What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-14 compared with 2022-02-14 · 372 added, 653 removed, 1088 unchanged (49% of the section changed)

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and subsidiaries (the "Company") as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, because of the effect of the material weakness identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated February 14, 2022, expressed an unqualified opinion on those consolidated financial statements and an emphasis of matter paragraph regarding the emergence from bankruptcy.

In our opinion, the Company maintained in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated February 14, 2023, expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting .

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Material Weakness

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified and included in management's assessment.

Management of the Company did not design and implement effective controls relating to management's review of complex and bespoke transactions.

Specifically, the controls did not include an assessment of the necessity to include subject matter expertise to review the key features of such transactions for purposes of the Company's accounting analyses.

This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2021, of the Company, and this report does not affect our report on such consolidated financial statements.

/s/ Deloitte SA

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Garrett Motion Inc.

and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements").

We have audited the accompanying consolidated balance sheets of Garrett Motion Inc.

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with the accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 14, 2022 expressed an adverse opinion on the Company's internal control over financial reporting because of a material weakness.

Emphasis of a Matter

Emergence from Bankruptcy

As discussed in Notes 1 and 2 to the financial statements, on April 26, 2021, the Bankruptcy Court entered an order confirming the plan of reorganization which became effective after the close of business on April 30, 2021.

Under the plan of reorganization, the Company is required to comply with certain terms and conditions as more fully described in Notes 1 and 2 to the financial statements.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 14, 2023 expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Income Taxes - Uncertain Tax Positions - Refer to Note 7 to the Financial Statements

Net Sales and Accrued Liabilities - Variable Consideration– Refer to Notes 3 and 15 to the Financial Statements

Critical Audit Matter Description

As of December 31, 2021, the company has recorded uncertain tax positions totaling $80 million.

The Company is subject to income taxes in the U.S.

and numerous foreign jurisdictions with constantly changing tax laws and regulations.

The Company’s management is required to interpret and apply these tax laws and regulations in determining the amount of its income tax liability and provision.

When an uncertain tax position is identified by management, the Company must evaluate whether it is more likely to be sustained than not on the basis of its technical merits.

In evaluating the tax benefits associated with the various tax filing positions, the Company records a net tax benefit for uncertain tax positions using the highest cumulative tax benefit that is more likely than not to be realized.

The evaluation of each uncertain tax position requires management to apply specialized skill, knowledge, and significant judgment related to the identified position.

This significant judgment includes determining the appropriate value of the liability based on the selected method of measurement, data, and assumptions determined by management.

Because of the numerous foreign jurisdictions in which the Company files its tax returns and the complexity of their tax laws and regulations, auditing uncertain tax positions and the determination of whether or not the more likely than not threshold was met requires a high degree of auditor judgment and increased extent of effort, including the involvement of our income tax specialists.

As disclosed in Notes 3 and 15 to the consolidated financial statements, the Company records net sales at the amount of consideration the Company expects to receive in exchange for transferring the promised goods, which includes estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized will not occur.

Variability in consideration typically results from discounts and rebates provided to customers.

The estimated variable consideration is based primarily on management’s best available information regarding customer negotiations, historical

experience, and anticipated future customer pricing strategies.

Estimating variable consideration to be received requires significant judgments by management that affect the amount of revenue recorded in the financial statements.

Given the significant estimates and assumptions management makes to estimate future discounts and rebates, auditing managements estimate of the amount related to variable consideration to recognize as net sales required a high degree of auditor judgement.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to uncertain tax positions included the following, among others:

• We tested the effectiveness of controls over income taxes, including managements' controls over identifying uncertain tax positions and measuring liabilities

• We evaluated, with the assistance of our tax specialists, a selection of underlying tax positions to evaluate the more likely than not principle as it applied to the specific underlying tax position.

• We evaluated, with the assistance of our tax specialists, the Company's unrecognized tax positions by performing the following:

• Evaluating management's method of measuring its liability for uncertain tax positions, including evaluation of the underlying data and assumptions

• Obtaining management and third-party memoranda’s regarding the analysis of certain uncertain tax positions reserves and identifying key judgements and evaluating whether the analysis was consistent with our interpretation of the relevant laws and regulations.

• Evaluating the completeness of management's identification of the uncertain tax positions.

• We also evaluated the appropriateness of the related disclosures included in Note 7 to the financial statements.

Our audit procedures related to the estimate of revenue variable considerations included the following, among others:

• We tested the effectiveness of relevant controls over the estimation of the variable consideration net sales.

• We selected a sample of revenue contracts with variable consideration and performed the following:

◦ Obtained contractual documents, including master agreements and other related documents, and evaluated whether managements calculations for variable consideration were consistent with the terms of the contracts.

◦ Compared transaction prices to the consideration expected to be received and determined that variable consideration was completely and accurately recorded.

• We tested the accuracy of managements estimate of the variable consideration by performing the following:

◦ Performed an evaluation on historical information to determine management’s ability to accurately estimate sales volumes and future concessions.

◦ Performed inquiries with individuals in the Company’s finance, operations and sales departments regarding the customer negotiations and corroborated the inquiries by examining supporting evidence as applicable.

◦ Tested the mathematical accuracy of the variable consideration calculation.

• Inspected manual revenue journal entries for unusual entries affecting revenue and examined supporting evidence.

/s/ Deloitte SA

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Interest expense 82 93 79

Non-operating (income) expense (Note 6)

Loss on extinguishment of debt (Note 17)

Non-operating income (Note 6)

( 121 ) ( 16 ) ( 38 )

Reorganization items, net ( 125 ) 73 —

Reorganization items, net (Note 1)

Income before taxes 496 538 119

Tax expense (Note 7)

Net income 390 495 80

preferred stock dividend (Note 21)

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Net income available for distribution $ 233 $ 398 $ 80

$ 398 $ 80 $ 313

Earnings per share (Note 24)

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(Dollars in millions)

$ 495 $ 80 $ 313

Net income $ 390 $ 495 $ 80

Foreign exchange translation adjustment ( 1 ) 38 ( 234 )

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Changes in fair value of net investment hedges, net of tax (Note 19)

Total other comprehensive income (loss) , net of tax

125 ( 259 ) 57

Total other comprehensive income (loss) 40 125 ( 259 )

Comprehensive income (loss) $ 430 $ 620 $ ( 179 )

$ 620 $ ( 179 ) $ 370

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

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Accounts payable $ 1,048 $ 1,006

Borrowings under revolving credit facility (Note 16)

Current maturities of long-term debt (Note 16)

Debtor-in-possession Term Loan (Note 16)

Mandatorily redeemable Series B Preferred Stock (Note 17)

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Deferred income taxes (Note 7)

Other liabilities (Note 20)

Total liabilities not subject to compromise 3,174 3,035

Liabilities subject to compromise (Note 2)

Other liabilities

Total liabilities $ 2,753 $ 3,174

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Series A Preferred Stock, par value $ 0.001 ;

245,921,617 shares issued and outstanding as of December 31, 2021 (Note 21)

245,089,671 and 245,921,617 shares issued and outstanding as of December 31, 2022 and 2021, respectively (Note 21)

Common Stock, par value $ 0.001 ;

1,000,000,000 and 400,000,000 shares authorized, 64,570,950 and 76,229,578 issued and 64,570,950 and 75,813,634 outstanding as of December 31, 2021 and December 31, 2020, respectively

1,000,000,000 and 1,000,000,000 shares authorized, 64,943,238 and 64,570,950 issued and 64,832,609 and 64,570,950 outstanding as of December 31, 2022 and 2021, respectively

Additional paid-in capital 1,333 1,326

Retained deficit ( 1,485 ) ( 1,790 )

( 1,790 ) ( 2,207 )

Accumulated other comprehensive income (Note 22)

( 4 ) ( 129 )

Accumulated other comprehensive income (loss) (Note 22)

Total deficit ( 116 ) ( 468 )

( 468 ) ( 2,308 )

Total liabilities and deficit $ 2,637 $ 2,706

$ 2,706 $ 3,017

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

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Year Ended December 31,

2021 2020 2019

(Dollars in millions) 2022 2021 2020

Cash flows from operating activities:

$ 495 $ 80 $ 313

Adjustments to reconcile net income to net cash provided by operating activities:

Net income $ 390 $ 495 $ 80

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

Reorganization items, net — ( 435 ) 60

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Accretion of debt discount, net of interest payments ( 19 ) 19 —

Loss on extinguishment of debt 5 — —

Foreign exchange loss (gain) ( 1 ) 7 ( 58 )

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Pension (income) expense ( 28 ) ( 2 ) 15

Change in fair value of derivatives ( 65 ) 1 20

Other 1 ( 11 ) 24

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Other liabilities ( 32 ) 87 2

Net cash (used for) provided by operating activities

( 310 ) 25 242

Net cash provided by (used for) operating activities 375 ( 310 ) 25

Cash flows from investing activities:

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Payments of revolving credit facilities — ( 370 ) ( 1,100 )

Payments for dividends ( 83 ) — —

Payments for share repurchases ( 7 ) ( 19 ) —

(Repayments) proceeds from debtor-in-possession financing — ( 200 ) 200

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Payments for Cash-Out election — ( 69 ) —

Repurchases of Series A Preferred Stock ( 15 ) — —

Repurchases of Common Stock ( 4 ) — —

Revolving facility financing costs ( 7 ) — —

Debtor-in-possession financing fees — ( 13 ) —

Debt financing costs ( 4 ) ( 7 ) ( 13 )

Other — — ( 4 )

Net cash provided by (used for) financing activities 139 530 ( 163 )

Net cash (used for) provided by financing activities ( 482 ) 139 530

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash ( 18 ) 13 31

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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 December 31, 2020

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Net income — — — — — 495 — 495

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

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

Share repurchases ( 2 ) — ( 1 ) — ( 10 ) ( 9 ) — ( 19 )

Other comprehensive income, net of tax — — — — — — 125 125

Stock-based compensation — — — — 7 — — 7

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 December 31, 2021

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Net income — — — — — 390 — 390

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

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

Repurchases of Common Stock — — ( 1 ) — — ( 4 ) — ( 4 )

Repurchases of Series A Preferred Stock ( 2 ) — — — ( 10 ) ( 5 ) — ( 15 )

Share repurchases — — — — ( 4 ) ( 2 ) — ( 6 )

Other comprehensive loss, net of tax — — — — — — 40 40

Dividends — — — ( 83 ) — ( 83 )

Stock-based compensation — — — — 11 — — 11

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

The accompanying Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business.

Our ability to continue as a going concern was contingent upon the Company’s ability to successfully implement a Plan of Reorganization in the Chapter 11 Cases, among other factors.

As a result of the Chapter 11 Cases, the realization of assets and the satisfaction of liabilities were subject to uncertainty.

While the Company was operating as debtors-in-possession under under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”), we sold or otherwise disposed of or liquidated assets or settled liabilities, with the approval of the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) or as otherwise permitted in the ordinary course of business, for amounts other than those reflected in our Consolidated Financial Statements.

As a result of our improved liquidity (see Note 2, Plan of Reorganization;

Note 16, Long-term Debt and Credit Agreements;

Note 17, Mandatorily Redeemable Series B Preferred Stock;

and Note 21, Equity), and removal of the risks and uncertainties surrounding the Chapter 11 Cases, substantial doubt no longer exists that we will be able to continue as a going concern.

Upon emergence from the Chapter 11 bankruptcy proceedings, the Company did not meet the requirements under Accounting Standards Codification (“ASC”) 852, Reorganizations (“ASC 852”) for fresh start accounting.

Fresh start accounting is applicable if both of the following criteria are met:

i) The reorganization value of the assets of the emerging entity immediately before the date of confirmation of the Plan of Reorganization is less than the total of all post-petition liabilities and allowed claims;

ii) The holders of existing voting shares immediately before confirmation of the Plan of Reorganization receive less than 50% of the voting shares of the emerging entity.

Based on the Company’s analysis, the Company was not required to apply fresh start accounting based on the provisions of ASC 852 since holders of the Company’s outstanding voting shares immediately before confirmation of the Plan received more than 50 % of the Company’s outstanding voting shares upon emergence.

Accordingly, a new reporting entity was not created for accounting purposes.

While the Company was a debtor-in-possession, it applied ASC 852 in preparing Consolidated Financial Statements.

ASC 852 required the financial statements for periods subsequent to September 20, 2020 (the “Petition Date”) to distinguish transactions and events that were directly associated with the Company's reorganization from the ongoing operations of the business.

Accordingly, revenues, expenses, realized gains and losses, and provisions for losses directly resulting from the reorganization and restructuring were reported separately as Reorganization items, net in the Consolidated Statements of Operations.

In addition, the balance sheet distinguished pre-petition liabilities subject to compromise from those pre-petition liabilities that were not subject to compromise and post-petition liabilities.

Pre-petition liabilities that were not fully secured or those that had at least a possibility of not being repaid at the allowed claim amount were classified as liabilities subject to compromise on the Consolidated Balance Sheet at December 31, 2020.

At December 31, 2021 there were no such balances.

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, including considerations for the impact of the outbreak of the novel coronavirus (“COVID-19”) pandemic on the Company's business due to various global macroeconomic, operational and supply-chain risks as a result of COVID-19.

Actual results could differ from the original estimates, requiring adjustments to these balances in future periods.

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”), who 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.

Plan of Reorganization

Emergence from Chapter 11

As previously reported, on the Petition Date, the Company and certain of its subsidiaries (collectively, the “Debtors”) each filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court.

On April 20, 2021, the Debtors filed the Plan.

On April 26, 2021, the Bankruptcy Court entered the Confirmation Order among other things, confirming the Plan.

On the Effective Date, April 30, 2021, the conditions to the effectiveness of the Plan were satisfied or waived and the Company emerged from bankruptcy.

On September 20, 2020 (the "Petition Date"), the Company and certain of its subsidiaries each filed a voluntary petition for relief under Chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”).

A Revised Amended Plan of Reorganization ("Plan") was confirmed by the Bankruptcy Court on April 26, 2021, and the Company emerged from bankruptcy (“Emergence”) on April 30, 2021 (the "Effective Date").

The Company applied ASC 852, Reorganizations , in preparing its Consolidated Financial Statements during its Chapter 11 bankruptcy proceedings, which required the financial statements for periods subsequent to filing for Chapter 11 to distinguish transactions and events that were directly associated with the Company's reorganization from the ongoing operations of the business.

Revenues, expenses, realized gains and losses, and provisions for losses directly resulting from the reorganization and restructuring were reported separately as Reorganization items, net in the Consolidated Statements of Operations.

Upon Emergence, the Company did not meet the requirements under ASC 852 for fresh start accounting and in accordance with ASC 852, a new reporting entity was not created for accounting purposes.

On the Effective Date, pursuant to the Plan:

• All shares of the common stock of the Company outstanding prior to the Effective Date (the “Old Common Stock”) were cancelled;

• The Company paid $ 69 million to holders of Old Common Stock who had made the cash-out election under the Plan (the “Cash-Out Election”) in consideration of the cancellation of the Old Common Stock held by such holders;

• The Company issued 65,035,801 shares of its new Common Stock (the “Common Stock”), to holders of the Old Common Stock who had not made the Cash-Out Election under the Plan in consideration of the cancellation of the Old Common Stock held by such holders;

• The Company issued 247,768,962 shares of its new convertible series A preferred stock (the “Series A Preferred Stock”) to the parties to the Plan Support Agreement, the Equity Backstop Commitment Agreement (as both defined in the Plan) and participants in the rights offering by the Company for aggregate consideration of $ 1,301 million;

• The Company issued 834,800,000 shares of its new mandatorily redeemable series B preferred stock (the “Series B Preferred Stock”) to Honeywell International Inc.

• The Company issued 65,035,801 shares of its new common stock ("Common Stock") to the holders of Old Common Stock who had not made the Cash-Out Election under the Plan;

• The Company issued 247,768,962 shares of Series A Preferred Stock to the parties to the Plan Support Agreement, the Equity Backstop Commitment Agreement (as both defined in the Plan) and participants in the rights offering by the Company for aggregate consideration of $ 1,301 million;

• The Company issued 834,800,000 shares of Series B Preferred Stock to Honeywell International Inc.

(“Honeywell”) in satisfaction and discharge of certain claims of Honeywell;

• The Company also paid $ 375 million to Honeywell in addition to the issuance of the Series B Preferred Stock in satisfaction and discharge of certain claims of Honeywell;

• The Company was authorized to grant up to 10 % of the equity in the reorganized Company (on a fully-diluted basis) from time to time to the directors, officers and other employees of the reorganized Company, for awards under the Garrett Motion Inc.

2021 Long-Term Incentive Plan adopted by the board of directors (the “Board”) on May 25, 2021;

• The Company p aid in full $ 101 million of interest and principal outstanding on, and terminated, the Senior Secured Super-Priority Debtor-in-Possession Credit Agreement (the “ DIP Credit Agreement ”);

• The obligations of the Debtors under the credit agreement, dated as of September 27, 2018, by and among the Company, as holdings, Garrett LX III S.à r.l., as Lux Borrower, Garrett Borrowing LLC, as U.S.

Co-Borrower, Garrett Motion Sàrl (f/k/a Honeywell Technologies Sàrl), as Swiss Borrower, the lenders and issuing banks party thereto and the Pre-petition Credit Agreement Agent (as defined in the Plan), as Administrative Agent, as amended, restated, supplemented or otherwise modified from time to time in accordance with its terms (the “Pre-petition Credit Agreement”) were cancelled, the applicable agreements governing such obligations were terminated and holders of Allowed Pre-petition Credit Agreement Claims (as defined in the Plan) received

payment in cash in an amount equal to such holder’s Allowed Pre-petition Credit Agreement Claim.

With respect to the Pre-petition Credit Agreement:

◦ The Company repaid its outstanding principal balance, accrued pre-petition and default interest of $ 307 million on its five-year term A loan facility;

◦ The Company repaid its outstanding principal balance, accrued pre-petition and default interest of (i) $ 374 million with respect to the EUR tranche and (ii) $ 422 million with respect to the USD tranche, on its seven -year term B loan facility;

◦ The Company repaid its outstanding principal balance and accrued interest of $ 374 million on its revolving credit facility (the “Old Revolving Facility”);

◦ The Company repaid its accrued pre-petition hedge obligations of $ 20 million;

• The obligations of the Debtors under that certain Indenture, dated as of September 27, 2018, among the Company, as Parent, Garrett LX I S.à r.l., as Issuer, Garrett Borrowing LLC, as Co-Issuer, the guarantors named therein, Deutsche Trustee Company Limited, as Trustee, Deutsche Bank AG, as Security Agent and Paying Agent, and Deutsche Bank Luxembourg S.A., as Registrar and Transfer Agent, as may be amended, supplemented or otherwise modified from time to time (the “Indenture”), were cancelled, the applicable agreements governing such obligations were terminated and holders of Allowed Pre-petition Credit Agreement Claims (as defined in the Plan) received payment in cash in an amount equal to such holder’s Allowed Senior Subordinated Noteholder Claims (as defined in the Plan).

With respect to the Indenture and the Allowed Senior Subordinated Noteholder Claims, the Company repaid its outstanding principal balance of € 350 million, or $ 423 million, (the “Senior Notes”), accrued pre-petition interest of $ 10 million, post-petition interest of $ 13 million, and payment of $ 15 million in connection with the complaint in the Bankruptcy Court against the indenture trustee of the 5.125 % senior notes due 2026 seeking declaratory judgment on two claims for relief that the Debtors did not owe, and the holders of the Senior Notes were not entitled to, any make-whole premium under the Indenture (the “Make-Whole” and such litigation, the “Make-Whole Litigation”);

• The Company and certain of its subsidiaries entered into secured debt facilities consisting of:

◦ a seven-year secured first-lien U.S.

Dollar term loan facility in the amount of $ 715 million (the “Dollar Facility”);

◦ a seven-year secured first-lien Euro term loan facility in the amount of € 450 million (the “Euro Facility,” and together with the Dollar Facility, the “Term Loan Facilities”);

◦ a five-year senior secured first-lien revolving credit facility in the amount of $ 300 million providing for multi-currency revolving loans, (the “Revolving Facility,” and together with the Term Loan Facilities, the “Credit Facilities”);

• The proceeds drawn under the Credit Facilities were reduced by deferred financing costs of $ 38 million, and deferred financing costs of $ 25 million on repaid historical debt were expensed;

• The Company paid or will pay certain pre-petition claims, transaction fees, stock incentive payments and other expenses incurred in connection with the Plan.

Mandatorily Redeemable Series B Preferred Stock for further discussion of the Series B Preferred Stock.

See Note 21, Equity for further discussion of the Common Stock and the Series A Preferred Stock.

See Note 16, Long-term Debt and Credit Agreements for further discussion of the Credit Facilities.

Reorganization Items, Net

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 year ended December 31, 2021 and 2020:

• The Company repaid, and terminated, its pre-petition credit agreement including:

• Outstanding principal balance, accrued pre-petition and default interest on its five-year term A loan facility of $ 307 million;

• Outstanding principal balance, accrued pre-petition and default interest of (i) $ 374 million with respect to the EUR tranche and (ii) $ 422 million with respect to the USD tranche, on its seven -year term B loan facility;

• Outstanding principal balance and accrued interest of $ 374 million on its revolving credit facility;

• Accrued pre-petition hedge obligations of $ 20 million.

• The Company repaid the outstanding principal balance on its senior subordinated notes of € 350 million, or $ 423 million.

The Company also paid accrued pre-petition interest of $ 10 million, post-petition interest of $ 13 million, and $ 15 million in connection with a complaint in the Bankruptcy Court against the indenture trustee of the 5.125 % senior notes due 2026 (the "Make-Whole Litigation").

• The Company entered into certain secured debt facilities, see Note 16, Long-term Debt and Credit Agreements for discussion.

The Company further paid $ 75 million in connection with the reimbursement of Centerbridge Partners, L.P.

(together with its affiliated funds, “Centerbridge”) and Oaktree Capital Management, L.P.

(together with its affiliated funds, “Oaktree”), who are significant shareholders, and Honeywell for professional fees and expenses related to their support of our emergence from Chapter 11 bankruptcy, as well as reimbursement to Centerbridge and Oaktree for their participation in the Equity Backstop Commitment Agreement.

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 years ended December 31, 2022 and 2021:

Year Ended December 31,

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Total reorganization items, net $ 3 $ 2 $ ( 125 )

(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.

(1) The gain on settlement of Honeywell claims of $ 502 million is comprised of the pre-emergence Honeywell claims of $ 1,459 million, less a $ 375 million payment made to Honeywell pursuant to the Plan, 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 Make-Whole Litigation and $ 13 million related to post-petition interest.

Exit Financing and Entry into Credit Facilities

On the Effective Date, in accordance with the Plan, the Company and certain of its subsidiaries entered into secured debt facilities consisting of:

• a seven-year secured first-lien U.S.

Dollar term loan facility in the amount of $ 715 million;

• a seven-year secured first-lien Euro term loan facility in the amount of € 450 million;

• a five-year senior secured first-lien Revolving Facility in the amount of $ 300 million providing for multi-currency revolving loans.

On January 11, 2022, the revolving facility was amended, refer to the "Revolving Facility and Letters of Credit", section of Note 16, Long-term Debt and Credit Agreements for further details.

The Company may use up to $ 125 million under the Revolving Facility for the issuance of letters of credit to the Swiss Borrower (as defined below) or any of 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 will reduce availability under the Revolving Facility.

This agreement was amended on January 11, 2022, as further discussed in Note 16, Long-term Debt and Credit Agreements .

The proceeds of the Term Loan Facilities were used on the Effective Date (i) for the payment of fees and expenses payable in connection with entry into the Credit Agreement, the effectiveness of the Plan, the refinancing of the Company’s existing indebtedness and the preferred equity investments that were made on the Effective Date, (ii) to fund distributions in accordance with the Plan, (iii) to pay off the Company’s existing indebtedness, including under its Pre-petition Credit Agreement, notes indenture and Debtor-in-possession Term Loan and (iv) for general corporate purposes.

The Revolving Facility was undrawn on the Effective Date.

Proceeds of the Revolving Facility are available to be used for working capital and other general corporate purposes, including acquisitions permitted under the Credit Agreement.

Any letters of credit will be used for general corporate purposes.

The table below presents changes to our debt outstanding as a result of the Plan:

financing (2)

December 31, 2021

(Dollars in millions)

Secured Term Loan Facilities and accrued interest

$ 1,082 $ 21 $ ( 1,103 ) $ — $ —

Borrowings under Old Revolving Facility 370 4 ( 374 ) — —

Senior Notes and accrued interest 429 32 ( 461 ) — —

Debtor-in-possession Term Loan 200 — ( 200 ) — —

Term Loan Facilities — — — 1,188 1,188

Total long-term debt $ 2,081 $ 57 $ ( 2,138 ) $ 1,188 $ 1,188

(1) Amounts primarily are related to accrued interest, unamortized deferred financing cost as of December 31, 2020 and the impact of foreign exchange.

(2) Term Loan Facilities amount, net of deferred financing costs as of December 31, 2021 of $ 1,188 million reflects exit financing amounts as of the Effective Date of $ 1,221 million adjusted to the December 31, 2021 foreign exchange rate.

Financial Statement Classification of Liabilities Subject to Compromise

As a result of the Chapter 11 Cases, the payment of pre-petition liabilities is generally subject to compromise pursuant to a Plan of Reorganization.

Generally, actions to enforce or otherwise effect payment of pre-bankruptcy filing liabilities are enjoined.

Although payment of pre-petition claims generally was not permitted during the Chapter 11 Cases, the Bankruptcy Court granted the Debtors authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions.

This relief generally was designed to preserve the value of the Debtors’ business and assets.

Among other things, the Bankruptcy Court authorized, but did not require, the Debtors to pay certain pre-petition claims relating to employee wages and benefits, taxes, critical vendors and foreign vendors Prior to emergence, pre-petition liabilities that were subject to compromise were required to be reported at the amounts expected to be allowed.

Therefore, liabilities subject to compromise in the table below reflected management’s estimates of amounts expected to be allowed by the Bankruptcy Court, based upon the status of negotiations with creditors.

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

The following table presents the movements in the liabilities subject to compromise as reported in the Consolidated Balance Sheet from December 31, 2020 to December 31, 2021:

2020 Change in

payment Issuance of

Stock Reinstatements Reorganization OCI December 31, 2021

(Dollars in millions)

Obligations payable to Honeywell

$ 1,482 $ ( 23 ) $ ( 375 ) $ ( 577 ) $ — $ ( 502 ) $ ( 5 ) $ —

Senior Notes 429 32 ( 461 ) — — — — —

Pension, compensation, benefit and other employee-related

92 ( 10 ) — — ( 82 ) — — —

Uncertain tax positions and deferred taxes

69 ( 8 ) — — ( 61 ) — — —

Accounts payable 82 ( 50 ) — — ( 32 ) — — —

Advanced discounts from suppliers

33 ( 6 ) — — ( 27 ) — — —

Lease liabilities 19 ( 2 ) — — ( 17 ) — — —

Product warranties and performance guarantees

16 — — — ( 16 ) — — —

Freight Accrual 27 ( 27 ) — — — — — —

Other 41 ( 14 ) — — ( 27 ) — — —

Total liabilities subject to compromise

$ 2,290 $ ( 108 ) $ ( 836 ) $ ( 577 ) $ ( 262 ) $ ( 502 ) $ ( 5 ) $ —

The Company emerged from Chapter 11 bankruptcy on the Effective Date of April 30, 2021.

The amounts in the table above represent the best estimate of our pre-petition liabilities prior to emergence on the Effective Date.

Summary of Significant Accounting Policies

Use of Estimates

The preparation of the Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions 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.

Actual results could differ from those estimates.

Estimates and assumptions are periodically reviewed and the effects of changes are reflected in the Consolidated Financial Statements in the period they are determined to be necessary.

Principles of Consolidation and Combination

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Restricted Cash

Restricted cash primarily consists of bank deposits used to pledge as collateral in order to be able to issue bank notes as payment to certain suppliers in the Asia Pacific region (refer to Note 9, Factoring and Notes Receivable ).

The Company released $ 39 million during January and February 2022.

Restricted cash primarily consists of bank deposits pledged as collateral to issue bank notes (refer to Note 9, Factoring and Notes Receivable ).

Trade Receivables and Allowance for Doubtful Accounts

Trade accounts receivable are recorded at the invoiced amount as a result of transactions with customers.

Garrett maintains allowances for doubtful accounts for estimated losses as a result of a customer’s inability to make required payments.

As of January 1, 2020, Garrett adopted Accounting Standards Update ("ASU") 2016-13 , Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

The new guidance requires an entity to recognize as an allowance its estimate of lifetime expected credit losses rather than incurred losses.

The guidance is also applicable to contract assets such as unbilled receivables.

Consistent with the new guidance, Garrett estimates losses from doubtful accounts expected over the contractual life of the receivables based on days past due as measured from the contractual due date and collection history.

Garrett also takes into consideration changes in economic conditions that may not be reflected in historical trends (for example, customers in bankruptcy, liquidation or reorganization).

In accordance with ASC 326, Financial Instruments - Credit Losses , the Company maintains allowances for doubtful accounts for losses as a result of a customer’s inability to make required payments, estimated based on the expected credit losses over the contractual life of the receivables based on days past due as measured from the contractual due date and collection history.

The Company also takes into consideration changes in economic conditions that may not be reflected in historical trends (for example, customers in bankruptcy, liquidation or reorganization).

Receivables are written-off against the allowance for doubtful accounts when they are determined uncollectible.

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Transfer of Financial Instruments

Sales and transfers of financial instruments are accounted for under ASC 860, Transfers and Servicing (“ASC 860”).

Sales and transfers of financial instruments are accounted for under ASC 860, Transfers and Servicing.

The Company may discount and sell accounts receivables during the normal course of business.

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The original equipment inventory on hand in excess of forecasted usage and lack of consumption in the previous 12 months is fully reserved, unless the value of such material is recoverable from either the vendor or the customer.

Property, Plant and Equipment

Property, Plant and Equipment, Net

Property, plant and equipment are recorded at cost less accumulated depreciation and amortization.

For financial reporting, the straight-line method of depreciation is used over the estimated useful lives of 10 to 50 years for buildings and improvements, 2 to 16 years for machinery and equipment, 3 to 10 years for tooling equipment and 5 to 7 years for software.

For the periods beginning January 1, 2019, right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Depreciation is calculated using the straight-line method over the estimated useful lives assets, which are 10 to 50 years for buildings and improvements, 2 to 16 years for machinery and equipment, 3 to 10 years for tooling equipment, and 5 to 7 years for software.

Maintenance and repairs are expensed as incurred.

Impairment testing of long lived assets is completed by the Company in accordance with ASC 360, Property, Plant and Equipment .

The testing is completed when a triggering event occurs, or at least on an annual basis to assess if any impairment triggering events existed during the year.

If a triggering event is occurs or is identified, the impairment testing is completed using the two-step impairment model.

Asset classes are identified and tested for recoverability by comparing the net carrying value of the asset group to the undiscounted net cash flows to be generated from the use and eventual disposition of that asset group.

If the carrying amount of an asset group is not recoverable, an impairment loss is recognized if the carrying amount exceeds the fair value.

The impairment analysis was completed in 2022 with no triggering events identified.

Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at the commencement date of a lease (the “commencement date”) based on the present value of lease payments over the lease term.

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No finance leases have been recognized.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate

based on the information available at commencement date in determining the present value of lease payments.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

We use the implicit rate when readily determinable.

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We account for short-term leases by recognizing lease payments in net income on a straight-line basis over the lease term and will not recognize any ROU assets and lease liabilities on the Consolidated Balance Sheet.

For the periods prior to January 1, 2019, we accounted for leases in accordance with ASC 840, Leases.

Goodwill is subject to impairment testing annually, and whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable.

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These estimates are adjusted from time to time based on facts and circumstances that impact the status of existing claims.

For additional information, see Note 25, Commitments and Contingencies of the Notes to the Consolidated Financial Statements.

For additional information, see Note 25, Commitments and Contingencies .

Sales Recognition

Product sales are recognized when we transfer control of the promised goods to our customer, which is based on shipping terms.

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the promised goods, which includes estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized will not occur.

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the promised goods, adjusted for any variable consideration such as price concessions or annual price adjustments as estimated at contract inception.

Amounts billed but ultimately expected to be refunded to the customer are recorded as part of the customer pricing reserve within Accrued liabilities on the Consolidated Balance Sheet.

In the sale of products in the OEM channel, the transaction price for these goods is generally equal to the agreed price of each unit and represents the standalone selling price for the unit.

In the sale of products in the aftermarket channel, the terms of a contract or the historical business practice can give rise to variable consideration due to, but not limited to, discounts and bonuses.

We estimate variable consideration at the most likely amount we will receive from customers and reduce revenues recognized accordingly.

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R&D costs are charged to expense as incurred.

Such costs are included in Cost of goods sold and were $ 136 million, $ 111 million and $ 129 million, for the years ended December 31, 2021, 2020 and 2019, respectively.

Such costs are included in Cost of goods sold and wer e $ 153 million, $ 136 million and $ 111 million, for the years ended December 31, 2022, 2021 and 2020, respectively.

Additionally, the Company incurs engineering-related expenses which are also included in Cost of goods sold and were $ 11 million, $ 22 million and $ 13 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Government Incentives

The Company receives incentives from governmental entities related to expenses, assets, and other activities.

The associated terms of the incentives can vary by country.

Government incentives are recorded in the financial statements in accordance with their purpose as a reduction of expense, a reduction of asset cost or other operating or non-operating income.

Incentives are recognized when there is probable assurance that the Company will comply with the conditions for the incentives and a reasonable expectation that the funds will be received.

Government incentives received prior to being earned are recognized as deferred income whereas incentives earned prior to being received are recognized as receivables.

The Company recognized government incentives of $ 25 million in Cost of goods sold for the year ended December 31, 2022.

Environmental Matters

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The liabilities are recorded in Accrued liabilities and Other liabilities in the Consolidated Balance Sheet.

Asbestos-Related Contingencies and Insurance Recoveries

Honeywell is subject to certain asbestos-related and environmental-related liabilities, primarily related to its legacy Bendix business.

In conjunction with the Spin-Off, certain operations that were part of the Bendix business, along with the ownership of the Bendix trademark, as well as certain operations that were part of other legacy elements of the Business, were transferred to us.

Prior to the Chapter 11 Cases, the accounting for the majority of our asbestos-related liability payments and accounts payable reflect the terms of the indemnification and reimbursement agreement with Honeywell entered into on September 12, 2018 (the “Honeywell Indemnity Agreement”), under which Garrett ASASCO Inc.

("Garrett ASASCO") is required to make payments to Honeywell in amounts equal to 90 % of Honeywell’s asbestos-related liability payments and accounts payable, primarily related to the Bendix business in the United States, as well as certain environmental-related liability payments and accounts payable and non-United States asbestos-related liability payments and accounts payable, in each case related to legacy elements of the Business, including the legal costs of defending and resolving such liabilities, less 90 % of Honeywell’s net insurance receipts and, as may be applicable, certain other recoveries associated with such liabilities.

During the Chapter 11 Cases, the Obligation payable to Honeywell related to these agreements was deemed a pre-petition, unsecured liability subject to compromise and as such all amounts were reclassified to Liabilities Subject to Compromise.

The Honeywell Indemnity Agreement provided that the agreement will terminate upon the earlier of (x) December 31, 2048 or (y) December 31st of the third consecutive year during which certain amounts owed to Honeywell during each such year were less than $ 25 million as converted into Euros in accordance with the terms of the agreement.

On April 26, 2021, the Bankruptcy Court entered the Confirmation Order, among other things, confirming the Plan.

On the Effective Date, the conditions to effectiveness of the Plan were satisfied or waived and the Company emerged from bankruptcy.

The Plan as confirmed by the Bankruptcy Court included a global settlement with Honeywell providing for, among other things, the full and final satisfaction, settlement, release, and discharge of all liabilities under or related to the Honeywell Agreements.

For more information see Note 17, Mandatorily Redeemable Series B Preferred Stock and Note 25, Commitments and Contingencies of the Notes to the Consolidated Financial Statements.

Stock-Based Compensation Plans

Stock-Based Compensation

The principal awards issued under our stock-based compensation plans, which are described in Note 23, Stock-Based Compensation , are performance stock units and restricted stock units.

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The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods (generally the vesting period of the equity award) and is included in Selling, general and administrative expenses in the Consolidated Statements of Operations.

Forfeitures are estimated at the time of grant to recognize expense for those awards that are expected to vest and are based on our historical forfeiture rates.

Pension Benefits

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For such plans, we are required to disaggregate the service cost component of net benefit costs and report those costs in the same line item or items in the Consolidated Statements of Operations as other compensation costs arising from services rendered by the pertinent employees during the period.

The other nonservice components of net benefit costs are required to be presented separately from the service cost component.

The other non service components of net benefit costs are required to be presented separately from the service cost component.

We record the service cost component of Pension ongoing (income) expense in Cost of goods sold or Selling, general and administrative expenses.

The remaining components of net benefit costs within Pension ongoing (income) expense, primarily interest costs and assumed return on plan assets, are recorded in Non-operating expense (income).

We recognize net actuarial gains or losses in excess of 10 % of the greater of

the fair value of plan assets or the plans’ projected benefit obligation (the corridor) annually in the fourth quarter each year (“MTM Adjustment”).

We recognize net actuarial gains or losses in excess of 10 % of the greater of the fair value of plan assets or the plans’ projected benefit obligation (the corridor) annually in the fourth quarter each year (“MTM Adjustment”).

The MTM Adjustment is recorded in Non-operating (income) expense.

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Earnings per share

As of December 31, 2021, basic earnings per share are calculated using the two-class method, pursuant to the issuance of our Series A preferred stock on the Effective Date.

Basic earnings per share are calculated using the two-class method, pursuant to the issuance of our Series A Preferred Stock on the Effective Date.

The calculation of basic earnings per share 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 calculated by dividing undistributed earnings allocated to common stock by the weighted average number of common shares.

See Note 24, Earnings Per Share for further details.

Diluted earnings per share for the year ended December 31, 2021 is calculated using the more dilutive of the two-class or if-converted methods.

Diluted earnings per share for the years ended December 31, 2022 and 2021 are 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 years ended December 31, 2020 and 2019 are computed based upon the weighted average number of common shares outstanding and all dilutive potential common shares outstanding and all potentially issuable PSUs 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.

Basic and diluted weighted average of common shares outstanding for the years ended December 31, 2021, 2020 and 2019 were 69,706,183 , 75,543,461 and 74,602,868 and 317,503,300 , 76,100,509 and 75,934,373 , respectively.

The if-converted method uses net income

and assumes conversion of all potential shares including the participating securities.

Diluted earnings per share for the year ended December 31, 2020 are computed based upon the weighted average number of common shares and dilutive potential common share equivalents outstanding during the year, whereby common share equivalents from equity-based awards are calculated using the treasury stock method.

See Note 24, Earnings Per Share for further details.

Use of Estimates

The preparation of the Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts in the Consolidated Financial Statements and related disclosures in the accompanying notes.

Actual results could differ from those estimates.

Estimates and assumptions are periodically reviewed and the effects of changes are reflected in the Consolidated Financial Statements in the period they are determined to be necessary.

In connection with the filing of the Chapter 11 Cases on the Petition Date, the Consolidated Financial Statements included herein have been prepared in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic No.

852, Reorganizations .

See Note 2, Plan of Reorganization , of the Consolidated Financial Statements for further details.

Liabilities Subject to Compromise

Liabilities subject to compromise include pre-petition liabilities that are unsecured, under-secured or where it cannot be determined that the liabilities are fully secured.

Liabilities that may be affected by a plan of reorganization must be reported at the amounts expected to be allowed by the Bankruptcy Court, even if they may be settled for lesser amounts as a result of the plan of reorganization or negotiations with creditors.

If there is uncertainty about whether a secured claim is undersecured, or will be impaired under the plan of reorganization, the entire amount of the claim is included with prepetition claims in liabilities subject to compromise.

Reorganization Items, Ne t

Effective on September 20, 2020, we began to apply the provisions of ASC 852, Reorganizations , which is applicable to companies under bankruptcy protection, and requires amendments to the presentation of key financial statement line items.

ASC 852 requires that the financial statements for periods subsequent to the filing of the Chapter 11 Cases distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business.

Revenues, expenses, realized gains and losses, and provisions for losses that can be directly associated with the reorganization and restructuring of the business must be reported separately as reorganization items, net in the consolidated statements of operations beginning September 20, 2020.

Related Party Transactions

We lease certain facilities and receive property maintenance services from Honeywell, which as of emergence from Chapter 11 is the owner of our Series B Preferred Stock and appoints a director to the Board of Directors ("the Board").

We lease certain facilities and receive property maintenance services from Honeywell, which as of Emergence was the owner of our Series B Preferred Stock that has since been fully redeemed by the Company, is a holder of our common stock and Series A Preferred Stock, and appoints a director to the 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 $ 9 million from emergence through the period ended December 31, 2021 and were included in Cost of goods sold, Selling, general and administrative expenses, and Reorganization Items, net in our Consolidated Statements of Operations.

Related to the agreements with Honeywell, our Consolidated Balance Sheet includes liabilities of $ 15 million as of December 31, 2021.

Liability balances are primarily related to lease contracts of $ 12 million as of December 31, 2021.

Certain of our related parties participated in our Plan as follows, as more fully discussed in Note 2, Plan of Reorganization and Note 21, Equity :

• The Company paid $ 75 million in connection with the following:

• We reimbursed Centerbridge Partners, L.P.

(together with its affiliated funds, “Centerbridge”) and Oaktree Capital Management, L.P.

• We reimbursed Centerbridge and Oaktree for their participation in the Equity Backstop Commitment Agreement;

• Centerbridge and Oaktree were parties to our Registration Rights Agreement (see definition in Note 21, Equity ) for the registration of our Series A Preferred Stock and our Series A Investor Rights Agreement.

Our payments under the agreements with Honeywell amounted to $ 9 million for the year ended December 31, 2022, as well as for the period from Emergence through December 31, 2021, and were included in Cost of goods sold, and Selling, general and administrative expenses, in our Consolidated Statements of Operations.

Related to the agreements with Honeywell, our Consolidated Balance Sheet includes liabilities of $ 10 million and $ 15 million as of December 31, 2022 and 2021, respectively.

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

Series A Preferred Stock

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It is considered a participating security with the Company’s Common Stock as holders of the Series A Preferred Stock will also be entitled to such dividends paid to holders of Common Stock to the same extent as if such holders of Series A Preferred Stock had converted their shares of Series A Preferred Stock into Common Stock (without regard to any limitations on conversions) and had held such shares of Common Stock on the record date for such dividends and distributions.

See Note 2, Plan of Reorganization and Note 21, Equity , of the Consolidated Financial Statements for further details.

Series B Preferred Stock

Our Series B Preferred Stock is a mandatorily redeemable financial instrument and is classified as debt in our Consolidated Balance Sheets.

The Series B Preferred stock does not require physical settlement by the repurchase of a fixed number of the issuer’s equity shares in exchange for cash, and therefore not required to be subsequently remeasured.

The Series B Preferred Stock redemption options are not required to be bifurcated and are not considered derivatives.

On September 30, 2021, the Company filed an amended and restated Certificate of Designations (the “A&R Certificate of Designations”) amending and restating the terms of the Series B Preferred Stock.

The A&R Certificate of Designations for this first amendment became effective on October 1, 2021.

On December 16, 2021, the Company filed a second amended and restated Certificate of Designations amending and restating the terms of the Series B Preferred Stock.

The second amended A&R Certificate of Designations became effective on December 17, 2021.

The amendment was accounted for as a debt modification that did not result in an extinguishment or have a material impact on our Consolidated Financial Statements.

On February 18, 2022, the Company will redeem 217,183,244 shares of Series B Preferred Stock for an aggregate price of $ 197 million.

See Note 2, Plan of Reorganization and Note 17, Mandatorily Redeemable Series B Preferred Stock , of the Consolidated Financial Statements for further details.

Reclassifications

Certain reclassifications have been made to prior year amounts to conform to current year classifications.

Specifically certain items that had been previously recorded in selling, general and administrative expenses presented now within Cost of goods sold in our Consolidated Statements of Operations.

Additionally, we reclassed a portion of our recorded obligations for product warranties and product performance guarantees from Accrued Liabilities to Other Liabilities.

The reclassifications had no impact on net income, equity, or cash flows as previously reported.

See Note 21, Equity for further details.

We declared dividends on the Series A Preferred Stock for the first time in September 2022 and again in December 2022.

The dividends are recorded in the financial statements when declared, and are reflected as an increase in the retained deficit on the Consolidated Balance Sheet.

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of Effects of Reference Rate Reform on Financial Reporting , which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform.

The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform.

The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848) , which clarified the scope and applicability of certain provisions.

The Company has evaluated the impact of ASU 2020-04 and ASU 2021-01 on our debt agreements and hedging contracts and determined that they do not have a material impact on our Consolidated Financial Statements.

Our Credit Agreement provides a mechanism for determining an alternative rate of interest to be used in place of LIBOR (“Benchmark Replacement”), mitigating the Reference Rate Reform transition impact.

Recently Adopted Accounting Standards

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):

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The amendments in this update increase the transparency surrounding government assistance by requiring disclosure of 1) the types of assistance received, 2) an entity’s accounting for the assistance, and 3) the effect of the assistance on the entity’s financial statements.

The update is effective for annual periods beginning after December 15, 2021.

We plan to adopt this pronouncement for our fiscal year beginning January 1, 2022, and we do not expect it to have a material effect on our Consolidated Financial Statements.

The Company adopted the new guidance prospectively as of January 1, 2022.

Accounting Standards Issued But Not Yet Adopted

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.

There are no other recently issued, but not yet adopted, accounting pronouncements which are expected to have a material impact on the Company’s Consolidated Financial Statements and related disclosures.

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OEM and aftermarket contracts generally include scheduling agreements that stipulate the pricing and delivery terms that identify the quantity and timing of the product to be transferred.

Revenue recognition under ASC 606 is generally consistent with the previous standard, with the exception of how we account for payments made to customers in conjunction with future business.

Historically these payments were recognized as a reduction of revenue at the time the payments were made.

Under ASC 606, these payments result in deferred reductions to revenue that are subsequently recognized when the products are delivered to the customer.

The Company evaluates the amounts capitalized each period end for recoverability and expenses any amounts that are no longer expected to be recovered over the term of the business arrangement.

These payments are recorded in Other current assets and Other assets in our Consolidated Balance Sheets.

Disaggregated Revenue

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For product sales, typically each product sold to a customer represents a distinct performance obligation.

Virtually all of our performance obligations are satisfied as of a point in time.

Performance obligations are supported by contracts with customers, providing a framework for the nature of the distinct goods, services or bundle of goods and services.

The timing of satisfying the performance obligation is typically indicated by the terms of the contract.

performance obligations are expected to be satisfied within one year , with substantially all performance obligations being satisfied within a month.

All performance obligations are expected to be satisfied within one year , with substantially all performance obligations being satisfied within a month.

The timing of satisfaction of our performance obligations does not significantly vary from the typical timing of payment, with cash advances (contract liabilities) and unbilled receivables (contract assets) being settled within 3 months.

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Factoring and notes receivables discount fees 2 1 1

$ 1 $ 46 $ 40

Non-operating (income) expense

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The sources of income (loss) from continuing operations, before income taxes, classified between domestic entities and those entities domiciled outside of the U.S., are as follows:

Year Ended December 31,

Years Ended December 31,

2022 2021 2020

Income before taxes (Dollars in millions)

(Dollars in millions)

Domestic entities $ 7 $ 242 $ ( 87 )

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Tax expense (benefit) consists of:

Year Ended December 31,

Years Ended December 31,

2022 2021 2020

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federal statutory income tax rate is reconciled to our effective income tax rate as follows:

Year Ended December 31,

Years Ended December 31,

2022 2021 2020

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21.4 % 7.9 % 32.8 %

The effective tax rate increased by 13.5 percentage points in 2022 compared to 2021.

The increase was primarily attributable to the nontaxable gain on the settlement of the Honeywell claims (partially offset by non-deductible transaction costs) and increased tax benefits from an internal restructuring, both of which occurred in 2021 and are non-recurring.

This increase was partially offset by tax benefits in the current year due to release of reserves for statute of limitation expirations.

The effective tax rate decreased by 24.9 percentage points in 2021 compared to 2020.

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partially offset by increases in withholding taxes on unrepatriated earnings.

The internal restructuring occurred predominantly in the fourth quarter of 2021 which involved transfers of certain rights to intellectual property and various intercompany financing arrangements resulting in an approximately 11 percent point decrease to the effective tax rate during the current year.

The overall increase in earnings from 2020 was also a contributing factor to a lower effective tax rate as the impact of certain recurring non-deductible permanent expenses and reserves for tax contingencies were diluted by higher earnings.

The effective tax rate increased by 23.3 percentage points in 2020 compared to 2019.

The increase was primarily attributable to the absence of tax benefits related to the remeasurement of deferred tax assets and liabilities for tax law changes enacted during 2019, higher tax expense because of nondeductible costs incurred in connection with the Chapter 11 Cases, the resolution of tax audits and an increase in losses for jurisdictions where we do not expect to generate future tax benefits from such losses.

The increase in the effective tax rate was also impacted by overall lower earnings compared to 2019 because of the adverse impacts of COVID-19, partially offset by tax benefits from lower withholding taxes on non-US earnings.

The internal restructuring occurred predominantly in the fourth quarter of 2021 which involved transfers of certain rights to intellectual property and various intercompany financing arrangements resulting in an approximate 11 percentage point decrease to the effective tax rate during 2021.

The overall increase in earnings from 2020 was also a contributing factor to a lower effective tax rate because the tax impacts as a percentage to earnings is less sensitive.

Deferred tax assets (liabilities)

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Net deferred tax asset $ 207 $ 268

As of December 31, 2021, the Company had net operating loss carryforwards of $ 109 million in the below jurisdictions.

As of December 31, 2022, the Company had net operating loss carryforwards of $ 85 million with the majority in the below jurisdictions:

Jurisdiction Expiration

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Other Various 9

We maintain a valuation allowance of $ 32 million against a portion of the non-U.S.

total deferred tax assets.

We maintain a valuation allowance of $ 31 million against a portion of total deferred tax assets.

In the event we determine that we will not be able to realize our net deferred tax assets in the future, we will reduce such amounts through an increase to tax expense in the period such determination is made.

Conversely, if we determine that we will be able to realize net deferred tax assets in excess of the carrying amounts, we will decrease the recorded valuation allowance through a reduction to tax expense in the period that such determination is made.

Our balance sheets present a deferred tax asset of $ 289 million and a deferred tax liability of $ 21 million after taking into account jurisdictional netting.

The Company does not intend to permanently reinvest the undistributed earnings of its foreign subsidiaries and has recorded a deferred tax liability mainly consisting of withholding taxes of approximately $ 19 million as of December 31, 2021 .

Our balance sheets present a deferred tax asset of $ 232 million and a deferred tax liability of $ 25 million after considering jurisdictional netting.

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

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

For the portion of undistributed earnings that are not permanently reinvested, Garrett has recorded a deferred tax liability mainly consisting of withholding taxes of approximately $ 13 million as of December 31, 2022.

The following table summarizes the activity related to the Company’s uncertain tax positions (excluding interest and penalties and related tax attributes):

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Balance at end of year $ 71 $ 80 $ 60

As of December 31, 2021 , 2020, and 2019 there wer e $ 80 million, $ 60 million, and $ 54 million, respectively, of unrecognized tax benefits that, if recognized, would be recorded as a component of Tax expense.

Estimated interest and penalties related to uncertain tax benefits are classified as a component of tax expense in the Consolidated Statements of Operations and totaled $ 3 million of income, $ 5 million of expense and $ 3 million of expense for the years ended December 31, 2021, 2020 , and 2019 , respectively.

As of December 31, 2022, 2021, and 2020 there were $ 71 million, $ 80 million, and $ 60 million, respectively, of unrecognized tax benefits that, if recognized, would be recorded as a component of tax expense.

The amount of unrecognized tax benefits that is reasonably possible to be resolved in the next twelve months is expected to be approximately $ 12 million, all of which, if recognized, would reduce tax expense and the effective tax rate.

Estimated interest and penalties related to uncertain tax benefits are classified as a component of tax expense in the Consolidated and Combined Statements of Operations and totaled $ 2 million of expense, $ 3 million of benefit and $ 5 million of expense for the years ended December 31, 2022, 2021, and 2020, respectively.

Accrued interest and penalties were $ 29 million, $ 26 million, and $ 29 million, as of December 31, 2022, 2021, and 2020, respectively.

We are currently under audit in a few jurisdictions for tax years ranging from 2006 through 2020.

We are currently under audit in multiple jurisdictions primarily India for tax years 2020 through 2022 and U.S.

for tax years 2018 and 2019.

Based on the outcome of these examinations, or as a result of the expiration of statutes of limitations for specific jurisdictions, it is possible that certain unrecognized tax benefits for tax positions taken on previously filed tax returns will materially change from those recorded as liabilities in our financial statements.

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Factoring and Notes Receivable

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

For the years ended December 31, 2021 and December 31, 2020, the Company sold $ 566 million and $ 473 million of eligible receivables, respectively, without recourse, and accounted for these arrangements as true sales.

Expense of $ 1 million was recognized within Other expense, net for each of the years ended December 31, 2021, December 31, 2020 and December 31, 2019.

The Company also received guaranteed banknotes without recourse, in settlement of accounts receivables, primarily in the Asia Pacific region.

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.

For the years ended December 31, 2021 and

December 31, 2020, the Company sold less than $ 1 million and $ 160 million of banknotes, respectively, without recourse and accounted for these as true sales.

Expense of less than $ 1 million was recognized within Other expense, net for each of the years ended December 31, 2021, December 31, 2020 and December 31, 2019.

As of December 31, 2021 and December 31, 2020, the Company has pledged collateral of $ 5 million and $ 18 million, respectively, of guaranteed banknotes which have not been sold in order to be able to issue banknotes as payment to certain suppliers.

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

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

Year Ended December 31,

2022 2021 2020

(Dollars in millions)

Eligible receivables sold without recourse $ 664 $ 566 $ 473

Guaranteed bank notes sold without recourse 102 — 160

The expenses related to the sale of trade receivables and guaranteed bank notes are recognized within Other expense, net in the consolidated statements of operations, and were $ 2 million, $ 1 million and $ 1 million for the years ended December 31, 2022, 2021 and 2020, respective.

(Dollars in millions)

Receivables sold but not yet collected by the bank from the customer $ 5 $ 26

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

As of December 31, 2022 the Company has no guaranteed bank notes pledged as collateral and as of December 31, 2021 and 2020, the Company has pledged as collateral $ 5 million and $ 18 million, respectively, 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 Balance Sheet.

Inventories—Net

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Foreign exchange forward contracts 27 12

Receivable from transfer agent (1)

________________________________

(1) Receivable from transfer agent includes the Series A Preferred Stock dividend that was paid to the transfer agent in December 2022, and settled with shareholders on January 3, 2023.

Refer to Note 21, Equity.

(Dollars in millions)

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Designated cross-currency swap 74 30

Designated and undesignated derivatives 76 7

Property, Plant and Equipment, Net

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Less — Accumulated depreciation and amortization ( 983 ) ( 969 )

Depreciation and amortization expense was $ 92 million, $ 86 million and $ 73 million in 2021, 2020 and 2019 , respectively.

The change in the carrying amount of goodwill for the years ended December 31, 2021 and 2020 is as follows:

2020 Currency

Adjustment December 31,

Depreciation and amortization expense amounted to $ 84 million, $ 92 million and $ 86 million for the years ended December 31, 2022, 2021 and 2020, respectively.

There were no changes to the carrying amount of goodwill for the years ended December 31, 2022 and 2021 :

2022 December 31,

(Dollars in millions)

Goodwill $ 193 $ 193

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Short-term lease liability (Note 18)

Freight accrual 9 11

Dividends declared on Series A Preferred Stock 42 —

Other (primarily operating expenses) (2)

(1) Customer advances and deferred income include $ 5 million and $ 2 million of contract liabilities as of December 31, 2021 and December 31, 2020, respectively.

(1) Customer advances and deferred income include $ 8 million and $ 5 million of contract liabilities as of December 31, 2022 and 2021, respectively.

See Note 4, Revenue Recognition and Contracts with Customers .

(2) Includes $ 3 million of environmental liabilities as of December 31, 2021 and December 31, 2020.

(2) Other accrued liabilities includes $ 3 million of environmental liabilities as of December 31, 2022 and 2021.

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

Expenses related to the repositioning accruals are included in Cost of goods sold in our Consolidated Statements of Operations.

(Dollars in millions)

Balance at December 31, 2020

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Usage—cash ( 13 ) — ( 13 )

Adjustments 1 ( 1 ) —

Balance at December 31, 2021

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Balance at December 31, 2022

$ 10 $ — $ 10

Long-term Debt and Credit Agreements

Exit Credit Facilities

On the Effective Date, in accordance with the Plan, the Company entered into a Credit Agreement, by and among the Company, Garrett LX I S.à r.l.

(the “Lux Borrower”), Garrett Motion Holdings Inc.

Co-Borrower”) and Garrett Motion Sàrl (the “Swiss Borrower,” together with the Lux Borrower and the U.S.

Co-Borrower, the “Borrowers”), the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Agreement”), which provides for senior secured financing.

The Credit Facilities consist of:

Long Term Debt

On the Effective Date, in accordance with the Plan, the Company entered into a Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A.

as administrative agent, which provides for long-term senior secured financing consisting of :

• Dollar Facility :

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a seven-year secured first-lien Euro term loan facility for € 450 million.

• Revolving Facility :

a five-year senior secured first-lien Revolving Facility for $ 300 million providing for multi-currency revolving loans.

On January 11, 2022, the revolving facility was amended, refer to the "Revolving Facility and Letters of Credit", section of this footnote, below, for further details.

On the Effective Date, Credit Facilities, net of deferred financing costs were $ 1,221 million , after proceeds from the Credit Facilities and issuance of Series A Preferred Stock (see Note 21, Equity ) were used to pay off the Company’s pre-emergence indebtedness.

For more information, see Note 2, Plan of Reorganization .

The principal outstanding and carrying amount of our long-term debt as of December 31, 2021 are as follows:

Due Interest Rate December 31, 2021

Dollar Facility 4/30/2028 3.75 % $ 713

Euro Facility 4/30/2028 3.50 % 510

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

(Dollars in millions) Maturity Date Interest Rate December 31, 2022 December 31, 2021

Dollar Facility April 30, 2028 LIBOR plus 325 bps $ 706 $ 713

Euro Facility April 30, 2028 EURIBOR plus 350 bps 480 510

Total principal outstanding 1,186 1,223

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Total long-term debt $ 1,148 $ 1,181

Revolving Facility and Letters of Credit

The Revolving Facility (as amended by the First Amendment, described and defined below) allows maximum borrowings of $ 424 million and matures on April 30, 2026.

On December 31, 2021, the Company had no borrowings outstanding under the Revolving Facility, $ 3 million of outstanding letters of credit, and available borrowing capacity of $ 297 million.

Under the Revolving Facility, the Company may use up to $ 125 million under the Revolving Facility for the issuance of letters of credit to the Swiss Borrower or any of its subsidiaries.

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

As of December 31, 2021, the Company had $ 8 million utilized and $ 27 million of remaining available capacity.

Minimum scheduled principal repayments of the Credit Facilities as of December 31, 2021 are as follows:

The following table summarizes the minimum scheduled principal repayments of long-term debt as of December 31, 2022:

(Dollars in millions)

Thereafter 1,151

Total debt payments $ 1,223

First Amendment to the Credit Agreement

On January 11, 2022, the Company entered into an Amendment No.

1 (the “First Amendment”) to the Credit Agreement.

The First Amendment increases the amount of revolving loan commitments available to the Swiss Borrower under the Credit Agreement by $ 124 million (the “Incremental Revolving Commitment”) to an aggregate amount of $ 424 million .

The Incremental Revolving Commitment has the same terms and is subject to the same conditions applicable to revolving loans generally under the Credit Agreement, except for fees paid in connection with the arrangement of the increased amount.

The First Amendment also removes LIBOR as an available rate at which revolving loans could accrue and add for such revolving loans new benchmark rate options based on the term or daily overnight secured overnight financing rate ("SOFR") published by the Federal Reserve Bank of New York and based on the average bid reference rate administered by ASX Benchmarks Pty Limited.

The outstanding term loan under the Credit Agreement continues to accrue interest in LIBOR, but will switch to an alternative benchmark rate when certain events occur, which alternative benchmark we anticipate will be term SOFR.

All obligations under the Credit Facilities are unconditionally guaranteed jointly and severally, by:

(a) the Company;

(b) each existing and future direct and indirect material wholly-owned subsidiary of the Company that is organized under the laws of any state of the United States and (c) substantially all of the existing and future direct and indirect material wholly-owned subsidiaries of the Company that are organized under the laws of certain other jurisdictions, including Australia, England and Wales, Ireland, Italy, Japan, Luxembourg (including Lux Borrower), Mexico, Romania, Slovakia, Switzerland (including Swiss Borrower), and any other jurisdiction at the Swiss Borrower’s option from time to time agreed with the administrative agent, subject in each case to certain exceptions and limitations and agreed guaranty and security principles.

The guarantors organized under the laws of England and Wales, Luxembourg, Switzerland and the United States entered into a guarantee under the Credit Agreement concurrently with the effectiveness of the Credit Agreement.

The guarantors organized under the laws of Australia, Ireland, Italy, Japan, Mexico, Romania and Slovakia have subsequently acceded to such guarantee.

Total payments on long-term debt $ 1,186

Revolving Facility and Letters of Credit

The Credit Agreement also provides for a five-year multi-currency senior secured first-lien Revolving Facility which matures on April 30, 2026.

In 2022, the maximum borrowing capacity under the Revolving Facility was increased from $ 300 million to $ 475 million.

Under the Revolving Facility, the Company may use up to $ 125 million under the Revolving Facility for the issuance of letters of credit to its subsidiaries.

As of December 31, 2022, the Company had no borrowings outstanding under the Revolving Facility, no outstanding letters of credit, and available borrowing capacity of $ 475 million.

Separate from the Revolving Facility, the Com pany 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 December 31, 2022, the Company had $ 14 million utilized and $ 1 million of re maining available capacity.

Amendments to the Credit Agreement

On the Effective Date, in accordance with the Plan, 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 “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 together with the Dollar Facility, the “Term Loan Facilities”);

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,” and together with the Term Loan Facilities, the “Credit Facilities”) .

On January 11, 2022 and March 22, 2022, the Company amended the Credit Agreement, increasing the maximum amount of borrowings available under the Revolving Facility from $ 300 million to approximately $ 475 million.

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, 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 Secured Overnight 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 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 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 debt modifications that did not result in an extinguishment or have a material impact on our Consolidated Financial Statements.

The Credit Facilities are secured on a first-priority basis by:

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The guarantors organized under the laws of Australia, Ireland, Japan, Mexico, Romania and Slovakia have subsequently executed security documents.

The Revolving Facility matures five years after the effective date of the Credit Agreement, with certain extension rights at the discretion of each lender.

The Term Loan Facilities mature seven years after the Effective Date of the Credit Agreement, with certain extension rights in the discretion of each lender.

Interest Rate and Fees

The Dollar 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 London Inter-bank Offered 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 Dollar 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 (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 Facility is subject to an interest rate equal to an adjusted Euro Interbank Offered Rate (“EURIBOR”) (which shall not be less than zero ) plus an applicable margin equal to 3.50 %.

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Interest payments with respect to the Term Loan 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 .

See discussion of the amendment to the Revolving Facility in First Amendment to the Credit Agreement, above.

See discussion of the amendment to the Revolving Facility in Amendments to the Credit Agreement, above.

In addition to paying interest on outstanding borrowings under the Revolving Facility, the Borrowers are required to pay a quarterly commitment fee based on the unused portion of the Revolving Facility, which is determined by our leverage ratio and ranges from 0.25 % to 0.50 % per annum.

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We may also reduce the commitments under the Revolving Facility, in whole or in part, in each case, subject to certain minimum amounts and increments.

See discussion of the amendment to the Revolving Facility in First Amendment to the Credit Agreement, above.

See discussion of the amendment to the Revolving Facility in Amendments to the Credit Agreement, above.

The Credit Agreement also 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, starting with the fiscal year ending on December 31, 2022, 0.50 % of excess cash flow on an annual basis (with step-downs to 25 % and 0 % subject to compliance with certain leverage ratios), in each case subject to terms and conditions customary for financings of this kind.

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Certain Covenants

The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type that, among other things, limit our and our subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends or to make other distributions or redemptions/repurchases in respect of our and our subsidiaries’ equity interests.

The Credit Agreement expressly permits

payments-in-kind on our Series A Preferred Stock as well as mandatory cash redemptions in respect of our Series B Preferred Stock.

During the fiscal years ending December 31, 2021 and December 31, 2022, the Credit Agreement restricts 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) is made to holders of our common equity and such payments would otherwise be permitted under the terms of the Credit Agreement.

On July 21, 2021, the terms of the Certificate of Designations of the Series A Preferred Stock were amended to allow the payment of a ratable dividend on the Series A Preferred Stock and the Common Stock prior to December 31, 2022 so long as the full board of directors of the Company ratifies the Disinterested Directors’ Committee’s declaration of any such dividend or distribution.

On January 25, 2022, the Board approved a further amendment to the terms of the Certificate of Designations of the Series A Preferred Stock to permit the such dividends or distributions to include individually negotiated transactions, to remove the December 31, 2022 sunset date from such dividends and distributions, and to expressly permit the purchase, redemption or other acquisition or cash by the Company of shares of Dividend Junior Stock (as defined in the Certificate of Designations of the Series A Preferred Stock) without requiring ratable participation by holders of Series A Preferred Stock.

These amendments were approved by written consent of the holders of a majority of our Series A Preferred Stock on February 8, 2022, and are expected to become effective on or about March 3, 2022.

In addition, the Revolving Facility also contains a financial covenant requiring the maintenance of a consolidated total leverage ratio of not greater than 4.7 to 1.00 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 thereunder.

As of December 31, 2021, the Company is in compliance with all its financing covenants.

Events of Default

The Credit Agreement contains customary events of default, including with respect to a failure to make payments under the Credit Facilities, cross-default, certain bankruptcy and insolvency events and customary change of control events.

Prepetition Indebtedness

Pursuant to the Plan, on the Effective Date, the obligations of the Debtors under each of the following debt instruments were cancelled and the applicable agreements governing such obligations were terminated:

(a) the Credit Agreement, dated as of September 27, 2018, by and among the Company, as holdings, Garrett LX III S.à r.l., as Lux Borrower, Garrett Borrowing LLC, as U.S.

Co-Borrower, Garrett Motion Sàrl, as Swiss Borrower, the lenders and issuing banks party thereto and the Pre-petition Credit Agreement Agent, as Administrative Agent, as amended, restated, supplemented or otherwise modified from time to time in accordance with its terms;

and (b) the Indenture, dated as of September 27, 2018, among Garrett Motion Inc., as Parent, Garrett LX I S.à r.l., as Issuer, Garrett Borrowing LLC, as Co-Issuer, the guarantors named therein, Deutsche Trustee Company Limited, as Trustee, Deutsche Bank AG, as Security Agent and Paying Agent, and Deutsche Bank Luxembourg S.A., as Registrar and Transfer Agent, pursuant to which the Senior Notes were issued, as may be amended, supplemented or otherwise modified from time to time.

Holders of Allowed Pre-petition Credit Agreement Claims (as defined in the Plan) received payment in cash in an amount equal to such holder’s Allowed Pre-petition Credit Agreement Claim.

Holders of Allowed Senior Subordinated Noteholder Claims (as defined in the Plan) received payment in cash in an amount equal to such holder’s Allowed Senior Subordinated Noteholder Claim.

DIP Credit Agreement

On the Effective Date, the DIP Credit Agreement, dated as of October 9, 2020, by and among the Company, as borrower, each lender party thereto from time to time, and the DIP Agent, as amended, supplemented or otherwise modified from time to time was paid in full and terminated.

The Credit Agreement contains certain affirmative and negative covenants customary for financing 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 thereunder.

As of December 31, 2022, the Company was in compliance with all its financing 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.

These restrictions were removed as part of the credit amendments noted above.

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.

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.

Mandatorily Redeemable Series B Preferred Stock

Series B Preferred Stock

Pursuant to the Plan and the Plan Support Agreement, on the Effective Date the Company issued 834,800,000 shares of Series B Preferred Stock to Honeywell in satisfaction of its claims arising from (a) that certain Indemnification Guarantee Agreement, dated September 27, 2018, by and among Honeywell ASASCO 2 Inc., Garrett ASASCO Inc., and the other Guarantors party thereto, as may be amended, restated, supplemented or otherwise modified from time to time

prior to the Effective Date (the “Honeywell Indemnification Guarantee Agreement”);

(b) the Honeywell Indemnity Agreement;

(c) the Tax Matters Agreement, dated September 12, 2018, by and among Honeywell International Inc., GMI, Honeywell ASASCO Inc.

and Honeywell ASASCO 2 Inc., as may be amended, supplemented or otherwise modified from time to time (the “Tax Matters Agreement” and, together with the Honeywell Indemnification Guarantee Agreement and the Honeywell Indemnity Agreement, the “Honeywell Agreements”).

The Company is authorized to grant 1,200,000,000 shares of preferred stock in the reorganized company.

The Series B Preferred Stock will not be entitled to any dividends or other distributions or payments other than the scheduled redemption payments and payments upon liquidation as provided in the Certificate of Designations of the Series B Preferred Stock (as amended and restated from time to time, the “Series B Certificate of Designations”).

On April 30 of each year, beginning on April 30, 2022 and ending on April 30, 2030, on which any shares of Series B Preferred Stock are outstanding (each, a “Scheduled Redemption Date”), the Company will redeem, pro rata from each holder, an aggregate number of shares of Series B Preferred Stock equal to a scheduled redemption amount with respect to such Scheduled Redemption Date as set forth in the Series B Certificate of Designations divided by $ 1.00 per share (the “Scheduled Redemption Amounts”), provided that the Company will not be obligated to redeem the shares of Series B Preferred Stock on a Scheduled Redemption Date if, as of such date, (i) the Consolidated EBITDA of the Company and its subsidiaries measured as of the end of the most recently completed fiscal year is less than $ 425 million or (ii) the Company does not have sufficient funds legally available to pay the redemption amount due on such Scheduled Redemption Date.

Shares of Series B Preferred Stock whose redemption on a Scheduled Redemption Date is deferred, and which are not thereafter redeemed in accordance with the applicable Initial Deferral Payment Schedule (as defined in the Series B Certificate of Designations) will accrue interest from and after the time that the Company fails to make redemption payments in accordance with the applicable Initial Deferral Payment Schedule.

Any shares of Series B Preferred Stock that have not been redeemed on a Scheduled Redemption Date outstanding as of April 30, 2030, will be redeemed on April 30, 2030.

Except as required by law, the holders of Series B Preferred Stock have no voting rights, provided that a vote or the consent of the holders representing a majority of the Series B Preferred Stock will be required to effect or validate (i) any amendment, modification or alteration to the Certificate of Incorporation that would authorize or create, or increase the authorized amount of, any shares of any class or series or any securities convertible into shares of any class or series of capital stock that would rank senior to the Series B Preferred Stock, (ii) any amendment, modification or alteration to the Certificate of Incorporation that would authorize or create, or increase the authorized amount of, any shares of any class or series of capital stock that would rank pari passu to the Series B Preferred Stock on the occurrence of a liquidation, (iii) entry by the Company or any of its subsidiaries into any agreement containing or imposing, directly or indirectly, any restrictions (including, but not limited to, any covenant or agreement) on the Company’s ability to make required payments on or redeem the shares of Series B Preferred Stock, (iv) any amendment, modification, alteration or repeal of any provision of the Certificate of Incorporation or any other certificate of designations of the Company that would have an adverse effect, in any material respect, on the rights, preferences, privileges or voting power of the shares of Series B Preferred Stock or any holder thereof or any amendment, modification, alteration or repeal of the Series B Certificate of Designations, (v) any increase in the number of members of the Board at a time when the sum of (a) the aggregate value of deferred Scheduled Redemption Amounts relating to past Scheduled Redemption Dates (plus any unpaid interest accruing thereon) plus (b) the aggregate present value of future Scheduled Redemption Amounts, calculated using a discount rate of 7.25 % (such sum, the “Aggregate Series B Liquidation Preference”) is greater than $ 125 million or (vi) any action or inaction that would reduce the stated amount of any share of Series B Preferred Stock to below $ 1.00 per share.

On September 30, 2021, the Company filed an amended and restated Certificate of Designations amending and restating the terms of the Series B Preferred Stock, and on December 16, 2021, the Company filed a second amended and restated Certificate of Designations amending and restating the terms of the Series B Preferred Stock.

These amendments, among other things, (i) require the Company to effect a redemption of outstanding shares of Series B Preferred Stock, on or prior to December 30, 2022, such that the Present Value (as defined in the Series B Certificate of Designations) of all of the remaining outstanding shares of Series B Preferred Stock shall be $ 400 million, subject to applicable law and certain conditions, including that the Company has funds legally available to do so (the “First Planned Partial Early Redemption”), which First Planned Partial Early Redemption was completed by the Company on December 28, 2021, (ii) provide that the right of each holder of the Series B Preferred Stock to require the Company to redeem all of such holder’s shares of Series B Preferred Stock (the “Holder Put Right”) cannot be exercised until December 30, 2022 at the earliest (subject to the prior occurrence of a triggering event), (iii) require the Company, on or before March 31, 2022, to effect a second partial redemption of outstanding shares of Series B Preferred Stock (the “Second Planned Partial Early Redemption”), such that following the First Planned Partial Early Redemption and the Second Planned Partial Early Redemption, the Present Value (as defined in the Series B Certificate of Designations) of all of the remaining outstanding shares of Series B Preferred Stock shall be $ 207 million (rounded down to the nearest dollar), subject to applicable law, including that the Company has funds legally available to do so, and subject to the Company having increased the size of its revolving credit facility from

$ 300 million to $ 500 million or the Company’s Board of Directors having determined that the Company otherwise has sufficient liquidity to effect the Second Planned Partial Early Redemption.

On December 28, 2021, Garrett completed the First Planned Partial Early Redemption, partially redeeming the Series B Preferred Stock with a cash payment of $ 211 million ($ 201 million principal and $ 10 million as interest).

As of December 31, 2021 and effective with the completion of the First Planned Partial Early Redemption, the scheduled redemptions were $ 200 million for March 29, 2022, $ 16 million for April 30, 2024, $ 100 million for April 30, 2025, $ 100 million for April 30, 2026, and $ 54 million for April 30, 2027, totaling $ 470 million.

This amount is recorded on our Consolidated Balance Sheet as of December 31, 2021 at the net present value of the redemptions, discounted at 7.67 %, of $ 395 million.

Of the amount recorded on our Consolidated Balance Sheet as of December 31, 2021, $ 195 million is classified as a long-term liability.

Each holder of Series B Preferred Stock will have the right to require the Company to redeem all, but not less than all, of such holder’s shares of Series B Preferred Stock if the Consolidated EBITDA (as defined in the Series B Certificate of Designations) of the Company and its subsidiaries exceeds $ 600 million for two consecutive fiscal quarters.

Upon liquidation, Series B Preferred Stock will rank (A) senior to the Common Stock and (B) junior to the Series A Preferred Stock and will have a right to be paid the Aggregate Series B Liquidation Preference.

The Company will be automatically obligated to redeem all shares of Series B Preferred Stock upon (i) a change of control, (ii) an assertion from the Company or the Board that any portion of the Series B Preferred Stock or any of the Company’s obligations under the Series B Certificate of Designations are invalid or unenforceable, (iii) if indebtedness outstanding under the Credit Agreement is accelerated (and such acceleration is not rescinded), or (iv) the Company or any of its material subsidiaries enters bankruptcy or similar proceedings affecting creditors’ or equity holders’ rights.

The Majority in Interest (as defined in the Series B Certificate of Designations) has a continuing right, voting separately as a class, to elect or appoint the Series B Director (as defined in the Series B Certificate of Designations), and an exclusive right to remove the Series B Director at any time for any reason or no reason (with or without cause), subject to the rights of other holders to remove any Series B Director for cause to the extent provided by the Delaware General Corporation Law (the "DGCL") until the first date on which the Aggregate Series B Liquidation Preference is not greater than $ 125 million (the “Series B Threshold Date”).

From and after the Series B Threshold Date, the Majority in Interest will have no right to elect or appoint any directors to the Board.

If the Majority in Interest is no longer entitled to elect or appoint a Series B Director, then the then-serving Series B Director will automatically be deemed to have resigned from the Board.

So long as any shares of Series B Preferred Stock are outstanding, the Company may not take certain actions without the written consent of the Majority in Interest, including, among other things, increasing the size of the Board so long as the Aggregate Series B Liquidation Preference is greater than $ 125 million.

On February 11, 2022, the Company delivered to the holder of shares of Series B Preferred Stock a notice of partial redemption to effect the Second Planned Partial Early Redemption on February 18, 2022.

As a result, on February 18, 2022, the Company will redeem 217,183,244 shares of Series B Preferred Stock for an aggregate price of $ 197 million.

Following the completion of the Second Planned Partial Early Redemption and the Company’s previously completed First Planned Partial Early Redemption, the Present Value of all of the remaining outstanding shares of Series B Preferred Stock shall be $ 207 million (rounded down to the nearest dollar).

We have operating leases that primarily consist of real estate, machinery and equipment.

On the Effective Date, pursuant to the Plan, the Company issued 834,800,000 shares of Series B Preferred Stock to Honeywell International Inc.

("Honeywell") in satisfaction of certain claims of Honeywell.

Under the Certificate of Designations of the Series B Preferred Stock, the Company is required to redeem on April 30 each year, beginning on April 30, 2022 and ending on April 30, 2030, an aggregate number of shares of Series B Preferred Stock based on a scheduled redemption amount determined in the Certificate of Designations.

Any shares of Series B Preferred Stock that have not been redeemed as of April 30, 2030, will be redeemed on that date.

The Series B Preferred Stock is not entitled to any dividends or other distributions or payments other than the scheduled redemption payments and payments upon liquidation as provided in the Certificate of Designations of the Series B Preferred Stock.

On December 28, 2021, the Company completed a partial early redemption of 345,988,497 shares of Series B Preferred Stock for a cash payment of $ 211 million including $ 10 million as interest.

During the year ended December 31, 2022, the Company further redeemed 488,811,503 shares of Series B Preferred Stock, representing the entirety of the remaining outstanding shares, for a total aggregate price of $ 409 million, of which $ 28 million related to settlement of accrued interest.

A loss on extinguishment of debt of $ 5 million was recognized in the Consolidated Statement of Operations related to the final early redemption.

There were no shares of Series B Preferred Stock outstanding as of December 31, 2022.

We have opera ting 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.

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Other liabilities 36 42

Liabilities subject to compromise — 19

Year Ended December 31,

(Dollars in millions)

Weighted-average lease term (in years) 8.41 8.88

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We hedge currency exposures with natural offsets to the fullest extent possible and, once these opportunities have been exhausted, through foreign currency exchange forward contracts (foreign currency exchange contracts).

The Company restarted its cash flow hedging program after the emergence from Chapter 11 and has since then entered into forward currency exchange contracts to mitigate exposure to foreign currency exchange rate volatility and the associated impact on earnings related to forecasted foreign currency commitments.

These forward currency exchange contracts are assessed as effective and are designated as cash flow hedges.

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These cross-currency swaps exchange contracts are assessed as effective and are designated as net investment hedges.

Gains and losses on derivatives qualifying as net investment hedges are recorded in Cumulative Translation Adjustment income (loss) until the net investment is liquidated or sold.

At December 31, 2021 and December 31, 2020, we had contracts with aggregate gross notional amounts of $ 2,788 million and $ 19 million, respectively, to hedge foreign currencies, principally the U.S.

Gains and losses on derivatives qualifying as net investment hedges are recorded in Accumulated other comprehensive income (loss) until the net investment is liquidated or sold.

As of December 31, 2022 and 2021, we had contracts with aggregate gross notional amounts of $ 2,621 million and $ 2,788 million, respectively, to hedge 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.

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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 December 31, 2021 and December 31, 2020:

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 December 31, 2022 and 2021:

Notional Amounts Assets Liabilities

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On June 11, 2021 the Company entered into interest rate swap contracts to partially mitigate market value risk associated with interest rate fluctuations on its variable rate term loan debt.

As of December 31, 2021, the Company had outstanding interest rate swaps with an aggregate notional amount of € 830 million, with respective maturities of April 2023, April 2024, April 2025, April 2026 and April 2027.

The Company entered into interest rate swap and forward interest rate swap contracts to partially mitigate market value risk associated with interest rate fluctuations on its variable rate term loan debt.

As of December 31, 2022, the Company had outstanding interest rate and forward interest rate swaps with an aggregate notional amount of € 960 million, with respective maturities of April 2023, April 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 and has not designated them as hedging instruments for accounting purposes.

Effective with our entry into the Credit Agreement (see Note 16, Long-term Debt and Credit Agreements ), the Company entered into floating-floating cross-currency swap contracts to limit its exposure to investments in certain foreign subsidiaries exposed to foreign exchange fluctuations.

The Company has floating-floating cross-currency swap contracts to limit its exposure to investments in certain foreign subsidiaries exposed to foreign exchange fluctuations.

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

As of December 31, 2021, an aggregate notional amount of € 606 million was designated as net investment hedges of the Company’s investment in Euro-denominated operations.

As of December 31, 2022, an aggregate notional amount of € 606 million was designated as net investment hedges of the Company’s investment in Euro-denominated operations, with mandatory termination options in April 2023, April 2024, April 2025 and April 2026.

The cross-currency swaps’ fair values were net assets of $ 74 million at December 31, 2022.

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No ineffectiveness has been recorded on the net investment hedges.

The Company initiated a cash flow hedging program in the first quarter of 2019 and has since then entered into forward currency exchange contracts to mitigate exposure to foreign currency exchange rate volatility and the associated impact on earnings related to forecasted foreign currency commitments.

These forward currency exchange contracts 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 (loss) until the underlying transactions are recognized in earnings.

The Company also enters into forward currency exchange contracts with maturities up to 18 months to mitigate exposure to foreign currency exchange rate volatility and the associated impact on earnings related to forecasted foreign currency commitments.

As of December 31, 2022, the Company had outstanding forward currency exchange contracts with an aggregate notional amount of $ 565 million.

These forward currency exchange contracts are designated as cash flow hedges and are assessed as highly effective.

Gains and losses on the derivatives qualifying as cash flow hedges are recorded in Accumulated other comprehensive income (loss) until the underlying transactions are recognized in earnings, and amounted to a gain of $ 6 million, net of tax, for the year ended December 31, 2022.

The foreign currency exchange, interest rate swap and cross-currency swap contracts are valued using market observable inputs.

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Income taxes $ 99 $ 106

Designated and undesignated derivatives — 22

Pension and other employee related 21 61

Long-term lease liability (Note 18)

L ong-term lease liability (Note 18)

Advanced discounts from suppliers 6 16

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Environmental Remediation – Long-term

Issuance of Common Stock

As discussed in Note 2, Plan of Reorganization , upon the effectiveness of and pursuant to the Plan, all Old Common Stock of the Company was cancelled, and the Company issued 65,035,801 shares of Common Stock to holders of Old Common Stock that did not exercise the Cash-Out Election.

Each holder of Existing Common Stock that did not exercise the Cash-Out Election received a number of shares of new Common Stock equal to the number of shares of Old Common Stock held by such holder in consideration for the cancellation of their shares of Old Common Stock.

The Company paid $ 69 million to holders of Old Common Stock who had made the Cash-Out Election.

Issuance of Series A Preferred Stock

In connection with the Company’s emergence from bankruptcy and pursuant to the Plan, the Company issued 247,768,962 shares of the Company’s Series A Preferred Stock to affiliated funds of Centerbridge, affiliated funds of Oaktree and certain other investors and parties, including in connection with the consummation of two rights offerings and

that certain replacement equity backstop commitment agreement.

In connection with the Company’s emergence from bankruptcy and pursuant to the Plan, the Company issued 247,757,290 shares of the Company’s Series A Preferred Stock to affiliated funds of Centerbridge, affiliated funds of Oaktree and certain other investors and parties, including in connection with the consummation of two rights offerings and that certain replacement equity backstop commitment agreement.

The Company is authorized to grant 1,200,000,000 shares of preferred stock in the reorganized company.

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Dividends on the Series A Preferred Stock will accumulate whether or not declared.

Under the terms of our Series B Preferred Stock, a dividend on the Series A Preferred Stock may not be declared so long as the Company has not satisfied or cannot satisfy in full any deferred redemption payments or redemption payments owed on the next scheduled redemption date to holders of Series B Preferred Stock.

Holders of the Series A Preferred Stock will also be entitled to such dividends paid to holders of Common Stock to the same extent as if such holders of Series A Preferred Stock had converted their shares of Series A Preferred Stock into Common Stock (without regard to any limitations on conversions) and had held such shares of Common Stock on the record date for such dividends and distributions.

Such payments will be made concurrently with the dividend or distribution to the holders of the Common Stock.

The Company is restricted from paying or declaring any dividend, or making any distribution, on any class of Common Stock or any future class of preferred stock established thereafter by the Board (other than any series of capital stock that ranks pari passu to the Series A Preferred Stock) (such stock, “Dividend Junior Stock”), other than a dividend payable solely in Dividend Junior Stock, unless (i) all cumulative accrued and unpaid preference dividends on all outstanding shares of Series A Preferred Stock have been paid in full and the full dividend thereon due has been paid or declared and set aside for payment and (ii) all prior redemption requirements with respect to Series A Preferred Stock have been complied with, provided, notwithstanding the foregoing, that the Company may pay a dividend or make a distribution on Dividend Junior Stock if (a) the holders of the Series A Preferred Stock also participate in such dividends or distributions, (b) such dividends or distributions are made on or prior to December 31, 2022, and (c) the full Board of the Company has ratified the Disinterested Directors’ Committee’s declaration of any such dividend or distribution.

Under the terms of the Credit Agreement, during the fiscal years ending December 31, 2021 and December 31, 2022, the Company may not make payments or redemptions in cash solely with respect to the Series A Preferred Stock unless a ratable payment (on an as-converted basis) is made to holders of the Common Stock and such payments would otherwise be permitted under the terms of the Credit Agreement.

On July 21, 2021, the terms of the Certificate of Designations of the Series A Preferred Stock were amended to allow the payment of a ratable dividend on the Series A Preferred Stock and the Common Stock prior to December 31, 2022 so long as the full Board of the Company ratifies the Disinterested Directors’ Committee’s declaration of any such dividend or distribution.

These amendments were approved by written consent of the holders of a majority of our Series A Preferred Stock on February 8, 2022, and are expected to become effective on or about March 3, 2022.

The Board determined that the amount of preference dividends which will accumulate for the preference dividend for the year ended December 31, 2021 is $ 0.394337 per share.

As there were 245,921,617 shares of Series A Preferred Stock as of December 31, 2021, the aggregate accumulated dividend as of December 31, 2021 is $ 97 million and is presented as a reduction to Net income available to common shareholders in our Consolidated Statements of Operations.

to a number of shares of Common Stock equal to the amount of cumulative unpaid preference dividends (whether or not authorized or declared) divided by the lesser of (i) the fair market value per share of such additional shares and (ii) the fair market value per share of the Common Stock.

stock that ranks pari passu to the Series A Preferred Stock) (such stock, “Dividend Junior Stock”), other than a dividend payable solely in Dividend Junior Stock, unless (i) all cumulative accrued and unpaid preference dividends on all outstanding shares of Series A Preferred Stock have been paid in full and the full dividend thereon due has been paid or declared and set aside for payment and (ii) all prior redemption requirements with respect to Series A Preferred Stock have been complied with, provided, notwithstanding the foregoing, that the Company may pay a dividend or make a distribution on Dividend Junior Stock if (a) the holders of the Series A Preferred Stock also participate in such dividends or distributions, (b) such dividends or distributions are made on or prior to December 31, 2022, and (c) the full Board of the Company has ratified the Disinterested Directors’ Committee’s declaration of any such dividend or distribution.

On March 3, 2022, the terms of the Series A Certificate of Designations were further amended to provide the Company with greater flexibility to pay dividends and make certain distributions on, and to purchase, redeem or otherwise acquire, including in individually negotiated transactions, shares of the Company’s Common Stock or any future class of preferred stock that ranks junior to the Series A Preferred Stock in right of payment of dividends.

Specifically, the amendments (i) expanded the scope of permitted Distributions on Dividend Junior Stock (as each term is 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) removed the requirement that dividends or Distributions on Dividend Junior Stock must occur on or prior to December 31, 2022, and (iii) expressly permitted 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 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.

This dividend was settled in full on October 3, 2022.

On December 6, 2022, the Board declared a cash divide nd of $ 0.17 per share on the Company's Series A Preferred Stock.

As of the record date of December 20, 2022, a total of 245,171,837 shares of Series A Preferred Stock were outstanding, resulting in an aggregate dividend amount of $ 42 million.

Cash was transferred on December 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 January 3, 2023.

As of December 31, 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.

The Board determined that the amount of preference dividends which will accumulate for the preference dividend for the year ended December 31, 2022 is $ 0.251772 per share, amounting to $ 157 million and is presented as a reduction to Net income available to common shareholders in our Consolidated Statements of Operations.

There were 247,757,290 shares of Series A Preferred Stock outstanding as of December 31, 2022, with an the aggregate accumulated dividend as of December 31, 2022 of $ 171 million.

Holders of the Series A Preferred Stock will be entitled to vote together as a single class with the holders of Common Stock, with each such holder entitled to cast the number of votes equal to the number of votes such holder would have been entitled to cast if such holder were the holder of a number of shares of Common Stock equal to the whole number of shares of Common Stock that would be issuable upon conversion of such holder’s shares of Series A Preferred Stock in addition to a number of shares of Common Stock equal to the amount of cumulative unpaid preference dividends (whether or not authorized or declared) divided by the lesser of (i) the fair market value per share of such additional shares and (ii) the fair market value per share of the Common Stock.

So long as any shares of Series A Preferred Stock are outstanding, a vote or the consent of the holders representing a majority of the Series A Preferred Stock will be required for (i) effecting or validating any amendment, modification or alteration to the Certificate of Incorporation that would authorize or create, or increase the authorized amount of, any shares of any class or series or any securities convertible into shares of any class or series of capital stock that would rank senior or pari passu to the Series A Preferred Stock with respect to dividend payments or upon the occurrence of a liquidation, (ii) any increase in the authorized number of shares of Series A Preferred Stock or of any series of capital stock that ranks pari passu with Series A Preferred Stock, (iii) effecting or validating any amendment, alteration or repeal of any provision of the Certificate of Incorporation or Bylaws that would have an adverse effect on the rights, preferences, privileges or voting power of Series A Preferred Stock or the holders thereof in any material respect, or (iv) any action or inaction that would reduce the stated amount of any share of Series A Preferred Stock to below $ 5.25 per share.

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The Company may, at its election, redeem all but not less than all of the outstanding shares of Series A Preferred Stock (i) at any time following the date which is six years after the Effective Date or (ii) in connection with the consummation of a Change of Control (as defined in the Series A Certificate of Designations), in either case for a cash purchase price equal to $ 5.25 per share plus cumulative unpaid preference dividends (whether or not authorized or declared) as of the redemption date.

Registration Rights Agreement

In connection with our emergence from bankruptcy, on April 30, 2021, we entered into a registration rights agreement (the “Registration Rights Agreement”) with the holders of our Common Stock and Series A Preferred Stock named therein to provide for resale registration rights for the holders’ Registrable Securities (as defined in the Registration Rights Agreement).

Pursuant to the terms of the Registration Rights Agreement, we filed a registration statement on Form S-1 (Registration No.

333-256659) registering (i) 243,265,707 shares of our Series A Preferred Stock, (ii) 52,471,709 shares of our Common Stock and (iii) 243,265,707 shares of our Common Stock issuable upon conversion of our Series A Preferred Stock (the “Resale Registration Statement"), in each case initially issued to certain holders of the Common Stock and Series A Preferred Stock (the “Registration Rights Holders”) in connection with our emergence from bankruptcy on April 30, 2021.

The Resale Registration Statement was declared effective by the Securities and Exchange Commission (the

"SEC") on June 11, 2021, which may result in the resale of a substantial number of shares of our Common Stock or Series A Preferred Stock by the relevant Registration Rights Holders.

At any time following the Effective Date, any Registration Rights Holders who, directly or indirectly, together with their respective affiliates, have beneficial ownership of at least 7.5 % of the then-issued and outstanding shares of Common Stock, after giving effect to the conversion of the Series A Preferred Stock (such Registration Rights Holders, the “Required Investors”), may request registration of all or any portion of the Registrable Securities beneficially owned by such Required Investors on Form S-1 or, if available, on Form S-3 (each, a “Demand Registration”).

Unless there is a currently effective shelf registration statement covering such Registrable Securities, the Company will effect such Demand Registration by filing with the SEC a registration statement within (i) 60 days in the case of a registration statement on Form S-1 and (ii) 30 days in the case of a registration statement on Form S-3.

The aggregate number of Demand Registrations on Form S-1 that may be requested by the Required Investors shall not exceed four ;

the Required Investors may request an unlimited number of Demand Registrations on Form S-3.

The relevant Required Investors may request to effectuate any offering of Registrable Securities by means of an underwritten offering, provided that the aggregate gross proceeds of such public offering are expected to be at least $ 50 million.

The Company will not be required to effect more than one underwritten offering in any 90 -day period.

In the event the Company proposes to file a shelf registration statement with respect to any offering of its equity securities, the Company will give written notice of such proposed filing to the Registration Rights Holders as soon as practicable (but in no event less than 5 business days prior to the proposed date of public filing of such shelf), and such notice shall offer the Registration Rights Holders the opportunity to register under such registration statement the resale of such number of Registrable Securities as each such Registration Rights Holder may request in writing (a “Piggyback Registration”).

If the Company proposes to file a registration statement that is not a shelf registration statement with respect to any offering of its equity securities, the Company will give written notice of such proposed filing to certain of the Registration Rights Holders (the “Piggyback Eligible Investors”), and such notice shall offer the Piggyback Eligible Investors the opportunity to make a Piggyback Registration.

If the Company proposes to undertake an underwritten offering pursuant to a registration statement for which there was a Piggyback Registration, the Piggyback Eligible Investors may be entitled to participate in such underwritten offering, subject to customary cutback provisions in certain circumstances.

If requested by the managing underwriter or underwriters in the event of any underwritten public offering of equity securities by the Company, each holder of Registrable Securities participating in such sale agrees, as a condition to such holder’s participation in the offering, to execute a lock-up agreement, which will provide for restrictions on transferring the Company’s capital stock as specified in the Registration Rights Agreement.

Additionally, in connection with any underwritten public offering of Registrable Securities and upon the request of the managing underwriter or underwriters, the Company will agree not to effect any public sale or distribution of any Lock-Up Securities (as defined in the Registration Rights Agreement).

The Registration Rights Agreement includes customary indemnification provisions.

The Company will be responsible for its own expenses associated with the performance of its obligations under the Registration Rights Agreement and certain fees and expenses of legal counsel to the relevant Registration Rights Holders.

Except as described in the preceding sentence, the Registration Rights Holders will bear their own expenses, including any underwriting discounts, selling commissions and transfer taxes applicable to any sale of Registrable Securities.

The Registration Rights Agreement will automatically terminate upon the later of (i) the expiration of the Shelf Period (as defined in the Registration Rights Agreement) and (ii) at such time as no Registrable Securities remain outstanding.

Series A Investor Rights Agreement

Pursuant to the Plan, the Company entered into a Series A Investor Rights Agreement (the “Series A Investor Rights Agreement”) with Centerbridge Credit Partners Master, L.P.

(“Centerbridge Credit”), Centerbridge Special Credit Partners III-Flex, L.P.

(“Centerbridge Special Credit” and, together with Centerbridge Credit, the “Centerbridge Investors”), OCM Opps GTM Holdings, LLC (“OCM Opps”), Oaktree Value Opportunities Fund Holdings, L.P.

(“Oaktree Value”), Oaktree Phoenix Investment Fund, L.P.

(“Oaktree Phoenix”) and Oaktree Opportunities Fund Xb Holdings (Delaware), L.P.

(“Oaktree Opportunities” and, together with OCM Opps, Oaktree Value and Oaktree Phoenix, the “Oaktree Investors”) and the other signatories thereto (the “Additional Investors” and, together with the Centerbridge Investors and the Oaktree Investors, the “Series A Investors”).

Pursuant to the Series A Investor Rights Agreement, as of the Effective Date, the Centerbridge Investors and Oaktree Investors each have the right to designate three members for election to our Board and

the Additional Investors have the right to designate one director for election to the Board.

One director will be the chief executive officer of the Company.

The Centerbridge Investors and Oaktree Investors each have a continuing right to designate three directors to the Board, subject to their respective (and permitted transferees’) beneficial ownership of at least 60 % of their respective aggregate initial ownership interest as of the Effective Date as calculated for each party in accordance with the relevant terms of the Series A Investor Rights Agreement (the “Initial Investor Interest”), at least one of which will not be employed by Centerbridge Investors or Oaktree Investors, as applicable, or their respective affiliates.

If the Centerbridge Investors or Oaktree Investors, as applicable, beneficially own less than 60 % but at least 40 % of their respective Initial Investor Interest, then they will each have the right to designate at least two directors to the Board.

If the Centerbridge Investors or Oaktree Investors, as applicable, beneficially own less than 40 % but at least 20 % of their respective Initial Investor Interest, then they will each have the right to designate at least one director to the Board.

If the Centerbridge Investors or Oaktree Investors, as applicable, cease to own at least 20 % of their respective Initial Investor Interest, then they will have no right to designate any directors to the Board.

Pursuant to the Series A Investor Rights Agreement, the Additional Investors have a continuing right to designate one director for election to the Board, subject to their (and permitted transferees’) beneficial ownership of at least 60 % of their Initial Investor Interest.

If the Additional Investors beneficially own less than 60 % of their Initial Investor Interest, then they have no right to designate any directors to the Board.

The designee of the Additional Investors shall be the person nominated, separately and not jointly, by those Additional Investors holding at least 65 % of the shares of Series A Preferred Stock held by the Additional Investors at such time.

After the Additional Investors no longer have a right to designate a director as described above, if the Company becomes aware that at least 20 % of the Series A Preferred Stock issued as of the Effective Date is held by stockholders other than the Centerbridge Investors and Oaktree Investors, then the holders of a majority of the Series A Preferred Stock then outstanding (excluding Series A Preferred Stock held by the Centerbridge Investors and the Oaktree Investors) will collectively have the right to designate one director to the Board.

If the number of individuals that any Series A Investor has the right to designate for election to the Board is decreased in accordance with the foregoing, then the corresponding number of directors designated by such investor will immediately offer to resign from the Board under the terms of the Series A Investor Rights Agreement.

The Company is restricted under the Series A Investor Rights Agreement from increasing the size of the Board without the written consent of the Series A Investors holding a majority of the then-outstanding Series A Preferred Stock for so long as the outstanding Series A Preferred Stock represents, in the aggregate, a majority of the combined voting power of the then-outstanding shares of all classes and series of capital stock of the Company entitled generally to vote in the election of directors of the Company.

Share Repurchase Program

On November 16, 2021, the Board of Directors authorized a $ 100 million share repurchase program valid until November 15, 2022, providing for the pro rata purchase of shares of Series A Preferred Stock and Common Stock.

Through December 31, 2021, the Company has repurchased 1,846,138 shares of Series A Preferred Stock for $ 15 million, and has repurchased 509,443 shares of Common Stock for $ 4 million.

On November 16, 2021, the Board of Directors authorized a $ 100 million share repurchase program valid until November 15, 2022, providing for the purchase of shares of Series A Preferred Stock and Common Stock.

The share repurchase program was subsequently extended by one year, to November 15, 2023.

Through December 31, 2022, the Company has repurchased 2,669,335 shares of Series A Preferred Stock for $ 22 million, and 559,749 shares of Common Stock for $ 4 million.

Accumulated Other Comprehensive Income (Loss)

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Changes in fair value of effective cash flow hedges 11 ( 1 ) 10

Changes in fair value of net investment hedges 51 ( 10 ) 41

$ 143 $ ( 18 ) $ 125

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$ ( 43 ) $ 7 $ 41 $ ( 9 ) $ ( 4 )

Other comprehensive loss before reclassifications 38 11 41 35 125

Other comprehensive income before reclassifications ( 1 ) 27 44 ( 11 ) 59

Amounts reclassified from accumulated other comprehensive income — ( 21 ) — 2 ( 19 )

Net current period other comprehensive loss 38 10 41 36 125

Net current period other comprehensive income ( 1 ) (1) 6 44 ( 9 ) 40

Balance at December 31, 2022

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Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

Year Ended December 31, 2021 Affected Line in the Consolidated Statement of Operations

Year Ended December 31, 2022

Sales Cost of

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Total reclassifications for the period, net of tax $ — $ ( 21 ) $ — $ 2 $ ( 19 )

Year Ended December 31, 2020

Affected Line in the Consolidated Statement of Operations

Sales Cost of

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Expenses Non-Operating (Income) Expense Total

Year Ended December 31, 2021

(Dollars in millions)

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Stock-Based Compensation

2018 Stock Incentive Plan

On September 14, 2018, our Board adopted, and Honeywell, as our sole stockholder, approved, the 2018 Stock Incentive Plan of Garrett Motion Inc.

and its affiliates (the “Stock Incentive Plan”) and the 2018 Stock Plan for Non-Employee Directors (the “Director Equity Plan”).

The Stock Incentive Plan provides for the grant of stock options, stock appreciation rights, performance awards, restricted stock units, restricted stock, other stock-based awards, and cash-based awards to employees of Garrett or its affiliates, and independent contractors or consultants of Garrett.

The maximum aggregate number of shares of our Common Stock that may be issued under the Stock Incentive Plan is 10,000,000 shares and, for the Director Equity Plan, 400,000 shares.

Up to 5,000,000 shares may be granted as incentive stock options under the Stock Incentive Plan.

As part of our emergence from Chapter 11 (Note 2, Plan of Reorganization ), the Plan provided for the acceleration of all outstanding awards under the Stock Incentive Plan.

As of the Effective Date, all outstanding awards pursuant to the Stock Incentive Plan were cancelled.

The Plan provided for the following:

• Acceleration and vesting of all outstanding equity awards;

• Vested equity awards were deemed to be exercised on a net settled basis;

• Common Stock provided upon the exercise of stock options were deemed outstanding as of the Effective Date.

• Award holders are deemed to have exercised the Cash-Out Election, and therefore entitled to a cash payment of $ 6.25 per share;

• Awards that were “Out of the money” were deemed cancelled for no consideration;

• Cash performance stock unit (“CPSU”) awards accelerated and vested based on target performance without proration and settled in cash in accordance with the Plan and are not classified as equity awards.

The cash settlement of an equity award (stock options, stock appreciation rights, performance awards, restricted stock units, restricted stock, other stock-based awards) is treated as the repurchase of an outstanding equity instrument.

In accordance with ASC 718, all outstanding awards were cancelled, with no replacement grant, therefore modification accounting was not applied.

Restricted stock units

As of the Effective Date, 1,205,650 restricted stock units (“RSU”) awards were settled for consideration of $ 6.25 per share, for a total cash settlement of $ 8 million, of which $ 7 million was recorded to equity, and $ 1 million was recorded to Reorganization items, net in the Consolidated Statement of Operations.

Cancellation of Incentive Awards

As part of the Company's emergence from Chapter 11, the Plan provided for the acceleration of all outstanding awards under the Stock Incentive Plan.

As of the Effective Date, all outstanding awards were cancelled as follows:

• Restricted stock units ("RSUs") - 1,205,650 RSUs were settled for consideration of $ 6.25 per share, for a total cash settlement of $ 8 million of which $ 7 million was recorded to equity, and $ 1 million was recorded to Reorganization items, net in the Consolidated Statement of Operations.

Measurement of the cash settlement value of RSU awards was performed on an individual grant basis.

As of the Effective Date, all unamortized stock compensation expense of $ 7 million was charged to Reorganization items, net in the Consolidated Statement of Operations.

Performance stock units

As of the Effective Date, 228,765 performance stock units (“PSU”) awards were settled for consideration of $ 6.25 per share, for a total cash settlement of $ 1 million, which was recorded to Reorganization items, net in the Consolidated Statement of Operations.

Stock options

As of the Effective Date, all unvested stock options were considered “Out of the money” and cancelled for no consideration.

All unamortized stock compensation expense of $ 1 million was charged to Reorganization items, net in the Consolidated Statement of Operations.

Cash performance stock units

As of the Effective Date, 2,069,897 CPSU awards were settled for consideration of $ 1.00 per unit, for a total cash settlement of $ 2 million, which was charged to Reorganization items, net in the Consolidated Statement of Operations.

As of the Effective Date, unamortized stock compensation expense of $ 7 million was charged to Reorganization items, net in the Consolidated Statement of Operations.

• Performance stock units - 228,765 PSUs were settled for consideration of $ 6.25 per share, for a total cash settlement of $ 1 million which was recorded to Reorganization items, net in the Consolidated Statement of Operations.

• Stock options - All unvested stock options were considered “out of the money” and cancelled for no consideration.

Unamortized stock compensation expense of $ 1 million was charged to Reorganization items, net in the Consolidated Statement of Operations.

• Cash performance stock units ("CPSUs") - 2,069,897 CPSUs were settled for consideration of $ 1.00 per unit, for a total cash settlement of $ 2 million which was charged to Reorganization items, net in the Consolidated Statement of Operations.

The cash settlement of an equity award is treated as the repurchase of an outstanding equity instrument.

In accordance with ASC 718, all outstanding awards were cancelled with no replacement grant, therefore modification accounting was not applied.

Continuity Awards

In September 2020, one-time cash continuity awards (“Continuity Awards”) were granted to certain employees in exchange for the forfeiture of RSUs and PSUs that had been granted in February 2020.

The Continuity Awards amounted to $ 11 million, with $ 9 million paid in September 2020 and the remaining $ 2 million paid in 2021.

As the Continuity Awards were subject to a one-year service requirement, the combined transaction was accounted for as a modification to liability-classified awards.

The total incremental compensation cost resulting from the modification was $ 5 million.

The Continuity Awards were fully vested as of December 31, 2021.

The following table summarizes information about the Continuity Awards:

Average Grant

Date Fair Value

Non-vested at December 31, 2020

Vested ( 43 ) ( 257,536 )

Forfeited — —

Non-vested at December 31, 2021

2021 Long-Term Incentive Plan

On May 25, 2021, our Board adopted, the Garrett Motion Inc.

2021 Long-Term Incentive Plan (the “Long-Term Incentive Plan”).

On May 25, 2021, the Garrett Motion Inc.

2021 Long-Term Incentive Plan (the “Long-Term Incentive Plan”) was adopted.

The Long-Term Incentive Plan provides for the grant of stock options, stock appreciation rights, performance awards, restricted stock units, restricted stock, other stock-based awards, and cash-based awards to employees and non-employee directors of Garrett or its affiliates, and independent contractors or consultants of Garrett.

The maximum aggregate number of shares of our Common Stock that may be issued under the Long-Term Incentive Plan is 31,280,476 shares.

As of December 31, 2021, an aggregate of 3,300,474 shares of our Common Stock were awarded and 27,980,002 shares of our Common Stock were available for future issuance under the Long-Term Incentive Plan.

Restricted Stock Units — RSU awards are issued to certain key employees and directors at fair market value at the date of grant.

As of December 31, 2022, an aggregate of 4,560,935 shares of our Common Stock were awarded, net of forfeitures and 26,719,541 shares of our Common Stock were available for future issuance under the Long-Term Incentive Plan.

Restricted Stock Units

RSUs are issued to certain key employees and directors at fair market value at the date of grant.

RSUs typically vest over 3 years or 5 years and when vested, each unit entitles the holder to one share of our Common Stock.

As of December 31, 2021, an aggregate of 1,827,599 RSU awards were granted to officers, certain key employees, and non-employee directors under the Long-Term Incentive Plan.

The following table summarizes information about RSU activity related to both the Stock Incentive Plan and the Long-Term Incentive Plan for each of the periods presented:

The following table summarizes information about RSU activity including for periods prior to Emergence:

Average Grant

1 unchanged sentence

Non-vested at December 31, 2020

1,538,969 $ 13.11

Granted 1,827,599 8.31

1 unchanged sentence

Forfeited ( 16,551 ) 11.71

Vested and cancelled ( 1,205,650 ) 13.10

Non-vested at December 31, 2021

3 unchanged sentences

Forfeited ( 75,429 ) 7.38

Vested and cancelled ( 1,205,650 ) 13.10

Non-vested at December 31, 2022

2,401,900 $ 7.48

The following table summarizes the impact to the Consolidated Statement of Operations from RSUs:

Year Ended December 31,

2021 2020 2019

(Dollars in millions)

Compensation expense $ 4 $ 9 $ 15

Reorganization items, net (Note 2)

Future income tax benefit recognized 1 3 —

As of December 31, 2021, there was $ 13 million of total unrecognized compensation cost related to unvested RSUs granted under our Long-Term Incentive Plan, which is expected to be recognized over a weighted-average period of 3.70 years.

There was no unrecognized compensation expense outstanding related to the Stock Incentive Plan.

Awards granted under the Stock Incentive Plan were cancelled pursuant to the Plan as part of our emergence from Chapter 11 noted above.

Performance Stock Units — As of December 31, 2021, an aggregate of 1,472,875 PSU awards were granted to officers and certain key employees under the Long-Term Incentive Plan, which, upon vesting, entitles the holder to shares of our Common Stock.

As of December 31, 2022, there was $ 14 million of total unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a weighted-average period of 2.58 years.

Performance Stock Units

As of December 31, 2022, an aggregate of 1,774,135 PSU awards were granted to officers and certain key employees under the Long-Term Incentive Plan, which, upon vesting, entitles the holder to shares of our Common Stock.

The actual number of shares an employee receives for each PSU depends on the Company’s performance against various measures.

For PSUs granted in 2021, under the Long-Term Incentive Plan, the performance measures are related to absolute total shareholder return (“TSR”) with stock price hurdles, adjusted EBITDA and adjusted EBITDA margin, weighted 60 %, 20 % and 20 % respectively over a two-year performance period from January 1, 2022 through December 31, 2023 for the TSR measure and a three-year performance period from January 1, 2021 through December 31, 2023 for the adjusted EBITDA and adjusted EBITDA margin measures.

Each grantee is granted a target level of PSUs and may earn between 0 % and 100 % of the target level depending on the Company’s performance against the financial measures.

For PSUs granted in 2021, the performance measures are related to absolute total shareholder return (“TSR”) with stock price hurdles, Adjusted EBITDA and Adjusted EBITDA margin, weighted 60 %, 20 % and 20 % respectively over a two-year performance period from January 1, 2022 through December 31, 2023 for the TSR measure and a three-year performance period from January 1, 2021 through December 31, 2023 for the Adjusted EBITDA and Adjusted EBITDA margin measures.

Each grantee is granted a target level of PSUs and may earn between 0 % and 100 % of the target level depending on achievement of the performance measures.

For PSUs granted in 2022, the performance measures are based on Adjusted EBITDA and Adjusted EBITDA margin, weighted 50 % each, over a three-year performance period from January 1, 2022 through December 31, 2024.

The PSUs vest at levels ranging from 0 % to 200 % of the target level depending on the Company’s performance against the financial measures.

The awards associated with the TSR performance measure are considered to have a market condition.

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The Company’s volatility estimate was based on the historical volatilities of peers over a historical period consistent with the simulation term.

The Company does not expect to pay a dividend during the applicable term.

The Company does not expect to pay a dividend on the Common Stock during the applicable term.

The fair value of the PSUs granted in 2021 was estimated using the following assumptions:

Monte Carlo Assumptions December 31, 2021

Monte Carlo Assumptions PSUs Granted in 2021

Volatility 64.01 %

5 unchanged sentences

Non-vested at December 31, 2020

314,111 $ 16.17

Granted 1,472,875 8.67

Forfeited ( 85,346 ) 14.00

Vested and cancelled ( 228,765 ) —

Non-vested at December 31, 2021

2 unchanged sentences

Forfeited ( 52,092 ) 8.15

Vested and cancelled ( 228,765 ) —

Non-vested at December 31, 2022

1,722,043 $ 8.36

The fair value of the TSR-based PSUs is based on the output of the Monte Carlo simulation model noted above and the PSUs not containing a market condition are based on the fair market value of the Company’s stock at the grant date.

The number of underlying shares to be issued will be based on actual performance achievement over the performance period.

The per-unit weighted average fair value at the date of grant for PSUs granted during the period ended December 31, 2021 was $ 8.67 .

The fair value of each PSU grant is amortized monthly into compensation expense on a graded vesting (accelerated) basis over a vesting period of 36 months.

The accrual of compensation costs is based on our estimate of the final expected value of the award and is adjusted as required for the performance-based condition.

The Company estimates forfeitures at the time of issuance, which results in a reduction in compensation expense.

As the payout of PSUs includes dividend equivalents, no separate dividend yield assumption is required in calculating the fair value of the PSUs.

The Company currently does not pay dividends.

The following table summarizes the impact to the Consolidated Statement of Operations from PSUs:

As the payout of PSUs granted in 2021

includes dividend equivalents, no separate dividend yield assumption is required in calculating the fair value of those PSUs.

The Company currently does not pay dividends on its common stock.

As of December 31, 2022, there was $ 7 million of total unrecognized compensation cost related to unvested PSUs, which is expected to be recognized over a weighted average period of 1.36 years.

Stock-Based Compensation Expense

The following table summarizes the impact to the Consolidated Statement of Operations from the Company's incentive awards:

Year Ended December 31,

1 unchanged sentence

(Dollars in millions)

Compensation expense $ 2 $ — $ 2

Reorganization items, net (Note 2)

As of December 31, 2021, there was $ 11 million of total unrecognized compensation cost related to unvested PSUs granted under our Long-Term Incentive Plan, which is expected to be recognized over a weighted average period of 1.96 years.

There was no unrecognized compensation expense outstanding related to the Stock Incentive Plan.

Awards granted under the Stock Incentive Plan were cancelled pursuant to the Plan as part of our emergence from Chapter 11 noted above.

Continuity Awards — In September 2020, in response to the unprecedented and ongoing market uncertainty resulting from the COVID-19 pandemic and in connection with the Board’s evaluation of strategic alternatives for the Company, the Compensation Committee approved one-time cash continuity awards (“Continuity Awards”) to ensure retention of key individuals in exchange for the forfeiture of RSUs and PSUs granted in February 2020.

The Continuity Awards total $ 11 million, with $ 9 million paid in September 2020 and the remaining $ 2 million paid in 2021.

The Continuity Awards were subject to repayment if, prior to June 30, 2021, the recipient had a qualifying termination of employment.

Given the Continuity Awards had a one-year service requirement, the combined transaction was accounted for as a modification to liability-classified awards.

The total incremental compensation cost resulting from the modification was $ 5 million.

As of December 31, 2021, there was no unrecognized compensation cost related to the Continuity Awards.

The following table summarizes information about Continuity Award activity for each of the periods presented:

Average Grant

Date Fair Value

Non-vested at December 31, 2020

Vested ( 43 ) ( 257,536 )

Forfeited — —

Non-vested at December 31, 2021

The following table summarizes the impact to the Consolidated Statement of Operations from Continuity Awards:

Year Ended December 31,

(Dollars in millions)

Compensation expense $ 5 $ 7

Future income tax benefit recognized 1 1

RSUs $ 6 $ 4 $ 9

Stock options — — 1

Stock-based compensation expense 11 6 10

Continuity Awards — 5 7

Reorganization items, net — 9 —

Future income tax benefits recognized 1 2 4

Earnings Per Share

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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 year ended December 31, 2021 is calculated using the more dilutive of the two-class or if-converted methods.

Diluted earnings per share for the years ended December 31, 2022 and 2021 are 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 if-converted method uses net income and assumes conversion of all potential shares including the participating securities.

Diluted earnings per share for the year ended December 31, 2020 are computed based upon the weighted average number of common shares outstanding and all dilutive potential common shares outstanding and all potentially issuable PSUs 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 earnings per share calculations for the years ended December 31, 2022, 2021 and 2020 are as follows:

11 unchanged sentences

Diluted earnings per share:

Two-class If-converted

Weighted average common shares outstanding - Basic 64,708,635 69,706,183 75,543,461

4 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.

For the years ended December 31, 2021, December 31, 2020, and December 31, 2019, the weighted average number of stock options excluded from the computations was 131,623 , 428,690 and 483,408 respectively.

As of December 31, 2021, there were no options outstanding.

For the years ended December 31, 2021 and 2020, the weighted average number of stock options excluded from the computations was 131,623 and 428,690 respectively.

There were no options outstanding as of December 31, 2022 and 2021, and 403,517 options outstanding as of December 31, 2020.

Commitments and Contingencies

Chapter 11 Cases

On the Petition Date, the Debtors each filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court.

The Chapter 11 Cases were jointly administered under the caption “In re:

Garrett Motion Inc., 20-12212.” On April 20, 2021, the Debtors filed the Plan.

On April 26, 2021, the Bankruptcy Court entered the Confirmation Order, among other things, confirming the Plan.

On the Effective Date, the conditions to effectiveness of the Plan were satisfied or waived and the Company emerged from bankruptcy.

Since the Effective Date, the reorganized Debtors have been administering and reconciling outstanding proofs of claim and proofs of interest filed against the Debtors.

All of the Chapter 11 Cases other than the main lead Chapter 11 Case of the Company have been closed, the main Chapter 11 Case of the Company will remain open until all proofs of claim and proofs of interest are fully administered.

See Note 2, Plan of Reorganization , for more information.

Obligations payable to Honeywell

Honeywell was a defendant in asbestos-related personal injury actions mainly related to its legacy Bendix friction materials (“Bendix”) business.

The Bendix business manufactured automotive brake linings that contained chrysotile asbestos in an encapsulated form.

Claimants consist largely of individuals who allege exposure to asbestos from brakes

from either performing or being in the vicinity of individuals who performed brake replacements.

Certain operations that were part of the Bendix business were transferred to Garrett.

In connection with the Spin-Off, Garrett ASASCO, a wholly owned indirect subsidiary of the Company, entered into the Honeywell Indemnity Agreement with Honeywell on September 12, 2018.

As of the Spin-Off date of October 1, 2018, Garrett ASASCO was obligated to make payments to Honeywell in amounts equal to 90 % of Honeywell’s asbestos-related liability payments and accounts payable, primarily related to the Bendix business in the United States, as well as certain environmental-related liability payments and accounts payable and non-United States asbestos-related liability payments and accounts payable, in each case related to legacy elements of the Business, including the legal costs of defending and resolving such liabilities, less 90 % of Honeywell’s net insurance receipts and, as may be applicable, certain other recoveries associated with such liabilities.

Pursuant to the terms of this Honeywell Indemnity Agreement, Garrett ASASCO was responsible for paying to Honeywell such amounts, up to a cap of an amount equal to the Euro-to-U.S.

dollar exchange rate determined by Honeywell as of a date within two business days prior to the date of the Distribution (1.16977 USD = 1 EUR) equivalent of $ 175 million in respect of such liabilities arising in any given calendar year.

The Honeywell Agreements governed the respective rights, responsibilities and obligations of Honeywell and us after the Spin-Off with respect to all tax matters (including tax liabilities, tax attributes, tax returns and tax contests).

The Tax Matters Agreement generally provided that, following the Spin-Off date of October 1, 2018, we were responsible and would indemnify Honeywell for all taxes, including income taxes, sales taxes, value-added and payroll taxes, relating to Garrett for all periods, including periods prior to the completion date of the Spin-Off.

For more information see Note 17, Mandatorily Redeemable Series B Preferred Stock.

The following table summarizes our Obligation payable to Honeywell related to these agreements as of December 31, 2020.

For the year ended December 31, 2020 all amounts were reclassified to Liabilities subject to compromise on the Consolidated Balance Sheets:

environmental Tax Matters Total

(Dollars in millions)

Beginning of year $ 1,090 $ 261 $ 1,351

Legal fees expensed 41 — 41

Payments to Honeywell ( 35 ) — ( 35 )

Currency translation adjustment 100 25 125

End of year $ 1,196 $ 286 $ 1,482

Current 2 40 42

Non-current 1,194 246 1,440

Total $ 1,196 $ 286 $ 1,482

As these liabilities were satisfied under the Plan, our Consolidated Balance Sheet as of December 31, 2021 reflects no liabilities related to these matters.

Securities Litigation

6 unchanged sentences

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

plaintiff sought to voluntarily dismiss his claim against Garrett Motion Inc.

On September 28, 2020, the plaintiff sought to voluntarily dismiss his claim against Garrett Motion Inc.

in light of the Company’s bankruptcy;

35 unchanged sentences

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.

The motions to dismiss remain pending before the District Court.

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, Craig Balis, Thierry Mabru 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.

Brazilian Tax Matters

5 unchanged sentences

The letter does not qualify as a formal decision and requires formal recognition from the Judge and from the Federal Judgement Office in charge of the disputes.

On August 21, 2021, we requested such formal recognition from the Judge, which request resulted in a suspension of the claims of the Brazilian Tax Authorities as set out in their initial September 2020 letter, until such a time as the Judge makes a formal determination on

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.

3 unchanged sentences

We recognize a liability for any contingency that is probable of occurrence 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.

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.

Warranties and Guarantees

5 unchanged sentences

Year Ended December 31,

2021 2020 2019

(Dollars in millions)

2 unchanged sentences

Settlement of warranty/guarantee claims ( 17 ) ( 19 )

Amounts reclassified from/(to) Liabilities subject to compromise 16 ( 16 ) —

$ 32 $ 14 $ 29

Amounts reclassified from Liabilities subject to compromise — 16

Foreign currency translation ( 2 ) —

Defined Benefit Pension Plans

3 unchanged sentences

employees are provided through a non-contributory, qualified defined benefit plan.

All non-union hourly and salaried employees that joined the Business or Garrett for the first time after December 31, 2012, are not eligible to participate in our U.S.

defined benefit pension plans.

We also sponsor defined benefit pension plans which cover non-U.S.

13 unchanged sentences

Interest cost 5 4 2 1

Plan amendments — — — ( 10 )

Actuarial (gains) losses (1)

20 unchanged sentences

Accrued pension liabilities- non-current (4)

Liabilities subject to compromise (5)

— — ( 17 ) ( 47 )

5 unchanged sentences

The increase in discount rates led to an assumption gain of $ 54 million in Ireland and $ 28 million in Switzerland.

Changes in demographic assumptions in Switzerland led to an additional gain of $ 11 million.

Lower actual salary increases led to a further gain of $ 5 million in Ireland.

This overall financial gain was offset by a loss of $ 8 million in Switzerland, attributable to an increase in projected benefits.

The overall financial gain was offset by a losses of $ 10 million and $ 9 million attributable to changes in interest credited rate demographic assumptions in Switzerland, and increases in salary rates and mortality rate demographic assumptions in Ireland, respectively.

(2) In Switzerland, the total lump sum benefit payments of $ 10 million were greater than the service cost and interest cost for year ended December 31, 2022, therefore settlement accounting was applied.

Following the settlement accounting, part of the previously unrecognized loss, approximately $ 1 million was recognized as pension settlement expense.

Following the settlement accounting, part of the previously unrecognized gain amounting to approximately $ 1 million was recognized as a gain on pension settlement.

(3) Included in Other assets in the Consolidated Balance Sheet.

(4) Included in Other liabilities in the Consolidated Balance Sheet.

(5) Included in Liabilities subject to compromise in the Consolidated Balance Sheet for the year ended December 31, 2020.

Amounts recognized in Accumulated other comprehensive (income) loss associated with our significant pension and other postretirement benefit plans at December 31, 2021 and December 31, 2020 are as follows:

Amounts recognized in Accumulated other comprehensive (income) loss associated with our significant pension and other postretirement benefit plans as of December 31, 2022 and 2021 are as follow:

Pension Benefits

15 unchanged sentences

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

Recognition of actuarial losses — — — — 13 13

Recognition of actuarial gains — — — ( 27 ) — 13

Settlements and curtailments (1)

— — — ( 1 ) — 1

Net periodic (income) benefit cost $ ( 3 ) $ ( 5 ) $ ( 4 ) $ ( 26 ) $ 4 $ 19

1 unchanged sentence

(1) In Switzerland, the total lump sum benefit payments of $ 10 million were greater than the service cost and interest cost for year ended December 31, 2022, therefore settlement accounting was applied.

Following the settlement accounting, part of the previously unrecognized loss, approximately $ 1 million was recognized as pension settlement expense.

Other Changes in Plan Assets and Benefits Obligations

Recognized in U.S.

Following the settlement accounting, part of the previously unrecognized gain amounting to approximately $ 1 million was recognized as gain on pension settlement.

Other Changes in Plan Assets and Benefits Obligations Recognized in

Other Comprehensive (Income) Loss U.S.

Plans Non-U.S.

Other Comprehensive (Income) Loss 2021 2020 2019 2021 2020 2019

2022 2021 2020 2022 2021 2020

(Dollars in millions)

6 unchanged sentences

Total recognized in net periodic benefit (income) cost and other comprehensive (income) loss $ 11 $ ( 15 ) $ ( 1 ) $ ( 28 ) $ ( 29 ) $ 12

Major actuarial assumptions used in determining the benefit obligations and net periodic benefit (income) cost for our significant benefit plans are presented in the following table as weighted averages.

The main actuarial assumptions used in determining the benefit obligations and net periodic (income) benefit cost for our significant benefit plans are presented in the following table as weighted averages.

Pension Benefits

1 unchanged sentence

2022 2021 2020 2022 2021 2020

(Dollars in millions)

Actuarial assumptions used to determine benefit obligations as of December 31:

11 unchanged sentences

(1) Only applicable to the defined benefit pension plan in Switzerland.

The discount rate for our significant pension plans reflects the current rate at which the associated liabilities could be settled at the measurement date of December 31, 2021 .

The discount rates for our significant pension plans reflect the current rates at which the associated liabilities could be settled at the measurement date of December 31, 2022 .

To determine the discount rates, we use a modeling process that involves matching the expected cash outflows of our benefit plans to a yield curve constructed from a portfolio of high quality, fixed-income debt instruments.

13 unchanged sentences

Our target allocations are as follows:

76 % fixed income securities, 15 % global equity securities, 5 % real estate investments, 2 % multi-asset credit income securities, and 2 % hedge funds bonds.

60 % global equity securities, 20 % real estate investments, 10 % multi-asset credit income securities, and 10 % hedge funds.

Global equity securities include mutual funds that invest in companies located both inside and outside the United States.

1 unchanged sentence

The multi-asset credit funds invest in diversified geographies, asset classes and credit instruments to capture global credit risk premiums.

The hedge funds are pooled investments structured to reduce volatility of returns and long-term return enhancements .

The hedge funds are pooled investments structured to reduce volatility of returns and

long-term return enhancements .

Our assets are reviewed on a daily basis to ensure that we are within the targeted asset allocation ranges and, if necessary, asset balances are adjusted back within target allocations.

6 unchanged sentences

(Dollars in millions)

Cash $ 4 $ 4 $ — $ —

Cash and cash equivalents $ 1 $ 1 $ — $ —

Equity funds 21 — 21 —

2 unchanged sentences

Real estate funds 11 — 11 —

Other 3 — 3 —

Total assets at fair value $ 169 $ 1 $ 168 $ 168 $ —

2 unchanged sentences

(Dollars in millions)

Cash and cash equivalents $ 4 $ 4 $ — $ —

Equity funds 34 — 34 —

Short-term investments 2 — 2 —

Government bond funds 39 — 39 —

Corporate bond funds 135 — 135 —

9 unchanged sentences

Real estate funds 17 — 17 —

Other 13 — 13 —

Total assets at fair value $ 152 $ 3 $ 149 $ —

73 unchanged sentences

Unaudited Quarterly Financial Information

The following tables show selected unaudited quarterly results of operations for 2021 and 2020.

The quarterly data have been prepared on the same basis as the audited annual financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair statement of our results of operations for these periods.

Basic and diluted earnings per share for the quarterly periods ended June 30, 2021 and September 30, 2021 have been corrected versus information previously filed in our quarterly reports Form 10-Q to correct for the calculation using the two-class method.

March 31 June 30 September 30 December 31

The following tables show selected unaudited quarterly results of operations for the years ended December 31, 2022 and 2021.

The quarterly data have been prepared on the same basis as the audited annual financial statements and include

all adjustments, which include only normal recurring adjustments, necessary for the fair statement of our results of operations for these periods.

March 31 June 30 September 30 December 31 Year Ended December 31

(Dollars in millions)

1 unchanged sentence

Gross Profit 175 169 178 161 683

Net (Loss) Income ( 105 ) 409 63 128 495

Net (Loss) Income available for distribution ( 105 ) 385 27 91 398

Earnings (loss) per share - basic ( 1.38 ) 1.63 0.09 0.29 1.69

Earnings (loss) per share - diluted ( 1.38 ) 1.29 0.09 0.29 1.56

March 31 June 30 September 30 December 31

Year Ended December 31

Net Income 88 85 105 112 390

Net Income available for distribution 50 46 65 72 233

Earnings per share - basic 0.15 0.15 0.21 0.23 0.75

Earnings per share - diluted 0.15 0.15 0.21 0.23 0.75

Earnings per share - diluted method Two-class Two-class Two-class Two-class Two-class

March 31 June 30 September 30 December 31 Year Ended December 31

(Dollars in millions)

2 unchanged sentences

Net Income (Loss) ( 105 ) 409 63 128 495

Net Income (Loss) available to common shareholders ( 105 ) 385 27 91 398

Earnings (loss) per share - basic ( 1.38 ) 1.63 0.09 0.29 1.69

Earnings (loss) per share - diluted ( 1.38 ) 1.29 0.09 0.29 1.56

Earnings (loss) per share - diluted method If-converted Two-class Two-class If-converted

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data