Preferred Stock in the amount of $ 42 million for the settlement of the dividend which occurred on October 3, 2022.

As of September 30,

2022, a dividend payable of $ 42 million was recorded within Accrued liabilities, and the cash held by the transfer agent was recorded within Other Current Assets.

As of September 30, 2022, the remaining unpaid cumulative dividends not yet declared on the shares of Series A Preferred Stock outstanding as of that date was $ 172 million.

Mandatorily Redeemable Series B Preferred Stock

4 unchanged sentences

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 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.

As of September 30, 2022 and December 31, 2021, we had contracts with aggregate gross notional amounts of $ 2,451 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 June 30, 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 September 30, 2022 and December 31, 2021:

Notional Amounts Assets Liabilities

September 30,

2022 December 31, 2021

September 30,

2022 December 31, 2021

September 30,

2022 December 31, 2021

4 unchanged sentences

Undesignated instruments:

Undesignated interest rate swap 866 940 41 7 (a) — —

Undesignated interest rate swap 809 940 64 7 (b) — —

Undesignated forward currency exchange contracts 426 751 5 2 (a) 6 4 (c)

4 unchanged sentences

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.

As of September 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 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.

As of September 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 $ 131 million at September 30, 2022.

Our Consolidated Interim Statements of Comprehensive Income include Changes in fair value of net investment hedges, net of tax, of $ 45 million and $ 87 million, during the three and nine months ended September 30, 2022, respectively, related to these net investment hedges.

No ineffectiveness has been recorded on the net investment hedges.

6 unchanged sentences

The following table sets forth the Company’s financial assets and liabilities that were not carried at fair value:

June 30, 2022

September 30, 2022

December 31, 2021

19 unchanged sentences

Net current period other comprehensive income 37 7 27 — 71

Balance at June 30, 2021

Balance at September 30, 2021

$ ( 44 ) $ 4 $ 27 $ ( 45 ) $ ( 58 )

9 unchanged sentences

Other comprehensive income before reclassifications

13 43 87 — 143

Amounts reclassified from accumulated other comprehensive income

1 unchanged sentence

Net current period other comprehensive income 13 26 87 — 126

Balance at June 30, 2022

Balance at September 30, 2022

$ ( 30 ) $ 33 $ 128 $ ( 9 ) $ 122

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 and six months ended June 30, 2022 and 2021 is calculated using the more dilutive of the two-class or if-converted methods.

Diluted earnings per share for the three and nine months ended September 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.

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

As previously disclosed in our 2021 Form 10-K, the basic and diluted earnings per share for the three and nine months ended September 30, 2021 have been restated in the table below as compared to the previously filed Quarterly Report on Form 10-Q for the corresponding period to correct for the calculation using the two-class and if-converted methods.

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

11 unchanged sentences

Diluted earnings per share:

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

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

Weighted average common shares outstanding - Basic 64,820,887 65,056,274 64,834,298 70,802,999

5 unchanged sentences

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 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.

There were no options outstanding as of or during the three and nine months ended September 30, 2022 or during the three months ended September 30, 2021.

For the nine months ended September 30, 2021, the weighted average number of stock options excluded from the computations was 175,497 .

Related Party Transactions

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 lease certain facilities and receive property maintenance services from Honeywell, which was the owner of our Series B Preferred Stock that was fully redeemed by the Company on June 28, 2022, is a holder of our common stock and Series A Preferred Stock and has a director on our board of directors (the “Board”).

We also contract with Honeywell for the occasional purchase of certain goods and services.

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

3 unchanged sentences

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.

Related to the agreements with Honeywell, our Consolidated Interim Balance Sheet at September 30, 2022 and our Consolidated Balance Sheet at December 31, 2021 includes liabilities of $ 9 million and $ 15 million, respectively.

Liability balances are primarily related to lease contracts of $ 6 million and $ 12 million as of September 30, 2022 and December 31, 2021, respectively.

Commitments and Contingencies

53 unchanged sentences

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.

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.

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 June 30, 2022 was $ 32 million, including penalties and interest.

The estimated total amount of the contingency as of September 30, 2022 was $ 31 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

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

23 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 $ 3 million has been contributed as of June 30, 2022.

pension plans to satisfy regulatory funding standards in 2022, of which $ 5 million has been contributed as of September 30, 2022.

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

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

Three Months Ended September 30, Nine Months Ended September 30,

Plans Non-U.S.

5 unchanged sentences

Expected return on plan assets ( 2 ) ( 3 ) ( 2 ) ( 2 ) ( 6 ) ( 8 ) ( 5 ) ( 5 )

Amortization of prior service (credit) — — — — — — — ( 1 )

$ ( 1 ) $ ( 2 ) $ — $ 1 $ ( 1 ) $ ( 4 ) $ 1 $ 3

3 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