Garrett Motion Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations, which we refer to as our “MD&A,” should be read in conjunction with our Consolidated Interim Financial Statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q as well as the audited annual Consolidated Financial Statements for the year ended December 31, 2022, included in our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on February 14, 2023 (our “2022 Form 10-K”). Some of the information contained in this MD&A or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many important factors, including those set forth in the “Risk Factors” section of our 2022 Form 10-K and this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in, or implied, by these forward-looking statements. The following MD&A is intended to help you understand the results of operations and financial condition of Garrett Motion Inc., for the three months ended March 31, 2023. Executive Summary For the three months ended March 31, 2023, net sales were $970 million, an increase compared to prior year of $69 million or 8%, including an unfavorable impact of $47 million or 5% due to foreign currency translation driven by lower Euro-to-US dollar exchange rates. This increase was driven by higher volumes as the industry recovers and the semiconductor shortages experienced in the prior year abate, as well as share of demand gains from new product ramp-ups and launches, and inflation recoveries net of pricing across all product lines. For the three months ended March 31, 2023, our light vehicle product sales (which comprise diesel and gasoline products, including products for passenger cars, SUVs, light trucks, and other products) accounted for approximately 69% of our revenues. Commercial vehicle product sales (products for on- and off-highway trucks, construction, agriculture and power-generation machines) accounted for 19% of our revenues. Our OEM sales contributed approximately 88% of our revenues while our aftermarket and other products contributed 12% of our revenues. Approximately 51% of our revenues came from sales to customers located in Europe, 29% from sales to customers located in Asia, 18% from sales to customers in North America, and 2% from sales to customers in other international markets. On March 8, 2023, we declared a cash dividend of $0.17 per share on our Series A Preferred Stock, payable to shareholders of record as of the close of business on March 22, 2023. On March 29, 2023, we transferred the aggregate dividend amount of $42 million to the transfer agent, for the settlement of the dividend to the shareholders of record, which occurred on April 3, 2023. On April 12, 2023, we entered into separate transaction agreements with Centerbridge and Oaktree (collectively, the "Transaction Agreements") to effect a series of integrated transactions designed to increase the attractiveness of the Company to investors, including by simplifying our capital structure through a conversion of all shares of the Series A Preferred Stock into shares of Common Stock on or about July 3, 2023. The transactions contemplated by the Transaction Agreements include, among other things, the cash repurchase of approximately $570 million of shares of Series A Preferred Stock, comprised of approximately $280 million of shares from Centerbridge and approximately $290 million of shares from Oaktree, subject to the successful completion by the Company of a debt financing of approximately $700 million, which the Company currently intends to be in the form of a new $700 million term loan B. The Board of Directors has also approved, and each of Centerbridge and Oaktree have consented to, an amendment and restatement of the Certificate of Designation of the Series A Preferred Stock. In connection with the conversion of the Series A Preferred Stock, holders of Series A Preferred Stock will receive accrued and unpaid dividends on their shares until conversion, as well as certain other dividends and amounts payable in respect of their shares, including an additional amount that represents the dividends that would have accrued on the Series A Preferred Stock through September 30, 2023. As part of the Agreements, Centerbridge and Oaktree have also agreed with the Company to certain changes to their governance rights under the Company’s governance documents, including a reduction of their existing board nomination rights, as well as lock-up restrictions on their equity securities of the Company for up to twelve months, and certain limits on their ability to purchase additional equity securities of the Company and to voting limitations, in each case for a period of up to eighteen months. The foregoing description of the transactions does not purport to be complete and is qualified in its entirety by reference to the full text of the Transaction Agreements, which are incorporated by reference as Exhibits 10.1 and 10.2 to this Quarterly Report on Form 10-Q. On April 12, 2023, the Board of Directors also authorized an increase in our share repurchase program, from $100 million to an aggregate amount of $250 million available as of April 12, 2023. 22 Disaggregated Revenue The following tables show our revenues by geographic region and product line for the three months ended March 31, 2023 and 2022, respectively. By Region Three Months Ended March 31, 2023 2022 (Dollars in millions) United States $ 173 18% $ 153 17% Europe 497 51% 451 50% Asia 282 29% 282 31% Other 18 2% 15 2% Total $ 970 $ 901 By Product Line Three Months Ended March 31, 2023 2022 (Dollars in millions) Diesel $ 262 27% $ 254 28% Gas 403 42% 363 40% Commercial Vehicle 183 19% 166 19% Aftermarket 110 11% 105 12% Other 12 1% 13 1% Total $ 970 $ 901 Results of Operations for the Three Months Ended March 31, 2023 Net Sales Three Months Ended March 31, 2023 2022 (Dollars in millions) Net sales $ 970 $ 901 % change compared with prior period 7.7 % For the three months ended March 31, 2023, net sales increased compared to prior year by $69 million or 8%, including an unfavorable impact of $47 million or 5% due to foreign currency translation driven by lower Euro-to-US dollar exchange rates. This increase was driven by volume upside as the industry recovers and the semiconductor shortages experienced in the prior year abate, as well as share of demand gains from new product ramp-ups and launches, and inflation recoveries net of pricing across all product lines. 23 Gasoline product sales increased by $40 million or 11% (including an unfavorable impact of $21 million or 6% due to foreign currency translation), primarily driven by industry recovery including reduced semiconductor shortages versus prior year, as well as new product launches in Europe, Asia and North America. Diesel product sales increased by $8 million or 3% (including an unfavorable impact of $13 million or 5% due to foreign currency translation), primarily driven by industry recovery in Europe, Korea and North America, balanced by soft light commercial vehicle demand in China affected by ripple effects from the end of their zero COVID policy. Commercial vehicle sales increased by $17 million or 10% (including an unfavorable impact of $9 million or 5% due to foreign currency translation), primarily driven by strong demand in Europe, Japan and North America in a less disruptive environment for both on and off-highway products combined with the ramp up to peak volumes on new programs. Aftermarket sales improved by $5 million or 5% (including an unfavorable impact of $3 million or 3% due to foreign currency translation), primarily due to strong demand in Europe and Asia Pacific related to favorable aftermarket conditions such as continued high demand for replacement parts, recovery in China from the end of their zero COVID policy, as well as growth through new product introductions, favorable pricing impacts and improved shipment performance. Cost of Goods Sold and Gross Profit Three Months Ended March 31, 2023 2022 (Dollars in millions) Cost of goods sold $ 781 $ 726 % change compared with prior period 7.6 % Gross profit percentage 19.5 % 19.4 % Cost of Goods Sold Gross Profit (Dollars in millions) Cost of Goods Sold / Gross Profit for the three months ended March 31, 2022 $ 726 $ 175 Increase/(decrease) due to: Volume 41 18 Product mix 34 4 Price, net of inflation pass-through — 23 Commodity, transportation & energy inflation 26 (26) Productivity, net (13) 8 Research & development 3 (3) Foreign exchange rate impacts (36) (10) Cost of Goods Sold / Gross Profit for the three months ended March 31, 2023 $ 781 781 $ 189 For the three months ended March 31, 2023, cost of goods sold increased by $55 million, primarily driven by our higher sales volumes and product mix, which contributed to increases of $41 million and $34 million, respectively. Cost of goods sold further increased due to $26 million of inflation on commodities, energy and transportation, as well as a $3 million increase in Research and development ("R&D") costs which reflects our shift in investment in new technologies and headcount increase year-over-year. Our continued focus on productivity, net of labor inflation, contributed to a decrease in cost of goods sold of $13 million. Foreign currency impacts from transactional, translational and hedging effects also contributed to decreases of $36 million. Gross profit increased by $14 million, mainly driven by the higher sales volumes of $18 million and $23 million of inflation recoveries from customer pass-through agreements net of pricing reductions. Furthermore, gross profit increased $8 million from higher productivity net of labor inflation and $4 million of favorable product mix. These increases were partially offset by $26 million inflation on commodities, energy costs and transportation, as discussed above, and $3 million of higher R&D costs. Foreign currency impacts from transactional, translational and hedging effects also contributed to decreases of $10 million. 24 Selling, General and Administrative Expenses Three Months Ended March 31, 2023 2022 (Dollars in millions) Selling, general and administrative expense $ 56 $ 53 % of sales 5.8 % 5.9 % Selling, general and administrative (“SG&A”) expenses for the three months ended March 31, 2023 increased by $3 million compared with the prior year, primarily due to $3 million of lower incentive compensation expense in 2022 and $2 million of consultant fees related to our capital structure transformation, partially offset by $2 million of favorable impacts from foreign exchange rates. Interest Expense Three Months Ended March 31, 2023 2022 (Dollars in millions) Interest expense $ 28 $ 23 For the three months ended March 31, 2023, interest expense increased by $5 million compared to the prior year, primarily due to $7 million of interest expense recorded from unrealized marked-to-market losses on our interest rate swaps. Non-operating income Three Months Ended March 31, 2023 2022 (Dollars in millions) Non-operating income $ (4) $ (28) For the three months ended March 31, 2023, non-operating income decreased by $24 million from $28 million in the prior year period, primarily related to $27 million of interest income recorded in 2022 from unrealized marked-to-market gains on our interest rate swaps. Tax Expense Three Months Ended March 31, 2023 2022 (Dollars in millions) Tax expense $ 27 $ 37 Effective tax rate 25.0 % 29.6 % The decrease in the effective tax rate for the three months ended March 31, 2023 compared to the prior period is primarily related to a decrease in tax reserve true ups and additional global research and development benefits. Net Income Three Months Ended March 31, 2023 2022 (Dollars in millions) Net income $ 81 $ 88 Net income margin 8.4 % 9.8 % 25 Net income for the three months ended March 31, 2023 decreased by $7 million compared with the prior year, primarily due to $24 million of lower non-operating income and $5 million of higher interest expense, partially offset by $14 million increase in gross profit and $10 million of lower tax expense, as discussed in the above sections. Non-GAAP Measures It is management’s intent to provide non-GAAP financial information to supplement the understanding of our business operations and performance, and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure is presented along with the most directly comparable GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure. The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be comparable to other similarly titled measures used by other companies. Additionally, the non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of the Company’s operating results as reported under GAAP. EBITDA and Adjusted EBITDA (1) Three Months Ended March 31, 2023 2022 (Dollars in millions) Net income (GAAP) $ 81 $ 88 Interest expense, net of interest income 27 (4) Tax expense 27 37 Depreciation 21 22 EBITDA (Non-GAAP) 156 143 Reorganization items, net (2) — 1 Stock compensation expense (3) 3 2 Repositioning costs (4) 7 1 Discounting costs on factoring 1 1 Other non-operating income (5) (1) (2) Capital structure transformation costs (6) 2 — Adjusted EBITDA (Non-GAAP) $ 168 $ 146 (1) We evaluate performance on the basis of EBITDA and Adjusted EBITDA. We define “EBITDA” as our net income calculated in accordance with U.S. GAAP, plus the sum of net interest expense, tax expense and depreciation. We define “Adjusted EBITDA” as EBITDA, plus the sum of net reorganization items, stock compensation expense, repositioning costs, discounting costs on factoring, other non-operating income and capital structure transformation costs. We believe that EBITDA and Adjusted EBITDA are important indicators of operating performance and provide useful information for investors because: • EBITDA and Adjusted EBITDA exclude the effects of income taxes, as well as the effects of financing and investing activities by eliminating the effects of interest and depreciation expenses and therefore more closely measure our operational performance; and • certain adjustment items, while periodically affecting our results, may vary significantly from period to period and have disproportionate effect in a given period, which affects the comparability of our results. In addition, our management may use Adjusted EBITDA in setting performance incentive targets to align performance measurement with operational performance. (2) The Company applied ASC 852 for periods subsequent to September 20, 2020, the 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, to distinguish transactions and events that were directly associated with the Company’s reorganization from the ongoing operations of the business. Accordingly, certain expenses and gains incurred related to these transactions and events were recorded within Reorganization items, net in the Consolidated Interim Statements of Operations. 26 (3) Stock compensation expense includes only non-cash expenses. (4) Repositioning costs includes severance costs related to restructuring projects to improve future productivity. (5) Reflects the non-service component of net periodic pension costs and other income that are non-recurring or not considered directly related to the Company's operations. (6) Reflects the third-party incremental costs that are directly attributable to the transformation of the Company's capital structure through the partial redemption and subsequent conversion of remaining outstanding Series A Preferred Stock into a single class of common stock. Adjusted EBITDA for the Three Months Ended March 31, 2023 For the three months ended March 31, 2023, net income decreased by $7 million versus the prior year as discussed above within the Results of Operations for the Three Months Ended March 31, 2023 section. Adjusted EBITDA increased by $22 million compared to the prior year, mainly due to volume increases, increased productivity and inflation pass-through net of pricing. These increases in Adjusted EBITDA were partially offset by inflation on commodities, energy and transportation, as well as unfavorable foreign exchange impacts. During the three months ended March 31, 2023, we saw strong customer demand increases in all verticals, in a less disruptive environment, as the industry recovers and the semiconductor shortages experienced in the prior year abate, as well as favorable impacts from new product launches in gasoline. We also saw ramp up to peak volumes on programs in commercial vehicles and favorable aftermarket conditions such as continued high demand for replacement parts, recovery in China from the end of their zero COVID policy, as well as growth through new product introductions, favorable pricing impacts and improved shipment performance. We maintained our focus on productivity in the current year as rising commodity prices led to higher raw material costs, particularly for nickel, aluminum and steel alloys. We recovered a majority of the increases from our customer pass-through agreements, especially for nickel, and continue to negotiate with our customers for further pass-through while actively managing our supply base and cost recovery mechanisms to minimize the impact of materials cost inflation. The increased productivity was partially offset by year-over-year labor inflation and increases in our SG&A expenses due primarily to lower incentive compensation expense in the prior year. R&D expenses increased $3 million which reflects our shift in investment in new technologies, increased hiring to accelerate growth in the new technologies and year-over-year labor inflation. Losses in foreign currency from translational, transactional and hedging effects in the three months ended March 31, 2023, primarily driven by a lower Euro-to-US dollar exchange rate versus the prior-year period, also accounted for a $6 million decrease in Adjusted EBITDA. 27 Liquidity and Capital Resources We employ several means to manage our liquidity, and our sources of financing include cash flows from operations, cash and cash equivalents, our Term Loan Facilities, and Revolving Facility. As of March 31, 2023, the Company reported a cash and cash equivalents position of $291 million (not including $1 million in restricted cash as of March 31, 2023) as compared to $246 million as of December 31, 2022 (not including $2 million in restricted cash as of December 31, 2022). The Company had no borrowings or letters of credit outstanding under the Revolving Facility, and available borrowing capacity of $475 million. In addition, as of March 31, 2023, the Company had $1,193 million of principal outstanding on its Term Loan Facilities and had utilized $12 million of the bilateral letter of credit facilities with $3 million of remaining available capacity. During the three months ended March 31, 2023, we repaid $2 million on our Dollar Facility. Additionally, holders of our Series A Preferred Stock are entitled to receive, when, as and if declared by a committee of disinterested directors of the Board out of funds legally available for such dividend, cumulative cash dividends at an annual rate of 11% on the stated amount per share plus the amount of any accrued and unpaid dividends on such share. These dividends accumulate whether or not declared. During the three months ended March 31, 2023, we declared a cash dividend of $0.17 per share on our Series A Preferred Stock for a total aggregate dividend of $42 million. As of March 31, 2023, the aggregate accumulated undeclared and unpaid dividend was approximately $169 million . As disclosed in our 2022 Form 10-K, we expect to continue investing in our facilities as we expand our manufacturing capacity for new product launches and invest in strategic growth opportunities, in particular in the electrification of drivetrains. We believe the combination of expected cash flows, the term loan borrowings, and the Revolving Facility being committed until 2026, will provide us with adequate liquidity to support the Company's operations. Following the definitive agreements entered into with Centerbridge and Oaktree to simplify the Company’s capital stock by converting all outstanding Series A Preferred Stock into a single class of Common Stock as previously discussed, we furthermore expect to enter into a new term loan B under our existing Credit Facilities for approximately $700 million in Q2 2023. We further expect to utilize the borrowings from the new term loan B to fund the repurchases of Series A Preferred Stock from Centerbridge and Oaktree, as well as cash payment of some or all of the preference dividends due to holders of Series A Preferred Stock upon conversion of the Series A Preferred Stock into Common Stock. Share Repurchase Program On November 16, 2021, the Board of Directors authorized a $100 million share repurchase program for one year, providing for the purchase of shares of Series A Preferred Stock and Common Stock. The share repurchase program was subsequently extended until November 15, 2023. As of March 31, 2023, the Company had repurchas ed $26 million of Series A Preferred Stock and Common Stock, with $74 million remaining under the share repurchase program. On April 12, 2023, the Board of Directors authorized an increase in the share repurchase program to an aggregate amount of $250 million available as of that date. For more information, see Item 2. Unregistered Sales of Equity Securities and Use of Proceeds . Cash Flow Summary for the Three Months Ended March 31, 2023 Three Months Ended March 31, 2023 2022 (Dollars in millions) Cash provided by (used for): Operating activities $ 92 $ 73 Investing activities (8) (29) Financing activities (44) (196) Effect of exchange rate changes on cash and restricted cash 4 8 Net increase (decrease) in cash, cash equivalents and restricted cash $ 44 $ (144) Cash provided by operating activities increased by $19 million for the three months ended March 31, 2023 versus the prior year, primarily due to an increase of $31 million in net income excluding non-cash charges and favorable impacts 28 from other assets and liabilities of $26 million, partially offset by unfavorable impacts from changes in working capital of $38 million. Cash used for investing activities decreased by $21 million for the three months ended March 31, 2023 versus the prior year due to decreased expenditures for property, plant and equipment. Cash used for financing activities decreased by $152 million for the three months ended March 31, 2023 compared with the prior year. The change was driven by $186 million paid in the prior year period for the final early redemption of our Series B Preferred Stock (exclusive of $11 million attributable to interest and included in cash from operating activities). Additionally, in the prior year period, there were payments of $2 million for repurchases of Series A Preferred Stock and Common Stock pursuant to the Company's share repurchase program, and $6 million incurred as debt financing costs, mainly on our Revolving Facility. During the three months ended March 31, 2023, $42 million of cash was transferred to the transfer agent for settlement of our Series A Preferred Stock dividend declared on March 8, 2023. Off-Balance Sheet Arrangements We do not engage in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. Critical Accounting Policies The preparation of our Consolidated Interim Financial Statements in accordance with generally accepted accounting principles is based on the selection and application of accounting policies that require us to make significant estimates and assumptions about the effects of matters that are inherently uncertain. Actual results could differ from our estimates and assumptions, and any such differences could be material to our financial statements. Our critical accounting policies are summarized in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our 2022 Form 10-K. Recent Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies of the Notes to the Consolidated Interim Financial Statements for further discussion of recent accounting pronouncements. Special Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including without limitation statements regarding the following, are forward-looking statements: statements regarding our future results of operations and financial position, results of operations and financial position, expectations regarding the growth of the turbocharger and electric vehicle markets and other industry trends, the sufficiency of our cash and cash equivalents, anticipated sources and uses of cash, anticipated investments in our business, our business strategy, pending litigation, anticipated interest expense, and the plans and objectives of management for future operations and capital expenditures are forward-looking statements . These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including: 29 • increases in the costs and availability of raw materials, components, energy and transportation and our ability to offset inflation; • sales to major customers as well as a network of independent dealers to manage the distribution of our products, and we could be adversely impacted by the loss of any of our such major customers or dealers, changes in their requirements for our products or changes in their financial condition. • the negotiating positions of our customers and our ability to negotiate favorable pricing terms; • risks associated with changes in the automotive industry and our inability, or a perception that we are unable, to respond appropriately to such changes, our financial condition and results of operations could be adversely impacted; • risks associated with any program launch difficulties and inaccuracies in estimates of volumes of awarded business; • changes in the automotive industry and economic or competitive conditions; • risks related to economic, political, regulatory and foreign exchange; • geopolitical conditions, such as the ongoing conflict between Russia and Ukraine, and catastrophic events, such as the Covid-19 pandemic; • risks related to international operations and our investment in foreign markets; • risks of increased scrutiny from customers, investors, regulators and others regarding sustainability/ESG practices, as well as the climate-related risks we may face, each of which could expose us to liabilities, including reputational harm, impact demand for our products, lead to increased costs and have other adverse effects on our business, supply chain and results of operations; • risks associated with joint venture partnerships and joint development projects; • any failure to protect our intellectual property or allegations that we have infringed the intellectual property of others; and our ability to license necessary intellectual property from third parties; • work stoppages, other disruptions or the need to relocate any of our facilities; • inability to recruit and retain qualified personnel; • any failure to increase productivity or successfully execute repositioning projects or manage our workforce; • potential material losses and costs as a result of any warranty claims and product liability actions brought against us; • the commencement of any lawsuits, investigations and disputes arising out of our current and historical businesses, and the consequences thereof; • potential material environmental liabilities and hazards; • risks of changes in the effective tax rates • the effects of any deterioration on industry, economic or financial conditions on our ability to access the capital markets on favorable terms; • quality control and creditworthiness of the suppliers on which we rely; • risks for system or service failures, including cyber or other security incidents, each of which could disrupt business operations, result in loss of critical and confidential information and adversely impact our reputation and results of operations; 30 • risks associated with the Company’s ability to complete its recently announced capital transformation transactions including on the timelines the Company anticipates, the anticipated impacts to the Company of such transactions including on the Company’s stock price, cash flows and anticipated future investments, the availability of debt financing in amounts and on terms acceptable to the Company, and risks relating to potential purchases by the Company of shares of Common Stock and Series A Preferred Stock under the Company’s share repurchase program ; and • the other factors described under the caption “Risk Factors” in our 2022 Form 10-K, as updated in this Quarterly Report on Form 10-Q, and our other filings with the SEC. You should read this Quarterly Report on Form 10-Q and the documents that we reference herein completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the Company’s quantitative and qualitative disclosures about currency, interest rate or commodity price risks as disclosed in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risks, in our 2022 Form 10-K.