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Item 1. Financial Statements

2023-10-24 compared with 2023-07-27 · 154 added, 118 removed, 663 unchanged (29% of the section changed)

3 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

2023 2022 2023 2022

8 unchanged sentences

Loss on extinguishment of debt — — — 5

Non-operating expense (income) 7 ( 16 ) 3 ( 44 )

Non-operating income ( 4 ) ( 29 ) ( 1 ) ( 73 )

Reorganization items, net — — — 2

6 unchanged sentences

— — ( 232 ) —

Net (loss) income available for distribution $ ( 201 ) $ 46 $ ( 160 ) $ 96

(Loss) Earnings per common share

Net income (loss) available for distribution $ 57 $ 65 $ ( 103 ) $ 161

Earnings (loss) per common share

Basic $ 0.23 $ 0.21 $ ( 0.73 ) $ 0.52

7 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

2023 2022 2023 2022

3 unchanged sentences

Changes in fair value of effective cash flow hedges, net of tax (Note 16)

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

( 2 ) 9 ( 3 ) 26

Total other comprehensive (loss) income, net of tax ( 3 ) 39 ( 9 ) 62

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

Total other comprehensive income, net of tax 32 64 23 126

Comprehensive income $ 89 $ 169 $ 232 $ 404

2 unchanged sentences

CONSOLIDATED INTERIM BALANCE SHEETS

September 30,

2023 December 31,

25 unchanged sentences

Series A Preferred Stock, par value $ 0.001 ;

zero and 245,089,671 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

zero and 245,089,671 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

Common Stock, par value $ 0.001 ;

1,000,000,000 and 1,000,000,000 shares authorized, 264,653,768 and 64,943,238 issued and 264,403,053 and 64,832,609 outstanding as of June 30, 2023 and December 31, 2022, respectively

1,000,000,000 and 1,000,000,000 shares authorized, 243,305,848 and 64,943,238 issued and 243,011,280 and 64,832,609 outstanding as of September 30, 2023 and December 31, 2022, respectively

Additional paid–in capital 1,188 1,333

7 unchanged sentences

CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

(Dollars in millions) 2023 2022

Nine Months Ended September 30,

(Dollars in millions)

7 unchanged sentences

Loss on remeasurement of forward purchase contract 13 —

Foreign exchange (gain) loss

Foreign exchange loss — 4

Stock compensation expense 12 8

1 unchanged sentence

Change in fair value of derivatives 21 ( 54 )

Other 9 ( 4 )

Changes in assets and liabilities:

24 unchanged sentences

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash ( 1 ) ( 27 )

Net increase (decrease) in cash, cash equivalents and restricted cash

Net decrease in cash, cash equivalents and restricted cash

( 85 ) ( 303 )

Cash, cash equivalents and restricted cash at beginning of the period 248 464

14 unchanged sentences

246 $ — 64 $ — $ 1,333 $ ( 1,485 ) $ 36 $ ( 116 )

— — — — — 81 — 81

Net income — — — — — 81 — 81

Other comprehensive loss, net of tax — — — — — — ( 6 ) ( 6 )

2 unchanged sentences

Balance at March 31, 2023 246 $ — 64 $ — $ 1,336 $ ( 1,446 ) $ 30 $ ( 80 )

246 $ — 64 $ — $ 1,336 $ ( 1,446 ) $ 30 $ ( 80 )

Net income — — — — — 71 — 71

7 unchanged sentences

Balance at June 30, 2023 — $ — 264 $ — $ 1,184 $ ( 1,834 ) $ 27 $ ( 623 )

Net income — — — — — 57 — 57

Repurchases of Common Stock — — ( 21 ) — — ( 161 ) — ( 161 )

Excise tax on share repurchases — — — — — ( 1 ) — ( 1 )

Other comprehensive loss, net of tax — — — — — — 32 32

Stock-based compensation — — — — 4 — — 4

Balance at September 30, 2023

— $ — 243 $ — $ 1,188 $ ( 1,939 ) $ 59 $ ( 692 )

20 unchanged sentences

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

Net income — — — — — 105 — 105

Repurchases of Series A Preferred Stock — — — — ( 1 ) — — ( 1 )

Other comprehensive income, net of tax — — — — — — 64 64

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

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

Balance at September 30, 2022 246 $ — 64 $ — $ 1,331 $ ( 1,555 ) $ 122 $ ( 102 )

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

11 unchanged sentences

The unaudited Consolidated Interim Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and accompanying notes for the year ended December 31, 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”).

The results of operations for the three and six months ended June 30, 2023 and cash flows for the six months ended June 30, 2023 should not necessarily be taken as indicative of the entire year.

The results of operations for the three and nine months ended September 30, 2023 and cash flows for the nine months ended September 30, 2023 should not necessarily be taken as indicative of the entire year.

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

2 unchanged sentences

It has been our practice to establish actual quarterly closing dates using a predetermined fiscal calendar, which requires our businesses to close their books on a Saturday to minimize the potentially disruptive effects of quarterly closing on our business processes.

For differences in actual closing dates that are material to year-over-year comparisons of quarterly or year-to-date results have been adjusted for the three months ended June 30, 2023.

Our actual closing dates for the three months ended June 30, 2023 and 2022 were July 1, 2023 and July 2, 2022 , respectively.

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

Our actual closing date for the three months ended September 30, 2022 was October 1, 2022 .

There was no difference in actual closing date for the three months ended September 30, 2023.

We evaluate segment reporting in accordance with ASC 280, Segment Reporting .

4 unchanged sentences

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

Capital Structure Transformation

On April 12, 2023, the Company entered into separate definitive agreements with each of Centerbridge Partners, L.P.

and funds managed by Oaktree Capital Management, L.P.

to effect a series of integrated transactions (the “Transaction”) designed to increase the attractiveness of the Company to investors, including simplifying the Company’s capital stock by converting all outstanding Series A Preferred Stock into a single class of Common Stock, subject to certain conditions.

Under the Transaction, the Company repurchased 69,707,719 shares of Series A Preferred Stock and converted the remaining 175,337,712 shares of Series A Preferred Stock into an equivalent number of Common Stock.

Total consideration paid to holders of Series A Preferred Stock under the Transaction amounted to cash payments of $ 605 million and the issuance of an additional 25,577,517 shares of Common Stock in settlement of accumulated and

unpaid preference dividends on the Series A Preferred Stock through June 30, 2023.

Capital Structure Transformation Transaction

On April 12, 2023, the Company entered into the Transaction (as defined in Note 15 below) to increase the attractiveness of the Company to investors, including simplifying the Company’s capital stock by converting all outstanding Series A Preferred Stock into a single class of Common Stock, subject to certain conditions.

In the Transaction, the Company repurchased and aggregate of 69,707,719 shares of Series A Preferred Stock from the C&O Investors (as defined below), and converted all remaining outstanding 175,337,712 shares of Series A Preferred Stock into an equivalent number of shares of Common Stock.

The total amounts paid to holders of Series A Preferred Stock in connection with the Transaction included aggregate cash payments of $ 605 million and the issuance of an

additional 25,577,517 shares of Common Stock in settlement of accumulated and unpaid preference dividends on the Series A Preferred Stock through June 30, 2023.

The Transaction was financed through a new Term Loan B for an aggregate principal amount of $ 700 million under the framework of the Company's existing credit agreement.

See Note 15, Series A Preferred Stock .

The Company recorded the following amounts in the Consolidated Interim Financial Statements related to the repurchase and conversion of its Series A Preferred Stock:

Movements for the Six Months Ended

June 30, 2023

Movements for the Nine Months Ended

September 30, 2023

Consolidated Interim Balance Sheet:

3 unchanged sentences

Retained earnings ( 441 )

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Consolidated Interim Statement of Operations:

1 unchanged sentence

Non-operating expenses $ 13

The Company also incurred $ 7 million of Transaction-related costs for the six months ended June 30, 2023, primarily for legal and advisory services that are included in Selling, general and administrative expenses in the Consolidated Interim Statement of Operations.

The Company also incurred $ 9 million of Transaction-related costs for the nine months ended September 30, 2023, primarily for legal and advisory services that are included in Selling, general and administrative expenses in the Consolidated Interim Statement of Operations.

See Note 14, Long-term Debt and Credit Agreement for discussion on the new Term Loan B and Note 15, Series A Preferred Stock for further discussion of the Transaction.

10 unchanged sentences

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

Three Months Ended June 30, 2023

Three Months Ended June 30, 2022

Three Months Ended September 30, 2023

Three Months Ended September 30, 2022

OEM Aftermarket Other Total OEM Aftermarket Other Total

5 unchanged sentences

$ 825 $ 118 $ 17 $ 960 $ 817 $ 115 $ 13 $ 945

Six Months Ended June 30, 2023

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2023

Nine Months Ended September 30, 2022

OEM Aftermarket Other Total OEM Aftermarket Other Total

9 unchanged sentences

Contract assets—January 1 $ 46 $ 63

Contract assets—June 30

Contract assets—September 30

Change in contract assets—(Decrease)/Increase $ ( 2 ) $ ( 12 )

Contract liabilities—January 1 $ ( 8 ) $ ( 5 )

Contract liabilities—June 30

Contract liabilities—September 30

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

5 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

2023 2022 2023 2022

1 unchanged sentence

Research and development costs $ 42 $ 38 $ 128 $ 112

Engineering-related expenses (1)

Engineering-related expenses, net of customer (reimbursements) (1)

( 3 ) 4 ( 8 ) 13

$ 39 $ 42 $ 120 $ 125

(1) Engineering-related expenses include customer reimbursements of $ 13 million and $ 6 million for the three months ended June 30, 2023 and 2022, respectively, and $ 24 million and $ 9 million for the six months ended June 30, 2023 and 2022, respectively.

(1) Engineering-related expenses include customer reimbursements of $ 10 million and $ 6 million for the three months ended September 30, 2023 and 2022, respectively, and $ 34 million and $ 15 million for the nine months ended September 30, 2023 and 2022, respectively.

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

2023 2022 2023 2022

2 unchanged sentences

Effective tax rate 18.6 % 19.8 % 25.1 % 23.0 %

The effective tax rates for the three months ended June 30, 2023 and 2022 were 29.7 % and 19.0 %, respectively.

The effective tax rates for the six months ended June 30, 2023 and 2022 were 27.3 % and 24.8 %, respectively.

The change in the effective tax rate for the three and six months ended June 30, 2023 compared to the prior period is primarily related to non-deductible Transaction-related expenses and a one-time benefit in 2022 related to a change in assertion to permanently reinvest a portion of undistributed earnings in China.

The effective tax rate for the three and six months ended June 30, 2023 was higher than the U.S.

federal statutory rate of 21% primarily because of U.S.

taxes on international operations, withholding taxes and non-deductible Transaction related expenses, partially offset by lower taxes on non-U.S.

The effective tax rate for the three months ended September 30, 2023 is lower than the effective rate for the three months ended September 30, 2022 primarily related to an increase in global research and development benefits, lower taxes on non-U.S.

earnings partially offset by nondeductible expenses, and a prior year non-recurring decrease in withholding taxes on undistributed earnings.

The effective tax rate for the nine months ended September 30, 2023 is higher than the effective rate for the nine months ended September 30, 2022 primarily related to a prior year non-recurring decrease in withholding taxes on undistributed earnings and nondeductible expenses, partially offset by increase in global research and development benefit and lower taxes on non-U.S.

The effective tax rate for the three months ended September 30, 2023 was lower than the U.S.

federal statutory rate of 21% primarily related to a decrease in the annual effective tax rate driven by lower taxes on international operations, partially offset by nondeductible transaction costs.

The effective tax rate for the nine months ended September 30, 2023 was higher than the U.S.

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

earnings and global research and development benefits.

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

tax reform), deductions related to employee share-based payments, internal restructurings, and pension mark-to-market adjustments.

Accounts, Notes and Other Receivables—Net

September 30,

2023 December 31,

4 unchanged sentences

Less—Allowance for expected credit losses

Trade receivables include $ 47 million and $ 46 million of unbilled customer contract asset balances as of June 30, 2023 and December 31, 2022, respectively.

Trade receivables include $ 44 million and $ 46 million of unbilled customer contract asset balances as of September 30, 2023 and December 31, 2022, respectively.

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

6 unchanged sentences

The Company also receives guaranteed bank notes without recourse, in settlement of accounts receivables, primarily in the Asia Pacific region.

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

party financial institutions in exchange for cash.

The Company can hold the bank notes until maturity, exchange them with suppliers to settle liabilities, or sell them to third-party financial institutions in exchange for cash.

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

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

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

2023 2022 2023 2022

2 unchanged sentences

Guaranteed bank notes sold without recourse 41 35 41 102

The expenses related to the sale of trade receivables and guaranteed bank notes are recognized within Other expense, net in the Consolidated Interim Statements of Operations, and were immaterial for the three and six months ended June 30, 2023 and 2022.

The expenses related to the sale of trade receivables and guaranteed bank notes are recognized within Other expense, net in the Consolidated Interim Statements of Operations.

Such expenses amounted to $ 1 million and $ 3 million for the three and nine months ended September 30, 2023, respectively, and were immaterial for the three and nine months ended September 30, 2022.

September 30,

2023 December 31,

2 unchanged sentences

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

As of June 30, 2023 and December 31, 2022, the Company had no guaranteed bank notes pledged as collateral .

As of September 30, 2023 and December 31, 2022, the Company had no guaranteed bank notes pledged as collateral .

Inventories—Net

September 30,

2023 December 31,

4 unchanged sentences

Less—Reserves ( 37 ) ( 31 )

September 30,

2023 December 31,

9 unchanged sentences

The Company also enters into arrangements with banking institutions to issue bankers acceptance drafts in settlement of accounts payables, primarily in the Asia Pacific region.

acceptance drafts, or guaranteed bank notes, have a contractual maturity of six months or less, and may be held by suppliers until maturity, transferred to their suppliers, or discounted with financial institutions in exchange for cash.

The bankers acceptance drafts, or guaranteed bank notes, have a contractual maturity of six months or less, and may be held by suppliers until maturity, transferred to their suppliers, or discounted with financial institutions in exchange for cash.

The supplier financing obligations and guaranteed bank notes outstanding are recorded within Accounts payable in our Consolidated Interim Balance Sheet.

September 30,

2023 December 31,

3 unchanged sentences

Accrued Liabilities

September 30,

2023 December 31,

13 unchanged sentences

Other (primarily operating expenses) (2)

(1) Customer advances and deferred inco me include $ 9 million and $ 8 million of contract liabilities as of June 30, 2023 and December 31, 2022, respectively.

(1) Customer advances and deferred inco me include $ 12 million and $ 8 million of contract liabilities as of September 30, 2023 and December 31, 2022, respectively.

See Note 3, Revenue Recognition and Contracts with Customers .

(2) Includes $ 4 million and $ 3 million of environmental liabilities as of June 30, 2023 and December 31, 2022, respectively.

(2) Includes $ 3 million and $ 3 million of environmental liabilities as of September 30, 2023 and December 31, 2022, respectively.

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

6 unchanged sentences

Non-cash asset write-offs — ( 2 ) ( 2 )

Balance at June 30, 2023

Balance at September 30, 2023

$ 12 $ — $ 12

5 unchanged sentences

Usage—cash ( 5 ) — ( 5 )

Balance at June 30, 2022

Balance at September 30, 2022

Other Liabilities

September 30,

2023 December 31,

1 unchanged sentence

Income taxes $ 104 $ 99

Designated and undesignated derivatives 2 —

Pension and other employee related 17 21

8 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

2023 2022 2023 2022

3 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

2023 2022 2023 2022

6 unchanged sentences

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

September 30,

2023 December 31,

3 unchanged sentences

Other liabilities 33 36

September 30,

2023 December 31, 2022

1 unchanged sentence

Weighted-average discount rate 5.69 % 5.61 %

Maturities of operating lease liabilities as of June 30, 2023 were as follows:

Maturities of operating lease liabilities as of September 30, 2023 were as follows:

(Dollars in millions)

3 unchanged sentences

Long-term Debt and Credit Agreements

The principal outstanding and carrying amounts of our long-term debt as of June 30, 2023 and December 31, 2022 are as follows:

Due Interest Rate June 30,

The principal outstanding and carrying amounts of our long-term debt as of September 30, 2023 and December 31, 2022 are as follows:

Due Interest Rate September 30,

2023 December 31,

12 unchanged sentences

3 (the "Third Amendment") to the Credit Agreement, which provided for additional financing consisting of a five-year secured first-lien U.S.

Dollar term loan facility initially in

the amount of $ 700 million (the “2023 Dollar Term Facility”, together with the 2021 Dollar Term Facility and Euro Term Facility, the "Term Loan Facilities", and together with the Revolving Facility, the "Credit Facilities").

Dollar term loan facility initially in the amount of $ 700 million (the “2023 Dollar Term Facility”, together with the 2021 Dollar Term Facility and Euro Term Facility, the "Term Loan Facilities", and together with the Revolving Facility, the "Credit Facilities").

The full amount of the 2023 Dollar Term Facility was drawn on June 6, 2023 (the "Closing Date"), and the proceeds were primarily used to finance the repurchases of the Series A Preferred Stock as part of the Transaction, and pay fees and expenses incurred in connection with the Third Amendment.

7 unchanged sentences

Letters of credit are available for issuance under the Credit Agreement on terms and conditions customary for financings of this kind, which issuances reduce availability under the Revolving Facility.

As of June 30, 2023, the Company had no loans outstanding under the Revolving Facility, no outstanding letters of credit, and available borrowing capacity of approximately $ 570 million.

As of September 30, 2023, the Company had no loans outstanding under the Revolving Facility, no outstanding letters of credit, and available borrowing capacity of approximately $ 570 million.

Separate from the Revolving Facility, the Company has a bilateral letter of credit facility in the amount of $ 15 million, which matures on April 30, 2026.

As of June 30, 2023, the Company had $ 12 million utilized and $ 3 million of remaining available capacity under such facility.

Minimum scheduled principal repayments of the Credit Facilities as of June 30, 2023 are as follow:

As of September 30, 2023, the Company had $ 12 million utilized and $ 3 million of remaining available capacity under such facility.

Minimum scheduled principal repayments of the Credit Facilities as of September 30, 2023 are as follow:

September 30,

(Dollars in millions)

10 unchanged sentences

The Credit Agreement 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 have excess cash flow (calculated on an annual basis with the required prepayment equal to 50 %, 25 % or 0 % of such excess cash flow, subject to compliance with certain leverage ratios), in each case subject to terms and conditions customary for financings of this kind.

On July 31, 2023, the Company made an early repayment in the amount of $ 200 million on the 2023 Dollar Term Facility.

The early repayment resulted in incremental amortization on debt issuance cost in the amount of $ 9 million, included within Interest Expense in the Consolidated Interim Statement of Operations .

Certain Covenants

1 unchanged sentence

The Revolving Facility also contains a financial covenant requiring the maintenance of a consolidated total leverage ratio of not greater than 4.7 times as of the end of each fiscal quarter if, on the last day of any such fiscal quarter, the aggregate amount of loans and letters of credit (excluding backstopped or cash collateralized letters of credit and other letters of credit with an aggregate face amount not exceeding $ 30 million) outstanding under the Revolving Facility exceeds 35 % of the aggregate commitments in effect thereunder on such date.

As of June 30, 2023, the Company was in compliance with all covenants.

As of September 30, 2023, the Company was in compliance with all covenants.

Series A Preferred Stock

1 unchanged sentence

and funds managed by Oaktree Capital Management, L.P.

(collectively, the “C&O Investors”) to effect a series of integrated transactions (the “Transaction”) designed to increase the attractiveness of the Company to investors, including by simplifying the Company’s capital structure by converting all outstanding Series A Preferred Stock into a single class of Common Stock, subject to certain conditions.

(collectively, the “C&O Investors”) to effect a series of integrated transactions (collectively the “Transaction”) designed to increase the attractiveness of the Company to investors, including by simplifying the Company’s capital structure by converting all outstanding Series A Preferred Stock into a single class of Common Stock, subject to certain conditions.

As part of the Agreements, the holders of a majority of the outstanding shares of the Series A Preferred Stock authorized and approved the amendment and restatement of the certificate of designations for the Series A Preferred Stock (as amended, the “Certificate of Designations”) to, among other things, require the conversion of all shares of Series A Preferred Stock into shares of the Company’s common stock (the “2023 Conversion”), subject to the repurchase by the Company of a portion of the shares of Series A Preferred Stock held by the C&O Investors (the “Series A Repurchase”).

Under the terms of the Agreements, the Company would repurchase a total of $ 570 million (“Base Repurchase Price”) from the C&O Investors at a cash price of $ 8.10 per share which will be adjusted to equal the volume-weighted average price of the Common Stock for the fifteen trading days following the announcement of the transactions (the “ 15 Days VWAP”), subject to a minimum price of $ 7.875 per share and a maximum price of $ 8.50 per share.

Under the terms of the Agreements, the Company agreed to repurchase a total of $ 570 million (“Base Repurchase Price”) of shares of Series A Preferred Stock from the C&O Investors at a cash price of $ 8.10 per share which was subsequently adjusted to equal the volume-weighted average price of the Common Stock for the fifteen trading days following the announcement of the transactions (the “ 15 Days VWAP”), subject to a minimum price of $ 7.875 per share and a maximum price of $ 8.50 per share.

The 15 Days VWAP was subsequently established at a value of $ 8.177 per share.

As part of the Transaction, all holders of Series A Preferred Stock, including the C&O Investors, would receive an amount equal to $ 0.853509 per share of Series A Preferred Stock, representing accumulated and unpaid preference dividends through June 30, 2023 (the “Accumulated Dividends”), as well as $ 0.144375 per share of Series A Preferred Stock, representing the preference dividends that would have accrued on the Series A Preferred Stock from July 1, 2023, through September 30, 2023 (the “Additional Amounts”).

As part of the Transaction, all holders of Series A Preferred Stock, including the C&O Investors, received approximately 0.104379 shares of Common Stock, being an amount equal to $ 0.853509 per share of Series A Preferred Stock, valued at the 15 Days VWAP, representing accumulated and unpaid preference dividends on each share of Series A Preferred Stock through June 30, 2023 (the “Accumulated Dividends”), as well as $ 0.144375 per share of Series A Preferred Stock, representing the preference dividends that would have accrued on the Series A Preferred Stock through September 30, 2023 (the “Additional Amounts”).

As part of the Transaction, following the effectiveness of the Certificate of Designations which occurred on June 6, 2023, the Company completed all steps of the Transaction as follows:

• The Company paid $ 580 million to the C&O Investors in connection with the repurchase of 69,707,719 shares of Series A Preferred Stock, comprising of the Base Repurchase Price as well as $ 10 million ($ 0.144375 for each repurchased share) in consideration of the Additional Amounts on the repurchased shares of Series A Preferred Stock.

• The remaining 175,337,712 shares of Series A Preferred Stock were converted into 175,337,712 shares of Common Stock in accordance with the customary procedures of the Company’s transfer agent, for shares held in registered form, and of the Depository Trust Company, for shares held in street name;

• The remaining 175,337,712 shares of Series A Preferred Stock outstanding following such repurchase were converted into 175,337,712 shares of Common Stock (in accordance with the customary procedures of the Company’s transfer agent, for shares held in registered form, and of the Depository Trust Company, for shares held in street name).

Following the completion of the 2023 Conversion, trading of the Series A Preferred Stock on Nasdaq was suspended;

• As part of the 2023 Conversion, the Company also paid $ 25 million ($ 0.144375 for each converted share) to the holders of Series A Preferred Stock in consideration of the Additional Amounts on the shares of Series A Preferred Stock that were converted;

• The Company issued 25,577,517 shares of Common Stock to all holders of Series A Preferred Stock (equal to $ 0.853509 per share, adjusted to avoid the issuance of fractional shares of Common Stock), in consideration of the Accumulated Dividends of an aggregate amount of $ 209 million.

• Issued 25,577,517 shares of Common Stock to all holders of Series A Preferred Stock (equal to $ 0.853509 per share, valued at the 15 Days VWAP, adjusted to avoid the issuance of fractional shares of Common Stock), in consideration of the Accumulated Dividends of an aggregate amount of $ 209 million.

Cash payments for fractional shares were immaterial.

9 unchanged sentences

A loss of $ 13 million was recognized in Non-operating expense in the Consolidated Interim Statement of Operations to reflect the subsequent remeasurement of fair value of the Agreements due to changes in the market price of the Company’s Common Stock.

The difference between the fair value of consideration transferred under the Agreements and the carrying value of the repurchased Series A Preferred Stock, amounting to $ 201 million, was recorded to Retained Deficit as a deemed dividend on the repurchase of Series A Preferred Stock from the C&O Investors as part of the Transaction.

The difference between the fair value of consideration transferred under the Agreements and the carrying value of the repurchased Series A Preferred Stock, amounting to $ 201 million, was recorded to Retained Deficit as a deemed dividend on the repurchase of shares of Series A Preferred Stock from the C&O Investors as part of the Transaction.

A liability for excise tax, amounting to $ 6 million, was also recorded to Retained Deficit as a deemed dividend.

In connection with the 2023 Conversion, the Company also recognized a deemed dividend on the 2023 Conversion for $ 25 million, corresponding to the Additional Amounts paid to the holders of Series A Preferred Stock on the shares of Series A Preferred Stock that were converted.

Effective after the close of market on June 12, 2023, trading of the Series A Preferred Stock on Nasdaq was suspended, and each holder of shares of Series A Preferred Stock as of the conversion was deemed to hold one share of the Company’s Common Stock for each share of Series A Preferred Stock previously held.

As part of the Agreements, the C&O Investors have 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 Company also announced an increase in its share repurchase authorization to $ 250 million.

On April 12, 2023, the Company also announced an increase in its share repurchase authorization to $ 250 million.

Under the share repurchase program, the Company may repurchase shares of Common Stock in open market transactions, privately negotiated purchases and other transactions from time to time.

The following table summarizes the effects of the Transaction on the Consolidated Interim Balance Sheet as of June 30, 2023 and the Consolidated Interim Statement of Operations for the six months ended June 30, 2023 :

The following table summarizes the effects of the Transaction on the Consolidated Interim Balance Sheet as of September 30, 2023 and the Consolidated Interim Statement of Operations and Consolidated Interim Statement of Cash Flows for the nine months ended September 30, 2023 :

Series A Repurchase 2023 Conversion Settlement of Accumulated Dividends Excise tax on share repurchase Total

12 unchanged sentences

Payments for Additional Amounts for conversion of Series A Preferred Stock — ( 25 ) — — ( 25 )

The Company has also incurred $ 7 million of Transaction-related costs for the six months ended June 30, 2023, primarily for legal and advisory services that are included in Selling, general and administrative expenses in the Consolidated Interim Statement of Operations.

The Company has also incurred $ 9 million of Transaction-related costs for the nine months ended September 30, 2023, primarily for legal and advisory services that are included in Selling, general and administrative expenses in the Consolidated Interim Statement of Operations.

Financial Instruments and Fair Value Measures

Our credit, market and foreign currency risk management policies are described in Note 19, Financial Instruments and Fair Value Measures , to the Consolidated Financial Statements for the year ended December 31, 2022 included in our 2022 Form 10-K.

As of June 30, 2023 and December 31, 2022, we had contracts with aggregate gross notional amounts of $ 3,309 million and $ 2,621 million, respectively, to hedge interest rates and foreign currencies, principally the U.S.

As of September 30, 2023 and December 31, 2022, we had contracts with aggregate gross notional amounts of $ 2,884 million and $ 2,621 million, respectively, to hedge interest rates and foreign currencies, principally the U.S.

Dollar, Swiss Franc, British Pound, Euro, Chinese Yuan, Japanese Yen, Mexican Peso, New Romanian Leu, Czech Koruna, Australian Dollar and Korean Won.

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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 June 30, 2023 and December 31, 2022:

The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2023 and December 31, 2022:

Notional Amounts Assets Liabilities

September 30,

2023 December 31, 2022

September 30,

2023 December 31, 2022

September 30,

2023 December 31, 2022

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Designated forward currency exchange contracts $ 449 $ 565 $ 15 $ 22 (a) $ 6 $ 6 (c)

Designated cross-currency swaps 1,015 715 47 74 (b) 2 — (d)

Designated cross-currency swaps 1,015 715 71 74 (b) — —

Designated interest-rate swaps 200 — 1 — (b) — —

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(d) Recorded within Other liabilities

As of June 30, 2023, the Company had outstanding interest rate swaps with aggregate notional amounts of € 830 million ($ 901 million based on June 30, 2023 foreign exchange rates) and $ 270 million, with maturities of January 2024, April 2024, July 2024, October 2024, April 2025, April 2026, April 2027 and April 2028.

As of September 30, 2023, the Company had outstanding interest rate swaps with aggregate notional amounts of € 830 million ($ 879 million based on September 30, 2023 foreign exchange rates) and $ 200 million, with maturities of April 2024, July 2024, October 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.

The $ 200 million interest rate swaps have been designated as cash flow hedges.

The designated interest rate swaps' fair value were net assets of $ 1 million as of June 30, 2023.

The designated interest rate swaps' fair value were net assets of $ 1 million as of September 30, 2023.

The Company executed cross-currency swaps which have been designated as net investment hedges of its Euro-denominated operations and cash flow hedges to hedge the foreign currency exposure from foreign currency-denominated debt.

In May 2023, the Company re-couponed the cross-currency swap contracts which have been designated as net investment hedges and received a cash settlement of $ 9 million.

As of June 30, 2023, an aggregate notional amount of € 615 million was designated as net investment hedges of the Company’s investment in Euro-denominated operations and € 280 million was designated as cash flow hedges.

The cross-currency swaps’ fair values were net assets o f $ 45 million as of June 30, 2023.

Our Consolidated Interim Statements of Comprehensive Income include Changes in fair value of net investment hedges and cash flow hedges, net of tax, of $ 3 million and $( 2 ) million, during the three and six months ended June 30, 2023, respectively, related to these designated cross-currency swaps.

As of September 30, 2023, an aggregate notional amount of € 615 million was designated as net investment hedges of the Company’s investment in Euro-denominated operations and € 280 million was designated as cash flow hedges.

The cross-currency swaps’ fair values were net assets o f $ 71 million as of September 30, 2023.

Our Consolidated Interim Statements of Comprehensive Income include Changes in fair value of net investment hedges and cash flow hedges, net of tax, of $ 20 million and $ 18 million, during the three and nine months ended September 30, 2023, respectively, related to these designated cross-currency swaps.

No ineffectiveness has been recorded on the designated cross-currency hedges.

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

June 30, 2023

September 30, 2023

December 31, 2022

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Other comprehensive income before reclassifications

( 6 ) 14 ( 2 ) — 6

Amounts reclassified from accumulated other comprehensive income

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Net current period other comprehensive income 8 ( 3 ) 18 — 23

Balance at June 30, 2023

Balance at September 30, 2023

$ ( 36 ) $ 10 $ 103 $ ( 18 ) $ 59

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Other comprehensive income before reclassifications

13 43 87 — 143

Amounts reclassified from accumulated other comprehensive income

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Net current period other comprehensive income 13 26 87 — 126

Balance at June 30, 2022

Balance at September 30, 2022

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

Earnings Per Share

Earnings per share ("EPS") is calculated using the two-class method pursuant to the issuance of our Series A Preferred Stock.

Our Series A Preferred Stock is considered a participating security because holders of the Series A Preferred Stock will also be entitled to such dividends paid to holders of Common Stock to the same extent on an as-converted basis.

For the three months ended September 30, 2023, basic earnings per share ("EPS") is computed using the weighted-average number of common shares outstanding during the period.

For the nine months ended September 30, 2023 as well as the three and nine months ended September 30, 2022, basic earnings per share is calculated using the two-class method as our Series A Preferred Stock, which was converted into Common Stock pursuant to the Transaction, was considered a participating security.

The two-class method 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 then calculated by dividing undistributed earnings allocated to common stock by the weighted

average number of common shares outstanding for the period.

The Series A Preferred Stock is not included in the computation of basic earnings per share in periods in which we have a net loss, as the Series A Preferred Stock is not contractually obligated to share in our net losses.

Diluted earnings per share for the three and six months ended June 30, 2023 and 2022 is calculated using the more dilutive of the two-class or if-converted methods.

Basic earnings per share are then calculated by dividing undistributed earnings allocated to common stock by the weighted average number of common shares outstanding for the period.

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

Diluted earnings per share for the three months ended September 30, 2023 is calculated based on the weighted-average number of common shares outstanding for the period plus the dilutive effect of common stock equivalents using the treasury stock method.

Diluted earnings per share for the nine months ended September 30, 2023 as well as the three and nine months ended September 30, 2022 is calculated using the more dilutive of the two-class or if-converted methods.

The two-class method uses net income available to common shareholders and assumes conversion of all potential shares other than the participating securities.

The if-converted method uses net income and assumes conversion of all potential shares including the participating securities.

The details of the EPS calculations for the three and six months ended June 30, 2023 and 2022 are as follows:

The details of the EPS calculations for the three and nine months ended September 30, 2023 and 2022 are as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Diluted earnings per share:

Two-class Two-class Two-class Two-class

Two-class Two-class Two-class

Weighted average common shares outstanding - Basic 250,888,716 64,820,887 141,745,701 64,834,298

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For the periods where a net loss attributable to common shareholders is present, dilutive securities have been excluded from the calculation of diluted net loss per share attributable to common stockholders as including them would have been anti-dilutive.

For the three and six months ended June 30, 2023, the weighted-average number of unvested RSUs and other contingently issuable shares excluded from the computations were 1,113,778 and 1,358,636 shares, respectively.

For the nine months ended September 30, 2023, the weighted-average number of unvested RSUs and other contingently issuable shares excluded from the computations was 1,349,442 shares.

Related Party Transactions

We lease certain facilities and receive property maintenance services from Honeywell International Inc.

(“Honeywell”), which is a holder of our Common Stock.

(“Honeywell”), which is a holder of our Common Stock and was also a holder of our Series A Preferred Stock prior to the 2023 Conversion as discussed below and in Note 15, Series A Preferred Stock .

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.

Honeywell is not considered a related party subsequent to the 2023 Conversion.

Our payments under the agreements with Honeywell during the period that Honeywell was considered a related party are as follow:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Our payments under the agreements with Honeywell are included in Cost of goods sold and Selling, general and administrative expenses in our Consolidated Interim Statements of Operations.

Related to the agreements with Honeywell, our Consolidated Interim Balance Sheet at June 30, 2023 and our Consolidated Balance Sheet at December 31, 2022 includes liabilities of $ 8 million and $ 10 million, respectively.

Liability balances are primarily related to lease contracts of $ 6 million and $ 7 million as of June 30, 2023 and December 31, 2022, respectively.

Related to the agreements with Honeywell, our Consolidated Balance Sheet at December 31, 2022 includes liabilities of $ 10 million.

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

As discussed in Note 15, Series A Preferred Stock , in order to effect the Transaction, on April 12, 2023, the Company entered into separate definitive agreements with each of Centerbridge Partners, L.P.

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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;

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On March 31, 2023, the action was dismissed with prejudice.

On April 19, 2023, the plaintiffs filed a timely notice of appeal of the trial court's decision to the United States Court of Appeals for the Second Circuit.

No schedule has yet been set by the Appeals Court.

The plaintiffs filed an appeal and the defendants' opposition is due on October 31, 2023.

Brazilian Tax Matter

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

The estimated total amount of the contingency as of June 30, 2023 was $ 38 million including penalties and interest.

estimated total amount of the contingency as of September 30, 2023 was $ 37 million including penalties and interest.

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.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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We expect to make contributions of cash and/or marketable securities of approximately $ 7 million to our non-U.S.

pension plans to satisfy regulatory funding standards in 2023, of which $ 3 million has been contributed as of June 30, 2023.

pension plans to satisfy regulatory funding standards in 2023, of which $ 6 million has been contributed as of September 30, 2023.

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

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

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

Plans Non-U.S.

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This approach provides a more precise measurement of service and interest costs by improving the correlation between projected cash flows and their corresponding spot rates.

Subsequent Events

On July 26, 2023, the Board of Directors of the Company approved the early repayment of approximately $ 200 million of our Term Loan Facilities.

The Company expects the repayment to occur in the third quarter of 2023.

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

What changed 10-Q

Item 1. Financial Statements