What changed in this filing

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Item 9A. Controls and Procedures

2023-02-14 compared with 2022-02-14 · 27 added, 92 removed, 146 unchanged (45% of the section changed)

4 unchanged sentences

In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on management's evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of December 31, 2021, due to the material weakness in internal control over financial reporting described under "Management's Annual Report on Internal Control Over Financial Reporting" below.

Management’s Annual Report on Internal Control Over Financial Reporting

Based on management's evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2022.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.

Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control-Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this assessment, management concluded that, as of December 31, 2021, our internal control over financial reporting was not effective because of the material weakness in internal control over financial reporting as explained herein.

In the course of preparing our Annual Report on Form 10-K and Consolidated Financial Statements for the year ended December 31, 2021, management identified an error in the calculation of its basic and diluted earnings per share for the three and six months ended June 30, 2021 and the three and nine months ended September 30, 2021, resulting from the Company's failure to correctly account for the outstanding shares of Series A Preferred Stock as a participating security in the earnings per share calculations.

Following the identification of the aforementioned error, management performed a root cause analysis and identified that the error related to a deficiency in the design and implementation of effective controls relating to involvement of subject matter experts in management’s review of complex and bespoke transactions.

As such, management determined that a material weakness in internal control over financial reporting existed at that time.

Management has since completed certain remediation steps as set out below.

Deloitte SA, our independent registered public accounting firm, has issued an attestation report on our internal control over financial reporting, which is included in Item 8, Financial Statements and Supplementary Data , of this Annual Report and which report expresses an adverse opinion on the effectiveness of internal control over financial reporting.

Remediation Plan

Our management is committed to remediating the identified material weakness in a timely manner.

In order to remediate the material weakness, management has developed a plan to implement measures designed to ensure that the control deficiencies that resulted in the material weakness are remediated, such that these controls are designed, implemented and operating effectively.

Specifically, subsequent to December 31, 2021, management completed a comprehensive review of our controls and procedures associated with complex and bespoke transactions, including revisiting such transactions with input from relevant subject matter experts as determined necessary, reassessing the understanding of each transaction, evaluating the application of the underlying accounting standards to the transactions, and verifying the completeness, accuracy and reasonableness of the final accounting conclusions.

Management has also since updated the design of our controls to evaluate the need to involve relevant subject matter experts as part of the review controls associated with complex and bespoke accounting transactions.

While management believes the foregoing efforts will effectively remediate the material weakness, the material weakness will not be considered fully remediated until all aspects of the remediation plan have been implemented and such controls operate for a sufficient period of time to allow

management to conclude, through testing, that these controls are operating effectively.

The Company will monitor the effectiveness of its remediation plan and will refine its remediation plan as appropriate.

Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2022.

Changes in Internal Control Over Financial Reporting

Other than the identification of the material weakness discussed above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other Information

Restatement of earnings per share

As discussed within Item 9A, Controls and Procedures , the Company concluded that an error was made in the calculation of earnings per share for the three and six months ended June 30, 2021 and the three and nine months ended September 30, 2021.

The following tables present the effect of the restatement on the Company's earnings per share for the aforementioned periods.

Three months ended June 30, 2021 Six months ended June 30, 2021

As reported Adjustment As restated As reported Adjustment As restated

(Dollars in millions except per share amounts)

Basic earnings per share:

Net Income $ 409 $ — $ 409 $ 304 $ — $ 304

preferred stock dividend (24) — (24) (24) — (24)

Net income available for distribution 385 — 385 280 — 280

earnings allocated to participating securities — (271) (271) — (150) (150)

Net income available to common shareholders $ 385 $ (271) $ 114 $ 280 $ (150) $ 130

Weighted average common shares outstanding - Basic 69,667,651 — 69,667,651 72,862,102 — 72,862,102

EPS – Basic $ 5.53 $ (3.90) $ 1.63 $ 3.84 $ (2.05) $ 1.79

Diluted earnings per share:

If-converted If-converted

Net income available to common shareholders $ 409 $ — $ 409 $ 304 $ — $ 304

Weighted average common shares outstanding - Basic 69,667,651 — 69,667,651 72,862,102 — 72,862,102

Dilutive effect of unvested RSUs and other contingently issuable shares — — — — — —

Dilutive effect of participating securities 166,086,887 81,682,075 247,768,962 83,502,247 164,266,715 247,768,962

Weighted average common shares outstanding – Diluted 235,754,538 235,754,538 81,682,075 317,436,613 156,364,349 156,364,349 164,266,715 320,631,064

EPS – Diluted $ 1.73 $ (0.44) $ 1.29 $ 1.94 $ (0.99) $ 0.95

Three months ended September 30, 2021 Nine months ended September 30, 2021

As reported Adjustment As restated As reported Adjustment As restated

(Dollars in millions except per share amounts)

Basic earnings per share:

Net Income $ 63 $ — $ 63 $ 367 $ — $ 367

preferred stock dividend (36) — (36) (60) — (60)

Net income available for distribution 27 — 27 307 — 307

earnings allocated to participating securities — (21) (21) — (203) (203)

Net income available to common shareholders $ 27 $ (21) $ 6 $ 307 $ (203) $ 104

Weighted average common shares outstanding - Basic 65,056,274 — 65,056,274 70,802,999 — 70,802,999

EPS – Basic $ 0.42 $ (0.33) $ 0.09 $ 4.34 $ (2.88) $ 1.46

Diluted earnings per share:

Two-class (1)

Net income available to common shareholders $ 63 $ (57) $ 6 $ 367 $ — $ 367

Weighted average common shares outstanding - Basic 65,056,274 — 65,056,274 70,802,999 — 70,802,999

Dilutive effect of unvested RSUs and other contingently issuable shares 25,069 — 25,069 8,289 — 8,289

Dilutive effect of participating securities 247,763,126 — 247,763,126 138,852,987 108,915,975 247,768,962

Weighted average common shares outstanding – Diluted 312,844,469 — 312,844,469 209,664,275 108,915,975 318,580,250

EPS – Diluted $ 0.20 $ (0.11) $ 0.09 $ 1.75 $ (0.60) $ 1.15

(1) The dilutive effect of participating securities is presented here merely for reference.

The denominator for the calculation of diluted earnings per share under the two-class method is comprised of the weighted average common shares outstanding - basic, and the dilutive effect of unvested RSUs and other contingently issuable shares.

The Company's Consolidated Interim Financial Statements for the above periods are not impacted except as disclosed above.

The changes to basic and diluted earnings per share also do not affect compliance with the financial covenants contained in the Company’s outstanding debt instruments or compliance with any other agreement of the Company or its subsidiaries.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

22 unchanged sentences

Consolidated Balance Sheets as of December 31, 202 2 and 202 1

Consolidated Statements of Cash Flows for the Y ears E nded December 31, 202 1 , 20 20 and 20 19 .

Consolidated Statements of Equity (Deficit) for the Y ears E nded December 202 1 , 20 20 and 20 19 .

Consolidated Statements of Cash Flows for the Years Ended December 31, 202 2 , 202 1 and 20 20

Consolidated Statements of Equity (Deficit) for the Years Ended December 2022, 2021 and 2020

Notes to the Consolidated Financial Statements

13 unchanged sentences

Allowance for expected credit losses $ 13 $ 3 $ ( 11 ) $ — $ — $ 5

$ 4 $ 6 $ ( 3 ) $ 1 $ 5 $ 13

Inventory reserves 41 5 ( 15 ) ( 2 ) — 29

2 unchanged sentences

Allowance for expected credit losses (1)

$ 4 $ 6 $ ( 3 ) $ 1 $ 5 $ 13

Inventory reserves 25 25 ( 11 ) 2 — 41

10 unchanged sentences

8-K 001-38636 3.1 4/30/2021

3.2 Certificate of Designations of the Company’s Series A Preferred Stock

8-K 001-38636 3.2 4/30/2021

3.3 Certificate of Amendment of Certificate of Designations of Series A Cumulative Convertible Preferred Stock of Garrett Motion Inc., filed with the Delaware Secretary of State on July 21, 2021

8-K 001-38636 3.1 7/21/2021

3.4 Second Amended and Restated Certificate of Designations of the Company’s Series B Preferred Stock

3.2 Amended and Restated Certificate of Designations of Series A Cumulative Convertible Preferred Stock of Garrett Motion Inc.

8-K 001-38636 3.1 4/28/2022

3.3 Amendment No.

2 to Certificate of Designation of Series A Cumulative Convertible Preferred Stock of Garrett Motion Inc.

14C 001-38636 2/9/2022

3.4 Third Amended and Restated Bylaws of Garrett Motion Inc., as amended

3 unchanged sentences

10-12B 001-38636 10.1 8/23/2018

10.11† Offer Letter for Daniel Deiro, dated June 1, 2018

10-12B 001-38636 10.3 8/23/2018

10.2† Offer Letter for Thierry Mabru, dated June 1, 2018

2 unchanged sentences

10-12B 001-38636 10.5 8/23/2018

10.14† Letter Agreement, dated May 31, 2018, between Honeywell Transportation Systems and Peter Bracke

10-Q 001-38636 10.2 11/8/2019

10.15† Addendum to Employment Contract, dated as of September 3, 2019, between Garrett Motion Sàrl and Peter Bracke

10-Q 001-38636 10.3 11/8/2019

10.16† Addendum to Employment Agreement, dated June 8, 2020, between Garrett Motion Sàrl and Peter Bracke

10-Q 001-38636 10.2 7/30/2020

10.4† Employment Contract, dated May 29, 2020, between Garrett Motion Sàrl, Garrett Motion Inc.

9 unchanged sentences

8-K 001-38636 10.1 6/19/2020

10.22† Employment Contract, dated July 30, 2021, with Joanne Lau

8-K 001-38636 10.1 10/6/2021

10.23 Credit Agreement, dated April 30, 2021, among Garrett Motion Inc., Garrett LX I S.à r.l., Garrett Motion Holdings, Inc., Garrett Motion Sàrl, the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent

8-K 001-38636 10.1 4/30/2021

10.24 Series A Investor Rights Agreement, dated as of April 30, 2021, among Garrett Motion Inc.

and the investors named therein

8-K 001-38636 10.2 4/30/2021

10.25 Registration Rights Agreement, dated as of April 30, 2021, among Garrett Motion Inc.

and the holders party thereto

8-K 001-38636 10.3 4/30/2021

10.9† Garrett Motion Inc.

13 unchanged sentences

8-K 001-38636 10.5 5/28/2021

10.14 Credit Agreement, dated April 30, 2021, among Garrett Motion Inc., Garrett LX I S.à r.l., Garrett Motion Holdings, Inc., Garrett Motion Sàrl, the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent

8-K 001-38636 10.1 4/30/2021

10.15 Amendment No.

1, dated January 11, 2022, to the Credit Agreement, dated April 30, 2021, among Garrett Motion Inc., Garrett LX I S.à r.l., Garrett Motion Holdings, Inc., Garrett Motion Sàrl, the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent

10.32† Settlement Agreement between Garrett Motion Sàrl and Peter Bracke, dated as of June 1, 2021.

10-K 001-38636 10.31 2/14/2022

10.16 Amendment No.

2, dated March 23, 2022, to the Credit Agreement, dated April 30, 2021, among Garrett Motion Inc., Garrett LX I S.à r.l., Garrett Motion Holdings, Inc., Garrett Motion Sàrl, the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent

AM 333-256659 10.1 6/9/2022

10.17 Series A Investor Rights Agreement, dated as of April 30, 2021, among Garrett Motion Inc.

and the investors named therein

8-K 001-38636 10.2 4/30/2021

10.18 Registration Rights Agreement, dated as of April 30, 2021, among Garrett Motion Inc.

and the holders party thereto

8-K 001-38636 10.3 4/30/2021

21.1* List of Subsidiaries

31 unchanged sentences

Sean Deason (Principal Financial Officer)

/s/ Joanne Lau Vice President and Corporate Controller (Principal Accounting Officer) February 14, 2022

/s/ Joanne Lau Vice President and Corporate Controller February 14, 2023

Joanne Lau (Principal Accounting Officer)

/s/ Daniel Ninivaggi Chairman of the Board and Director February 14, 2023

5 unchanged sentences

Robert Shanks

/s/ Steven Silver Director February 14, 2022

Steven Silver

/s/ Kevin Mahoney Director February 14, 2023

Kevin Mahoney

/s/ Julia Steyn Director February 14, 2023

2 unchanged sentences

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

What changed 10-K

Item 9A. Controls and Procedures