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, 2024, included in our 2024 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 various risks and uncertainties. Please refer to the "Special Note Regarding Forward-Looking Statements" below. The following MD&A is intended to help you understand the results of operations and financial condition of Garrett Motion Inc. for the three and six months ended June 30, 2025. Executive Summary During the second quarter of 2025, we continued to navigate macro-economical challenges. Increased demand in light vehicle gasoline, primarily driven by new program launches in Europe, North America and India, was offset by declines in light vehicle volumes, particularly in Europe, and decreased demand for replacement parts in North America. Our sustainable cost measures implemented in the prior year, along with our effective recoveries on enacted import tariffs and a favorable foreign exchange environment, enabled us to achieve Net income of $87 million and Adjusted EBIT of $124 million for the quarter. We continue to have success across our differentiated technologies by winning business across our turbo and zero emission technologies offerings. We have secured ongoing business through the extension of light vehicle programs, and won a significant E-Turbo program in Europe. We have been awarded serial production for our Fuel cell compressor by a leading Asian OEM. Additionally, we received positive testing feedback on the application of our E-Cooling Compressor, laying the foundation for future business growth. For the three months ended June 30, 2025, we repurchased $22 million of Common Stock under our share repurchase program. As of June 30, 2025, we had $198 million of the authorized amount remaining under our share repurchase program. On May 1, 2025, the Board of Directors declared a cash dividend of $0.06 per share of Common Stock, payable on June 16, 2025, to shareholders of record as of June 2, 2025. The total amount of dividends paid on June 16, 2025 amounted to $13 million. Disaggregated Revenue The following tables show our revenues by geographic region and product line for the three and six months ended June 30, 2025 and 2024, respectively. By Region Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (Dollars in millions) United States $ 178 20% $ 174 19% $ 354 20% $ 352 19% Europe 461 50% 434 49% 886 49% 903 50% Asia 250 27% 263 30% 507 28% 515 29% Other 24 3% 19 2% 44 3% 35 2% Total $ 913 $ 890 $ 1,791 $ 1,805 25 By Product Line Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (Dollars in millions) Diesel $ 217 24% $ 220 25% $ 425 24% $ 461 26% Gas 398 43% 375 42% 801 45% 763 42% Commercial Vehicle 170 19% 161 18% 325 18% 322 18% Aftermarket 111 12% 121 14% 209 11% 233 13% Other 17 2% 13 1% 31 2% 26 1% Total $ 913 $ 890 $ 1,791 $ 1,805 Results of Operations for the Three and Six Months Ended June 30, 2025 Net Sales Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (Dollars in millions) Net sales $ 913 $ 890 $ 1,791 $ 1,805 % change compared with prior period 2.6 % (0.8) % For the three months ended June 30, 2025, net sales compared to the prior period increased by $23 million or 3% (including a favorable impact of $23 million or 3% due to foreign currency translation primarily driven by higher Euro-to-U.S. dollar exchange rates). This increase was driven by foreign currency impacts and recoveries on newly enacted import tariffs. Strong demand for gasoline and commercial vehicle applications was more than offset by weaker demand for replacement parts on aftermarket sales and diesel products. Gasoline product sales increased by $23 million or 6% (including a favorable impact of $9 million or 2% due to foreign currency translation), primarily driven by new application launches and program ramp-ups in Europe, North America and India. Diesel product sales decreased by $3 million or 1% (including a favorable impact of $8 million or 4% due to foreign currency translation), primarily driven by passenger vehicles in Europe transitioning to gasoline hybrids, partially offset by sustained demand for pickup trucks in North and South America. Commercial vehicle sales increased by $9 million or 6% (including a favorable impact of $3 million or 2% due to foreign currency translation), primarily driven by recovering demand in off-highway across Europe, North America and China as well as the launch of a new on-highway program in Europe. Aftermarket sales decreased by $10 million or 8% (including a favorable impact of $2 million or 2% due to foreign currency translation), primarily due to softer demand for off-highway replacement parts in North America. The decrease was partially offset by stronger demand for replacement parts through the independent aftermarket channels in Europe, China, South America and India. 26 For the six months ended June 30, 2025, net sales compared to the prior period decreased by $14 million or 1% (including a favorable impact of $2 million or 0% due to foreign currency translation, primarily driven by fluctuations in global exchange rates). This decrease was mainly driven by soft demand in diesel and replacement parts on aftermarket sales, partially offset by higher demand for gasoline and commercial vehicle applications, recoveries on newly enacted import tariffs, and favorable foreign exchange impacts. Net sales further decreased due to price, net of inflation pass-through driven by commodity deflation. Gasoline product sales increased by $38 million or 5% (including an unfavorable impact of $1 million or 0% due to foreign currency translation) driven by new application launches and program ramp-ups in Europe, North America and India. Diesel product sales decreased by $36 million or 8% (including a favorable impact of $2 million or 0% due to foreign currency translation), primarily driven by passenger vehicles in Europe pursuing transition to gasoline hybrids, partially offset by sustained demand for pickup trucks in North and South America. Commercial vehicle sales increased by $3 million or 1% (including a favorable impact of $1 million or 0% due to foreign currency translation), primarily driven by recovering demand in off-highway across Europe, North America and China as well as the launch of a new on-highway program in Europe. Aftermarket sales decreased by $24 million or 10% (with no impact from foreign currency translation), primarily due to softer demand for off-highway replacement parts in North America. Cost of Goods Sold and Gross Profit Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (Dollars in millions) Cost of goods sold $ 732 $ 705 $ 1,431 $ 1,448 % change compared with prior period 3.8 % (1.2) % Gross profit percentage 19.8 % 20.8 % 20.1 % 19.8 % Cost of Goods Sold Gross Profit (Dollars in millions) Cost of Goods Sold / Gross Profit for the three months ended June 30, 2024 $ 705 $ 185 Increase/(decrease) due to: Volume 3 1 Product mix 6 (25) Price, net of inflation pass-through — (2) Commodity, transportation & energy inflation (4) 4 Productivity, net (8) 9 Enacted import tariffs 15 (1) Research & development (1) 1 Foreign exchange rate impacts 16 9 Cost of Goods Sold / Gross Profit for the three months ended June 30, 2025 $ 732 $ 181 27 For the three months ended June 30, 2025, cost of goods sold increased by $27 million, primarily driven by $16 million from foreign currency impacts, $15 million from the impact of newly enacted import tariffs, $6 million due to unfavorable product mix and $3 million of higher sales volumes. These increases were partially offset by $8 million of productivity net of labor inflation, $4 million of commodity, transportation and energy deflation, and $1 million of lower R&D costs. For the three months ended June 30, 2025, gross profit decreased by $4 million, primarily driven by $25 million of unfavorable product mix, and $2 million of pricing, net of inflation pass-through. These decreases were partially offset by $9 million from foreign currency impacts, $9 million of productivity, net of labor inflation, $4 million of commodity, transportation and energy deflation, $1 million from higher sales volumes, and $1 million of lower R&D costs. We also saw a $1 million impact to gross profit from newly enacted import tariffs due to the timing of negotiated recoveries. Cost of Goods Sold Gross Profit (Dollars in millions) Cost of Goods Sold / Gross Profit for the six months ended June 30, 2024 $ 1,448 $ 357 Increase/(decrease) due to: Volume (12) (6) Product mix 12 (32) Price, net of inflation pass-through — 2 Commodity, transportation & energy inflation (13) 13 Productivity, net (24) 25 Enacted import tariffs 19 (1) Research & development (1) 1 Foreign exchange rate impacts 2 1 Cost of Goods Sold / Gross Profit for the six months ended June 30, 2025 $ 1,431 $ 360 For the six months ended June 30, 2025, cost of goods sold decreased by $17 million, primarily driven by $24 million of productivity net of labor inflation, $13 million of commodity, transportation and energy deflation, $12 million of lower sales volumes and $1 million of lower R&D costs. These decreases were partially offset by $19 million of higher cost of goods sold due to the impact of newly enacted import tariffs, $12 million from unfavorable product mix and $2 million of foreign currency impact. For the six months ended June 30, 2025, gross profit increased by $3 million, primarily driven by $25 million of productivity, net of labor inflation, $13 million of commodity, transportation and energy deflation, $2 million of pricing, net of inflation pass-through, $1 million of lower R&D costs and $1 million of foreign currency impact. These increases were partially offset by $32 million from unfavorable product mix and $6 million of lower sales volumes. We also saw a $1 million impact to gross profit from newly enacted import tariffs due to the timing of negotiated recoveries. Selling, General and Administrative Expenses Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (Dollars in millions) Selling, general and administrative expense $ 59 $ 61 $ 118 $ 125 % of sales 6.5 % 6.9 % 6.6 % 6.9 % Selling, general and administrative (“SG&A”) expenses for the three months ended June 30, 2025, decreased by $2 million compared with the prior period, primarily driven by $3 million lower personnel costs partially offset by $2 million of unfavorable foreign currency impact. SG&A expenses for the six months ended June 30, 2025, decreased by $7 million compared with the prior period, primarily driven by $4 million lower personnel costs and $2 million of lower legal fees. Other Expense, Net 28 Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (Dollars in millions) Other expense, net $ 1 $ 3 $ 8 $ 4 Other expense, net for the three months ended June 30, 2025 decreased by $2 million compared to the prior period, primarily due to professional fees incurred in the prior year associated with our 2032 Senior Notes. Other expense, net for the six months ended June 30, 2025 increased by $4 million compared to the prior period, primarily driven by $6 million in professional fees related to our Restatement Agreement partially offset by $2 million of professional fees associated with our 2032 Senior Notes in the prior year. Interest Expense Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (Dollars in millions) Interest expense $ 25 $ 62 $ 54 $ 93 For the three months ended June 30, 2025, interest expense decreased by $37 million compared to the prior period. This decrease was primarily due to a $29 million reduction in debt issuance cost amortization, driven by accelerated amortization in the prior year, and $8 million in lower interest expense resulting from a change in the notional amount of debt outstanding during the period. Additionally, we recorded net gains of $4 million on designated and undesignated interest rate derivatives, consistent with the prior year's net gains of $4 million. For the six months ended June 30, 2025, interest expense decreased by $39 million compared to the prior period. This decrease was primarily due to a $30 million reduction in debt issuance cost amortization, driven by accelerated amortization in the prior year, and $18 million of lower interest expense resulting from a change in the notional amount of debt outstanding during the period. In addition, we recorded net gains of $4 million on our designated and undesignated interest derivatives in the current year, in comparison to net gains of $14 million in the prior year. Non-Operating Income, Net Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (Dollars in millions) Non-operating income, net $ (6) $ (1) $ (7) $ (6) For the three months ended June 30, 2025, we had non-operating income of $6 million versus $1 million in the prior period. The increase in non-operating income was primarily driven by foreign exchange transactional gains. For the six months ended June 30, 2025, we had non-operating income of $7 million versus $6 million in the prior period. The increase in non-operating income was primarily driven by $2 million in foreign exchange transactional gains and $1 million of lower other non-operating expense, partially offset by lower equity income of $2 million due to the prior year sale of an equity interest in an unconsolidated joint venture. Tax Expense Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (Dollars in millions) Tax expense $ 15 $ 23 $ 38 $ 38 Effective tax rate 14.7 % 26.4 % 20.3 % 22.6 % 29 The effective tax rates for the three months ended June 30, 2025 and 2024 were 14.7% and 26.4%, respectively. The effective tax rates for the six months ended June 30, 2025 and 2024 were 20.3% and 22.6%, respectively. The change in the effective tax rate for the three months ended June 30, 2025, compared to the prior period is primarily related to a one-time sale of an equity interest in an unconsolidated joint venture in the prior year and a one-time benefit attributable to the revaluation of deferred tax assets in China, partially offset by an increase in U.S. taxes on international operations. The change in the effective tax rate for the six months ended June 30, 2025, compared to the prior period is primarily related to a one-time sale of an equity interest in an unconsolidated joint venture in the prior year and a one-time benefit attributable to the revaluation of deferred tax assets in China, partially offset by an increase in U.S. taxes on international operations and additional tax reserve positions in the current year. The Organization for Economic Cooperation and Development reached agreement among over 140 countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two. Many countries we operate in continue to announce changes in their tax laws and regulations based on the Pillar Two framework. While we continue to evaluate the impact of these legislative changes as additional guidance becomes available, uncertainty remains regarding the timing and interpretation by tax authorities in affected jurisdictions. For 2025, Pillar Two is not expected to have a material impact to our effective tax rate. On July 4, 2025, the United States enacted H.R. 1, comprehensive legislation that introduced changes to federal tax law, among other things. We are currently evaluating the implications of the new tax law and its impact on our Consolidated Interim Financial Statements. F urther enactment of legislation by jurisdictions in which we do business could also have an impact on our future effective tax rate, tax liabilities, and cash tax. 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. Net Income Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (Dollars in millions) Net income $ 87 $ 64 $ 149 $ 130 Net income margin 9.5 % 7.2 % 8.3 % 7.2 % Net income for the three months ended June 30, 2025, increased by $23 million compared with the prior period, primarily due to $37 million of lower interest expense, $8 million of lower tax expense, $2 million of lower SG&A expense, $2 million of lower other expense, net, and a $5 million increase in non-operating income. These were partially offset by $4 million of decreased gross profit and the prior year gain of $27 million on the sale of an equity interest in an unconsolidated joint venture. Net income for the six months ended June 30, 2025, increased by $19 million compared with the prior period, primarily due to $39 million of lower interest expense, $7 million of lower SG&A expense, $3 million of higher gross margin and a $1 million increase in non-operating income. These were partially offset by $4 million of higher other expense, net and the prior year gain of $27 million on the sale of an equity interest in an unconsolidated joint venture. 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 from, or as a substitute for, an analysis of the Company’s operating results as reported under GAAP. 30 EBIT and Adjusted EBIT In 2025, we revised our non-GAAP reporting metric, transitioning from Adjusted EBITDA to Adjusted EBIT. This change is intended to better reflect our core operating performance and align with industry practices. We believe this change will provide investors with a clearer understanding of our ongoing operational performance. We define “EBIT” as our net income calculated in accordance with U.S. GAAP, plus the sum of (i) interest expense net of interest income and (ii) tax expense. We define “Adjusted EBIT” as EBIT, plus the sum of (i) repositioning costs, (ii) foreign exchange (gain) loss on debt net of related hedging (gains) losses, (iii) discounting costs on factoring, (iv) gain on sale of equity investment, (v) acquisition and divestiture expenses, (vi) other non-operating income, (vii) capital structure transformation expenses, (viii) debt refinancing and redemption costs, and (ix) loss on extinguishment of debt, if any. We believe that EBIT and Adjusted EBIT are important indicators of operating performance and provide useful information for investors because: • EBIT and Adjusted EBIT exclude the effects of income taxes, as well as the effects of financing activities by eliminating the effects of interest 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 could therefore have a disproportionate effect in a given period, affecting the comparability of our results. The following table reconciles Net income under GAAP to Adjusted EBIT: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (Dollars in millions) Net income $ 87 $ 64 $ 149 $ 130 Interest expense, net of interest income (1) 23 61 52 90 Tax expense 15 23 38 38 EBIT 125 148 239 258 Repositioning costs (2) (2) 1 5 12 Foreign exchange gain on debt, net of related hedging loss (1) (1) — (1) Factoring and notes receivables discount fees 1 1 2 2 Gain on sale of equity investment — (27) — (27) Other non-operating income (3) (2) (2) (3) (3) Debt refinancing and redemption costs (4) — 2 6 2 Acquisition and divestiture expenses 3 1 6 1 Adjusted EBIT $ 124 $ 123 $ 255 $ 244 (1) Reflects interest income of $2 million and $1 million for the three months ended June 30, 2025 and 2024, respectively, and $2 million and $3 million for the six months ended June 30, 2025 and 2024, respectively. (2) Repositioning costs includes severance costs related to restructuring projects to improve future productivity. (3) Reflects the non-service component of net periodic pension income. (4) Reflects the third-party costs directly attributable to the refinancing of our term loan and revolving credit facility. 31 Adjusted EBIT for the Three Months Ended June 30, 2025 For the three months ended June 30, 2025 , net income increased by $23 million versus the prior period as discussed above within Results of Operations for Three and Six Months Ended June 30, 2025 . Adjusted EBIT increased by $1 million compared to the prior period, driven by $11 million of foreign currency impacts, $11 million of productivity, $4 million of commodity, transportation and energy deflation, and $1 million of higher volumes. These increases were partially offset by $25 million of unfavorable product mix and $2 million of lower pricing net of inflation pass-through. During the three months ended June 30, 2025, diesel volume declined, driven by lower industry production in Europe and Aftermarket softness in off-highway applications in North America. These volume decreases were partially offset by favorable demand in gasoline due to new application launches and program ramp-ups in Europe, North America, and India. The increased productivity from our ability to flex our variable cost structure while driving sustained fixed cost productivity was partially offset by year-over-year labor inflation. Gains in foreign currency from translational, transactional, and hedging effects in the three months ended June 30, 2025, primarily driven by a higher Euro-to-U.S. dollar versus the prior period, accounted for a $11 million increase in Adjusted EBIT. Adjusted EBIT for the Six Months Ended June 30, 2025 For the six months ended June 30, 2025 , net income increased by $19 million versus the prior period as discussed above within Results of Operations for Three and Six Months Ended June 30, 2025 . Adjusted EBIT increased by $11 million compared to the prior year, mainly from $29 million of operational productivity, net of labor inflation and repositioning costs, $13 million of commodity, transportation, and energy deflation, $4 million of favorable foreign exchange impacts and $2 million price net of inflation pass through. These increases were partially offset by $32 million unfavorable product mix and $6 million of lower sales volume from diesel and aftermarket products. During the six months ended June 30, 2025 , diesel volume declined, driven by impact of lower industry production mainly in Europe and Aftermarket Off-highway applications in North America. These volume decreases were partially 32 offset by favorable demand in gasoline driven by new application launches and program ramp-ups in Europe, North America and India. The increased productivity from our ability to flex our variable cost structure while driving sustained fixed cost productivity was partially offset by year-over-year labor inflation. Liquidity and Capital Resources Overview June 30, 2025 December 31, 2024 (Dollars in millions) Cash and cash equivalents $ 232 $ 125 Restricted cash 1 1 Revolving Facility - available borrowing capacity 630 600 Revolving Facility - borrowings or letters of credit outstanding — — Term Loan Facilities - principal outstanding 690 692 Senior Notes - principal outstanding 800 800 Bilateral letter of credit facility - utilized capacity 8 8 On January 30, 2025, the Company entered into the Restatement Agreement, which amends and restates the Existing Credit Agreement, under which the Company refinanced in full its $692 million 2021 Dollar Term Facility with a new 2025 Dollar Term Facility in an aggregate principal amount of $692 million. The 2025 Dollar Term Facility will mature on January 30, 2032, and bear interest at a spread equal to, at the Company's option, the Adjusted Term SOFR Rate plus 2.25% per annum in the case of Term Benchmark Loans and the Alternate Base Rate plus 1.25% per annum in the case of ABR Loans. The Company also replaced its existing $600 million revolving facility under the Existing Credit Agreement with the New Revolving Facility under the Credit Agreement in an aggregate principal amount of $630 million. The maturity date of the New Revolving Facility is January 30, 2030. We employ several means to manage our liquidity, and our sources of financing include cash flows from operations, cash and cash equivalents on hand, the 2032 Senior Notes, and our Credit Agreement, including our 2025 Dollar Term Facility and our New Revolving Facility. We expect to continue investing in our facilities as we expand our manufacturing capacity for new product launches and invest in new technologies and strategic growth opportunities, in particular in connection with our zero-emission technologies. We believe the combination of expected cash flows, the term loan borrowings, the 2032 Senior Notes, and the New Revolving Facility being committed until 2030, will provide us with adequate liquidity to support the Company's operations. Share Repurchase Program On December 4, 2024, the Board of Directors authorized a $250 million share repurchase program valid from January 1, 2025, until December 31, 2025. During the six months ended June 30, 2025, the Company repurchased $52 million of Common Stock, with $198 million remaining under the share repurchase program as of that date. The Company may repurchase shares from time to time under the program through various methods, including in open market transactions, block trades, privately negotiated transactions, and otherwise. The timing, as well as the number and value of shares repurchased under the program, will depend on a variety of factors. The Company is not obligated to purchase any shares under the share repurchase program, and the program may be suspended, modified, or discontinued at any time without prior notice. For more information, see Item 2. Unregistered Sales of Equity Securities and Use of Proceeds . 33 Cash Flow Summary for the Six Months Ended June 30, 2025 Six Months Ended June 30, 2025 2024 (Dollars in millions) Cash provided by (used for): Operating activities $ 214 $ 210 Investing activities (26) 18 Financing activities (89) (384) Effect of exchange rate changes on cash and restricted cash 8 (5) Net increase (decrease) in cash, cash equivalents and restricted cash $ 107 $ (161) Cash provided by operating activities increased by $4 million for the six months ended June 30, 2025, versus the prior year. The increase was primarily driven by $22 million of favorable impacts from working capital changes and $19 million of higher net income, partially offset by a decrease of $16 million of non-cash charges, as well as $21 million of unfavorable impacts from changes in other assets and liabilities. Cash flow used for investing activities decreased by $44 million for the six months ended June 30, 2025, compared to t he same period in the prior year. The decrease was primarily driven by $46 million in proceeds from the sale of our unconsolidated joint venture realized in the prior year, along with $6 million in reduced proceeds from the cross currency swap. These impacts were partially offset by $8 million in lower capital expenditures on property, plant and equipment. Cash used for financing activities was $89 million for the six months ended June 30, 2025, compared with $384 million in the prior year. During the six months ended June 30, 2025, we made debt repayments of $73 million, payments of $52 million for the repurchase of Common Stock under our share repurchase program and payments of $25 million for dividends on our Common Stock. These payments were partially offset by proceeds of $68 million from the Credit Facilities. In comparison, cash used for financing activities was $384 million for the six months ended June 30, 2024 primarily driven by aggregate debt repayments of $989 million on our term loan facilities. We also made payments of $173 million for Common Stock repurchases, $7 million for debt issuance costs and $9 million for other financing activities. These payments were partially offset by proceeds of $794 million, net of deferred financing costs, from the issuance of our 2032 Senior Notes. 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 GAAP 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 2024 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. 34 Special Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q and the other reports filed by us with the SEC from time to time, as well as statements incorporated by reference herein and related comments by our management, contain forward-looking statements within the meaning of the U.S. federal securities laws. All statements other than statements of historical fact, including without limitation statements regarding our future 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 . In many cases, you can identify forward-looking statements by terms such as “aim,” “anticipate,” “appears,” “approximately,” “believe,” “continue,” “could,” “designed,” “effect,” “estimate,” “evaluate,” “expect,” “forecast,” “goal,” “initiative,” “intend,” “may,” “objective,” “outlook,” “plan,” “potential,” “priorities,” “project,” “pursue,” “seek,” “should,” “target,” “when,” “will,” “would,” or the negative of these terms or other similar expressions. In making these forward-looking statements, we rely on our current expectations and projections about possible future events and financial trends that we believe may affect our business, financial condition and results of operations. We believe these judgments are reasonable, but these statements are not guarantees of any future events or financial results, and our actual results may differ materially due to a variety of important factors, many of which are beyond our control. These factors, which may be revised or supplemented in subsequent reports we file with the SEC, include, among other things, risks related to the following: (1) the ongoing evolution of the automotive industry; (2) the highly competitive markets in which we operate; (3) our reliance on sales to major customers; (4) changing industry and economic conditions; (5) the unique aspects of our aftermarket business; (6) pricing pressures from our original equipment manufacturer customers; (7) the foreign markets in which we operate; (8) climate change and increased scrutiny from customers, investors, regulators and other stakeholders; (9) recruitment, development, and retention of qualified personnel; (10) program launch difficulties; (11) volatility in the cost of raw materials, components, energy, transportation, and other inputs; (12) supply shortages or supplier distress leading to a disruption of our operations; (13) realization of sales from awarded business; (14) economic, political, regulatory, foreign exchange and other risks of our international operations; (15) geopolitical conditions, catastrophic events and pandemics; (16) joint venture partnerships, joint development projects and other strategic opportunities; (17) intellectual property rights; (18) work stoppages or other disruptions at our facilities; (19) realization of productivity and efficiency improvements and repositioning projects; (20) warranty claims, product recalls, field actions or product liability actions; (21) litigation, government proceedings and other contingencies and uncertainties; (22) environmental matters and liabilities; (23) third-party licensing arrangements; (24) information technology and data privacy considerations, including cybersecurity and other security concerns; (25) our substantial indebtedness and restrictive covenants related to such indebtedness; (26) tax considerations; (27) our ability to raise capital; (28) our pension funding obligations; (29) concentration of ownership of our equity securities; or (30) payment of dividends and share repurchases. For a further discussion of these and other risks, refer to Part I, Item 1A. "Risk Factors" of our 2024 Form 10-K. You should read this Quarterly Report and the documents that we reference herein completely and with the understanding that our actual future results may be materially different from those envisioned by these forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report. 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.