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 nine months ended September 30, 2025. Executive Summary During the third quarter of 2025, we continued to navigate macro-economic challenges. Increased demand in light vehicle gasoline, primarily driven by new program launches in Europe, China, India and North America, was partially offset by decreased demand for Aftermarket off-highway replacement parts in North America, resulting in unfavorable product mix. Driven by sustainable cost initiatives implemented over the last year and the current year, successful recovery of import tariffs, and a favorable foreign exchange environment, we delivered Net income of $77 million and Adjusted EBIT of $133 million for the quarter. We continue to have success across our differentiated technologies by winning business in both turbo and zero emission offerings. We secured light vehicle turbo awards in the US, India and Brazil and continued to win commercial vehicle and industrial business across multiple regions, including turbo technology for data centers. With respect to our zero-emission offerings, we deepened our strategic collaborations with OEMs by executing additional E-Powertrain proof-of-concept initiatives. Furthermore, we received favorable feedback related to the efficiency gains for our E-Cooling oil-free compressor from mobility and industrial customers. These zero-emission technologies lay the foundation for future business growth. For the three months ended September 30, 2025, we repurchased $84 million of Common Stock under our share repurchase program. These repurchases include a total of 5 million shares from funds affiliated with Oaktree Capital Management, L.P., a related party, for approximately $62 million. As of September 30, 2025, we had $114 million of the authorized amount remaining under our share repurchase program. The repurchased shares are held as treasury stock. On July 24, 2025, the Board of Directors declared a cash dividend of $0.06 per share of Common Stock, payable on September 16, 2025, to shareholders of record as of September 2, 2025. The total amount of dividends paid on September 16, 2025 amounted to $11 million. Disaggregated Revenue The following tables show our revenues by geographic region and product line for the three and nine months ended September 30, 2025 and 2024, respectively. By Region Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (Dollars in millions) United States $ 170 19% $ 178 22% $ 524 19% $ 530 20% Europe 434 48% 376 46% 1,320 49% 1,279 49% Asia 264 29% 252 30% 771 29% 767 29% Other 34 4% 20 2% 78 3% 55 2% Total $ 902 $ 826 $ 2,693 $ 2,631 27 By Product Line Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (Dollars in millions) Diesel $ 201 22% $ 180 22% $ 626 23% $ 641 24% Gas 405 45% 360 43% 1,206 45% 1,123 43% Commercial Vehicle 164 18% 155 19% 489 18% 477 18% Aftermarket 116 13% 117 14% 325 12% 350 13% Other 16 2% 14 2% 47 2% 40 2% Total $ 902 $ 826 $ 2,693 $ 2,631 Results of Operations for the Three and Nine Months Ended September 30, 2025 Net Sales Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (Dollars in millions) Net sales $ 902 $ 826 $ 2,693 $ 2,631 % change compared with prior period 9.2 % 2.4 % Net Sales for the Three Months Ended September 30, 2025 For the three months ended September 30, 2025, net sales compared to the prior period increased by $76 million or 9% (including a favorable impact of $26 million or 3% due to foreign currency translation primarily driven by higher Euro-to-U.S. dollar exchange rates). This increase was primarily related to favorable foreign currency impacts and higher demand in gasoline and diesel, partially offset by weaker demand for replacement parts on aftermarket sales and unfavorable product mix. Net sales also includes $12 million of recoveries on enacted import tariffs. Gasoline product sales increased by $45 million or 13% (including a favorable impact of $11 million or 3% due to foreign currency translation), primarily driven by new application launches and program ramp-ups in Europe, China, India and North America. Diesel product sales increased by $21 million or 12% (including a favorable impact of $9 million or 5% due to foreign currency translation), primarily driven by strong light commercial vehicle performance in Europe combined with sustained demand for pickup trucks in North America, South America and Southeast Asia. Commercial vehicle sales increased by $9 million or 6% (including a favorable impact of $2 million or 2% due to foreign currency translation), primarily driven by launch of an on-highway program in Europe and partial recovery of prior year softness in the construction and agriculture industries. Aftermarket sales decreased by $1 million or 1% (including a favorable impact of $3 million or 3% due to foreign currency translation), primarily due to softer demand for off-highway replacement parts in North America. 28 Net Sales for the Nine Months Ended September 30, 2025 For the nine months ended September 30, 2025, net sales compared to the prior period increased by $62 million or 2% (including a favorable impact of $28 million or 1% due to foreign currency translation, primarily driven by fluctuations in global exchange rates). This increase was primarily related to favorable foreign currency impacts and higher demand in gasoline and commercial vehicles, partially offset by weaker demand for replacement parts on aftermarket sales and weakness in light vehicle diesel in Europe. Net sales also include $30 million of recoveries on enacted import tariffs. Gasoline product sales increased by $83 million or 7% (including a favorable impact of $10 million or 1% 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 $15 million or 2% (including a favorable impact of $11 million or 2% 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 America, South America and Southeast Asia. Commercial vehicle sales increased by $12 million or 3% (including a favorable impact of $3 million or 1% due to foreign currency translation), primarily driven by launch of an on-highway program in Europe and partial recovery of prior year softness in the construction and agriculture industries. Aftermarket sales decreased by $25 million or 7% (including a favorable impact of $3 million or 1% due to foreign currency translation), primarily driven by softer demand for off-highway replacement parts in North America. Cost of Goods Sold and Gross Profit Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (Dollars in millions) Cost of goods sold $ 716 $ 660 $ 2,147 $ 2,108 % change compared with prior period 8.5 % 1.9 % Gross profit percentage 20.6 % 20.1 % 20.3 % 19.9 % 29 Cost of Goods Sold and Gross Profit for the Three Months Ended September 30, 2025 Cost of Goods Sold Gross Profit (Dollars in millions) Cost of Goods Sold / Gross Profit for the three months ended September 30, 2024 $ 660 $ 166 Increase/(decrease) due to: Volume 61 28 Product mix (9) (28) Price, net of inflation pass-through — (17) Commodity, transportation & energy inflation (7) 7 Productivity, net (6) 10 Enacted import tariffs 12 — Research & development (6) 6 Foreign exchange rate impacts 11 14 Cost of Goods Sold / Gross Profit for the three months ended September 30, 2025 $ 716 $ 186 For the three months ended September 30, 2025, cost of goods sold increased by $56 million, primarily driven by $61 million from higher sales volumes, $12 million from enacted import tariffs and $11 million from foreign currency impacts. These increases were partially offset by $9 million of favorable product mix, $7 million of commodity, transportation and energy deflation, $6 million of productivity net of labor inflation and $6 million of lower R&D costs. For the three months ended September 30, 2025, gross profit increased by $20 million, primarily driven by $28 million from higher sales volumes, $14 million from foreign currency impacts, $10 million from productivity net of labor inflation, $7 million from commodity, transportation and energy deflation and $6 million of lower R&D costs. These increases were partially offset by $28 million of unfavorable product mix and $17 million of pricing, net of inflation pass-through. Cost of Goods Sold and Gross Profit for the Nine Months Ended September 30, 2025 Cost of Goods Sold Gross Profit (Dollars in millions) Cost of Goods Sold / Gross Profit for the nine months ended September 30, 2024 $ 2,108 $ 523 Increase/(decrease) due to: Volume 52 22 Product mix 1 (60) Price, net of inflation pass-through — (15) Commodity, transportation & energy inflation (20) 20 Productivity, net (30) 35 Enacted import tariffs 31 (1) Research & development (7) 7 Foreign exchange rate impacts 12 15 Cost of Goods Sold / Gross Profit for the nine months ended September 30, 2025 $ 2,147 $ 546 For the nine months ended September 30, 2025, cost of goods sold increased by $39 million, primarily driven by $52 million from higher sales volumes, $31 million from enacted import tariffs, $12 million from foreign currency impacts and $1 million from unfavorable product mix. These increases were partially offset by $30 million of productivity net of labor inflation, $20 million of commodity, transportation and energy deflation and $7 million of lower R&D costs. For the nine months ended September 30, 2025, gross profit increased by $23 million, primarily driven by $35 million of productivity, net of labor inflation, $22 million of higher sales volumes, $20 million of commodity, transportation and energy deflation, $15 million from foreign currency impacts and $7 million of lower R&D costs. These increases were 30 partially offset by $60 million from unfavorable product mix and $15 million of price net of inflation pass through. We also had 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 September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (Dollars in millions) Selling, general and administrative expense $ 57 $ 53 $ 175 $ 178 % of sales 6.3 % 6.4 % 6.5 % 6.8 % Selling, general and administrative (“SG&A”) expenses for the three months ended September 30, 2025, increased by $4 million compared with the prior period, primarily driven by $4 million unfavorable foreign currency impacts and $2 million of higher bad debt expense. These increases were partially offset by a $3 million reduction in personnel costs, driven by sustainable cost measures implemented in the current and prior years. SG&A expenses for the nine months ended September 30, 2025, decreased by $3 million compared with the prior period, primarily driven by a $5 million reduction in personnel costs related to cost measures implemented in current and prior years and $3 million of lower outsourced activities partially offset by $6 million primarily related to acquisition and divestiture expenses. Other Expense, Net Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (Dollars in millions) Other expense, net $ 1 $ 1 $ 9 $ 5 Other expense, net for the three months ended September 30, 2025 was consistent with the prior period. Other expense, net for the nine months ended September 30, 2025 increased by $4 million compared to the prior period, primarily driven by $6 million in third-party costs 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 September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (Dollars in millions) Interest expense $ 29 $ 37 $ 83 $ 130 For the three months ended September 30, 2025, interest expense decreased by $8 million compared to the prior period. This decrease was primarily due to $3 million in lower interest expense resulting from the Amendment and Restatement of our Credit Agreement. Additionally, we did not record any net gains on designated and undesignated interest rate derivatives in the current year, in comparison to net gains of $5 million in the prior year. For the nine months ended September 30, 2025, interest expense decreased by $47 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 $22 million of lower interest expense resulting from the Amendment and Restatement of our Credit Agreement. 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 $9 million in the prior year. Non-Operating Income, Net 31 Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (Dollars in millions) Non-operating income, net $ (3) $ (1) $ (10) $ (7) For the three months ended September 30, 2025, we had non-operating income of $3 million versus $1 million in the prior period. The increase in non-operating income was primarily driven by higher interest income. For the nine months ended September 30, 2025, we had non-operating income of $10 million versus $7 million in the prior period. The increase in non-operating income was primarily driven by higher foreign exchange transactional gains, partially offset by lower equity income due to the prior year sale of an equity interest in an unconsolidated joint venture. Tax Expense Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (Dollars in millions) Tax expense $ 25 $ 24 $ 63 $ 62 Effective tax rate 24.5 % 31.6 % 21.8 % 25.4 % The effective tax rates for the three months ended September 30, 2025 and 2024 were 24.5% and 31.6%, respectively. The effective tax rates for the nine months ended September 30, 2025 and 2024 were 21.8% and 25.4%, respectively. The change in the effective tax rate for the three months ended September 30, 2025, compared to the prior period is primarily related to a decrease in U.S. taxes on international operations and the global mix of earnings. The change in the effective tax rate for the nine months ended September 30, 2025 , compared to the prior period is primarily related to a one-time benefit attributable to the revaluation of deferred tax assets in China. 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 September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (Dollars in millions) Net income $ 77 $ 52 $ 226 $ 182 Net income margin 8.5 % 6.3 % 8.4 % 6.9 % 32 Net income for the three months ended September 30, 2025, increased by $25 million compared with the prior period, primarily due to $20 million of increased gross profit, $8 million of lower interest expense, and a $2 million increase in non-operating income. These were partially offset by $4 million of increased SG&A expense and $1 million of higher tax expense. Net income for the nine months ended September 30, 2025, increased by $44 million compared with the prior period, primarily due to $47 million of lower interest expense, $23 million of increased gross profit, $3 million of lower SG&A expense, and a $3 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. 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: 33 Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (Dollars in millions) Net income $ 77 $ 52 $ 226 $ 182 Interest expense, net of interest income (1) 28 37 80 127 Tax expense 25 24 63 62 EBIT 130 113 369 371 Repositioning costs (2) 3 4 8 16 Foreign exchange gain on debt, net of related hedging loss — — — (1) Factoring and notes receivables discount fees — 1 2 3 Gain on sale of equity investment — — — (27) Other non-operating income (3) (1) (1) (4) (4) Debt refinancing and redemption costs (4) 1 — 7 2 Acquisition and divestiture expenses — — 6 1 Adjusted EBIT $ 133 $ 117 $ 388 $ 361 (1) Reflects interest income of $1 million and $0 million for the three months ended September 30, 2025 and 2024, respectively, and $3 million and $3 million for the nine months ended September 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 third-party costs directly attributable to the refinancing of our credit facilities and any amendments. Adjusted EBIT for the Three Months Ended September 30, 2025 For the three months ended September 30, 2025 , net income increased by $25 million versus the prior period as discussed above within Results of Operations for Three and Nine Months Ended September 30, 2025 . Adjusted EBIT increased by $16 million compared to the prior period, driven by $28 million of higher sales volumes, $11 million of productivity, net of labor inflation and higher stock based compensation, $9 million of foreign currency impacts, $7 million of commodity, transportation and energy deflation and $6 million lower R&D costs. These increases were partially offset by $28 million of unfavorable product mix and $17 million of lower pricing net of inflation pass-through. During the three months ended September 30, 2025, we saw growth in gasoline from new application launches and program ramp-ups in Europe, China, India and North America. Volumes for diesel and commercial vehicles also increased due to higher demand in Europe and North America, and the launch of an on-highway program in Europe, respectively. Aftermarket volumes, however, showed continued softness primarily due to lower demand for off-highway replacement 34 parts in North America. The combination of these volume dynamics, led by the strong growth in gasoline, resulted in an unfavorable product mix. 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 and higher stock based compensation. Gains in foreign currency from translational, transactional, and hedging effects in the three months ended September 30, 2025, primarily driven by a higher Euro-to-U.S. dollar versus the prior period, accounted for a $9 million increase in Adjusted EBIT. Adjusted EBIT for the Nine Months Ended September 30, 2025 For the nine months ended September 30, 2025 , net income increased by $44 million versus the prior period as discussed above within Results of Operations for Three and Nine Months Ended September 30, 2025 . Adjusted EBIT increased by $27 million compared to the prior year, mainly from $40 million of productivity, net of labor inflation and higher stock based compensation, $22 million of higher sales volumes from gasoline and commercial vehicles, $20 million of commodity, transportation, and energy deflation, $13 million of favorable foreign exchange impacts and $7 million of lower R&D costs. These increases were partially offset by $60 million of unfavorable product mix and $15 million of pricing net of inflation pass through. During the nine months ended September 30, 2025, we saw growth in gasoline from new application launches and program ramp-ups in Europe, North America and India. Volumes for commercial vehicles also increased due to a launch of an on-highway program in Europe and partial recovery of prior year softness in the construction and agriculture industries . Aftermarket volumes, however, showed continued softness primarily due to lower demand for off-highway replacement parts in North America. The combination of these volume dynamics resulted in an unfavorable product mix. 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 nine months ended September 30, 2025, primarily driven by a higher Euro-to-U.S. dollar versus the prior period, accounted for a $13 million increase in Adjusted EBIT. 35 Liquidity and Capital Resources Overview September 30, 2025 December 31, 2024 (Dollars in millions) Cash and cash equivalents $ 230 $ 125 Restricted cash 2 1 Revolving Facility - available borrowing capacity 630 600 Revolving Facility - borrowings or letters of credit outstanding — — Term Loan Facilities - principal outstanding 688 692 Senior Notes - principal outstanding 800 800 Bilateral letter of credit facility - utilized capacity 9 8 On January 30, 2025, we entered into the Restatement Agreement, which amends and restates the Existing Credit Agreement, under which we refinanced in full our $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 initially bore interest at a spread equal to, at our 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. We also replaced our 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. On August 6, 2025, we entered into the First Amendment to the Restatement Agreement, which reduced the Applicable Rate to the Adjusted Term SOFR Rate plus 2.00% per annum in the case of Term Benchmark Loans and the Alternate Base Rate plus 1.00% per annum in the case of ABR Loans. During the nine months ended September 30, 2025, we paid cash dividends of $36 million. On October 23, 2025, we declared a cash dividend of $0.08 per share of Common Stock, payable on December 15, 2025, to shareholders of record as of December 1, 2025. 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, 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 nine months ended September 30, 2025, we repurchased $136 million of Common Stock, with $114 million remaining under the share repurchase program as of that date. These repurchases include a total of 5 million shares repurchased from funds affiliated with Oaktree Capital Management, L.P., a related party, for approximately $62 million. We 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. We are 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 . 36 Cash Flow Summary for the Nine Months Ended September 30, 2025 Nine Months Ended September 30, 2025 2024 (Dollars in millions) Cash provided by (used for): Operating activities $ 314 $ 277 Investing activities (27) 1 Financing activities (187) (439) Effect of exchange rate changes on cash and restricted cash 6 (2) Net increase (decrease) in cash, cash equivalents and restricted cash $ 106 $ (163) Cash provided by operating activities increased by $37 million for the nine months ended September 30, 2025, versus the prior year. The increase was primarily driven by $44 million of higher net income and $39 million of favorable impacts from working capital changes, partially offset by a decrease of $34 million of non-cash charges and $12 million of unfavorable impacts from changes in other assets and liabilities. Cash flow used for investing activities decreased by $28 million for the nine months ended September 30, 2025, compared to the 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 $3 million in reduced proceeds from the cross currency swap. These impacts were partially offset by $18 million in lower capital expenditures on property, plant and equipment and $3 million received for the first deferred payment on the sale of our unconsolidated joint venture. Cash used for financing activities was $187 million for the nine months ended September 30, 2025, compared with $439 million in the prior year. During the nine months ended September 30, 2025, we made debt repayments of $87 million, payments of $136 million for the repurchase of Common Stock under our share repurchase program and payments of $36 million for dividends on our Common Stock. These payments were partially offset by proceeds of $80 million from the Credit Facilities. In comparison, cash used for financing activities was $439 million for the nine months ended September 30, 2024 primarily driven by aggregate debt repayments of $991 million on our credit facilities. We also made payments of $226 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. 37 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.