Garrett Motion Inc. 10-K

Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Garrett Motion Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Garrett Motion Inc. and subsidiaries (the "Company") as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2025, of the Company and our report dated February 19, 2026, expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte SA Geneva, Switzerland February 19, 2026 46 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Garrett Motion Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Garrett Motion Inc. and subsidiaries (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), cash flows and equity (deficit), for each of the three years in the period ended December 31, 2025, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with the accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 19, 2026 expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate. Net Sales and Accrued Liabilities - Customer Pricing Reserve related to Variable Consideration – Refer to Notes 2 and 14 to the Financial Statements Critical Audit Matter Description As disclosed in Notes 2 and 14 to the consolidated financial statements, the Company records net sales at the amount of consideration the Company expects to receive in exchange for transferring the promised goods, which includes estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized will not occur. Variability in consideration typically results from discounts and rebates provided to customers. The estimated variable consideration is based primarily on management’s best available information regarding customer negotiations, historical experience, and anticipated future customer pricing strategies. Estimating the customer pricing reserve related to variable 47 consideration requires significant judgments by management that affect the amount of revenue recorded in the financial statements. The amount of customer pricing reserve as of December 31, 2025 is $88 million. Given the significant estimates and assumptions management makes to estimate future discounts and rebates, auditing management's estimates of the amount of customer pricing reserve related to variable consideration to recognize as net sales required a high degree of auditor judgment. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the estimate of variable consideration included in the customer pricing reserve comprise the following, among others: • We tested the effectiveness of relevant controls over the estimation of the variable consideration within net sales including review of discounts and rebates which impact the customer pricing reserve. • We selected a sample of revenue contracts with variable consideration and performed the following: ◦ Obtained contractual documents, including master agreements and other related documents, and evaluated whether management's calculations for variable consideration were consistent with the terms of the contracts. ◦ Compared transaction prices to the consideration expected to be received to assess whether variable consideration was completely and accurately recorded. • We further tested management's estimate of the variable consideration and performed the following: ◦ Evaluated historical information to determine management’s ability to accurately estimate sales volumes and future concessions. ◦ Inquired of individuals in the Company’s finance, operations and sales departments regarding the customer negotiations and examined supporting evidence as applicable. ◦ Performed a retrospective assessment of the previous year's accruals within the customer pricing reserve to assess whether they were appropriately utilized throughout the current period, to conclude on management's ability to make reliable forecasts. ◦ Tested the mathematical accuracy of the variable consideration calculation. /s/ Deloitte SA Geneva, Switzerland February 19, 2026 We have served as the Company’s auditor since 2018. 48 GARRETT MOTION INC. CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 2025 2024 2023 (Dollars in millions except per share amounts) Net sales (Note 3) $ 3,584 $ 3,475 $ 3,886 Cost of goods sold 2,853 2,770 3,130 Gross profit 731 705 756 Selling, general and administrative expenses 240 240 247 Other expense, net (Note 4) 10 6 5 Interest expense 108 156 159 Gain on sale of equity investment (Note 26) — ( 27 ) — Non-operating income, net (Note 5) ( 19 ) ( 13 ) ( 2 ) Income before taxes 392 343 347 Tax expense (Note 6) 82 61 86 Net income 310 282 261 Less: preferred stock dividends (Note 19) — — ( 80 ) Less: preferred stock deemed dividends (Note 19) — — ( 232 ) Net income (loss) available for distribution $ 310 $ 282 $ ( 51 ) Earnings (Loss) per share (Note 22) Basic $ 1.55 $ 1.27 $ ( 0.31 ) Diluted $ 1.52 $ 1.26 $ ( 0.31 ) Weighted average common shares outstanding Basic 199,758,058 222,316,484 166,595,397 Diluted 203,623,998 224,121,156 166,595,397 The Notes to the Consolidated Financial Statements are an integral part of this statement. 49 GARRETT MOTION INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Year Ended December 31, 2025 2024 2023 (Dollars in millions) Net income $ 310 $ 282 $ 261 Foreign exchange translation adjustment ( 83 ) 30 ( 13 ) Defined benefit pension plan adjustment, net of tax (Note 24) ( 1 ) 5 ( 2 ) Changes in fair value of effective cash flow hedges, net of tax (Note 17) 4 ( 8 ) ( 15 ) Changes in fair value of net investment hedges, net of tax (Note 17) ( 131 ) 49 ( 9 ) Total other comprehensive (loss) income ( 211 ) 76 ( 39 ) Comprehensive income $ 99 $ 358 $ 222 The Notes to the Consolidated Financial Statements are an integral part of this statement. 50 GARRETT MOTION INC. CONSOLIDATED BALANCE SHEETS December 31, 2025 2024 (Dollars in millions) ASSETS Current assets: Cash and cash equivalents $ 177 $ 125 Restricted cash (Note 2) 2 1 Accounts, notes and other receivables, net (Note 7) 703 687 Inventories, net (Note 9) 339 286 Other current assets (Note 10) 98 94 Total current assets 1,319 1,193 Investments and long-term receivables 11 10 Property, plant and equipment, net (Note 12) 462 449 Goodwill (Note 13) 193 193 Deferred income taxes (Note 6) 210 207 Other assets (Note 11) 172 224 Total assets $ 2,367 $ 2,276 LIABILITIES Current liabilities: Accounts payable $ 1,061 $ 972 Current maturities of long-term debt (Note 15) 7 7 Accrued liabilities (Note 14) 295 299 Total current liabilities 1,363 1,278 Long-term debt (Note 15) 1,411 1,464 Deferred income taxes (Note 6) 32 25 Other liabilities (Note 18) 363 182 Total liabilities $ 3,169 $ 2,949 COMMITMENTS AND CONTINGENCIES (Note 23) EQUITY (DEFICIT) Common Stock, par value $ 0.001 ; 1,000,000,000 and 1,000,000,000 shares authorized, 242,549,685 and 240,987,329 issued and 190,556,297 and 206,387,938 outstanding as of December 31, 2025 and 2024, respectively — — Additional paid-in capital 1,240 1,213 Retained deficit ( 1,384 ) ( 1,653 ) Accumulated other comprehensive (loss) income (Note 20) ( 138 ) 73 Treasury Stock, at cost; 51,993,388 and 34,599,391 shares as of December 31, 2025 and 2024, respectively (Note 19) ( 520 ) ( 306 ) Total deficit ( 802 ) ( 673 ) Total liabilities and deficit $ 2,367 $ 2,276 The Notes to the Consolidated Financial Statements are an integral part of this statement. 51 GARRETT MOTION INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (Dollars in millions) 2025 2024 2023 Cash flows from operating activities: Net income $ 310 $ 282 $ 261 Adjustments to reconcile net income to net cash provided by operating activities Deferred income taxes 9 7 24 Depreciation 99 90 90 Amortization of deferred debt issuance costs 7 37 20 Loss on remeasurement of forward purchase contract — — 13 Gain on sale of equity investment — ( 27 ) — Foreign exchange (gain) loss ( 66 ) 27 ( 15 ) Stock compensation expense 27 23 14 Pension expense ( 8 ) ( 6 ) ( 1 ) Unrealized loss (gain) on derivatives 73 ( 2 ) 51 Other 10 ( 6 ) 7 Changes in assets and liabilities: Accounts, notes and other receivables 22 89 1 Inventories ( 35 ) ( 48 ) 12 Other assets ( 18 ) ( 25 ) ( 2 ) Accounts payable 8 ( 52 ) 8 Accrued liabilities ( 46 ) 26 ( 8 ) Other liabilities 21 ( 7 ) ( 10 ) Net cash provided by operating activities 413 408 465 Cash flows from investing activities: Expenditures for property, plant and equipment ( 72 ) ( 91 ) ( 83 ) Proceeds from cross-currency swap contracts 28 31 28 Proceeds from sale of equity investment 3 46 — Net cash used for investing activities ( 41 ) ( 14 ) ( 55 ) Cash flows from financing activities: Proceeds from issuance of long-term debt, net of deferred financing costs 80 794 667 Proceeds from revolving credit facilities 70 — — Payments of long-term debt ( 139 ) ( 992 ) ( 207 ) Payments of revolving credit facilities ( 70 ) — — Payments for dividends ( 52 ) — ( 42 ) Repurchases of Series A Preferred Stock — — ( 580 ) Repurchases of Common Stock ( 208 ) ( 296 ) ( 213 ) Excise tax on Common Stock repurchase ( 3 ) ( 8 ) — Payments of Additional Amounts for conversion of Series A Preferred Stock — — ( 25 ) Payments for debt and revolving facility financing costs ( 2 ) ( 8 ) ( 2 ) Other ( 2 ) ( 10 ) ( 1 ) Net cash used for financing activities ( 326 ) ( 520 ) ( 403 ) Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash 7 ( 8 ) 5 Net increase (decrease) in cash, cash equivalents and restricted cash 53 ( 134 ) 12 Cash, cash equivalents and restricted cash at beginning of period 126 260 248 Cash, cash equivalents and restricted cash at end of period $ 179 $ 126 $ 260 Supplemental cash flow disclosures: Income taxes paid (net of refunds and credits) $ 62 $ 64 $ 60 Interest paid 95 88 89 Supplemental disclosure of non-cash financing activities: Dividends declared, not paid $ — $ 13 $ — The Notes to the Consolidated Financial Statements are an integral part of this statement. 52 GARRETT MOTION INC. CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) Series A Preferred Stock Common Stock Treasury Stock Additional Paid-in Capital Retained Deficit Accumulated Other Comprehensive Income/(Loss) Total Deficit Shares Amount Shares (1) Amount Shares Amount (in millions) Balance at December 31, 2022 246 $ — 64 $ — $ — $ — $ 1,333 $ ( 1,485 ) $ 36 $ ( 116 ) Net income — — — — — — — 261 — 261 Repurchases of Series A Preferred Stock ( 70 ) — — — — — ( 366 ) ( 201 ) — ( 567 ) Repurchases of Common Stock — — ( 28 ) — — — — ( 213 ) — ( 213 ) Excise tax on share repurchases — — — — — — — ( 8 ) — ( 8 ) Other comprehensive loss, net of tax — — — — — — — — ( 39 ) ( 39 ) Preferred Stock dividends — — — — — — — ( 42 ) — ( 42 ) Issuance of Common Stock for preference dividends — — 26 — — — 209 ( 209 ) — — Conversion of Series A Preferred Stock to Common Stock ( 176 ) — 176 — — — — ( 25 ) — ( 25 ) Stock-based compensation — — — — — — 14 — — 14 Balance at December 31, 2023 — $ — 238 $ — $ — $ — $ 1,190 $ ( 1,922 ) $ ( 3 ) $ ( 735 ) Net income — — — — — — — 282 — 282 Share repurchases — — — — 34 ( 296 ) — — — ( 296 ) Excise tax on share repurchases — — — — — ( 3 ) — — — ( 3 ) Shares issued under stock plan, net of shares withheld for employee taxes — — 3 — 1 ( 7 ) — — — ( 7 ) Other comprehensive income, net of tax — — — — — — — — 76 76 Common Stock dividends — — — — — — — ( 13 ) — ( 13 ) Stock-based compensation — — — — — — 23 — — 23 Balance at December 31, 2024 — $ — 241 $ — $ 35 $ ( 306 ) $ 1,213 $ ( 1,653 ) $ 73 $ ( 673 ) Net income — — — — — — — 310 — 310 Share repurchases — — — — 17 ( 208 ) — — — ( 208 ) Excise tax on share repurchases — — — — — ( 2 ) — — — ( 2 ) Shares issued under stock plan, net of shares withheld for employee taxes — — 2 — — ( 4 ) — — — ( 4 ) Other comprehensive loss, net of tax — — — — — — — — ( 211 ) ( 211 ) Common Stock dividends — — — — — — — ( 41 ) — ( 41 ) Stock-based compensation — — — — — — 27 — 27 Balance at December 31, 2025 — $ — 243 $ — 52 $ ( 520 ) $ 1,240 $ ( 1,384 ) $ ( 138 ) $ ( 802 ) 1) Common shares issued less treasury shares equals common shares outstanding The Notes to the Consolidated Financial Statements are an integral part of this statement. 53 GARRETT MOTION INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Background and Basis of Presentation Background Garrett Motion Inc. (the "Company" or "Garrett") is a cutting-edge technology leader delivering differentiated solutions for emission reduction and energy efficiency. We design, manufacture and sell highly engineered turbocharging, air and fluid compression, and high-speed electric motor technologies for OEMs and distributors within the mobility and industrial space. We have significant expertise in delivering products at scale for ICE using gasoline, diesel, natural gas and hydrogen, as well as for zero emission technologies using hydrogen fuel cell systems, both for mobility and industrial use. As our customers continue to progress on electrification, we are applying our technological pillars to develop highly engineered E-Powertrain and E-Cooling compressor products to support their ambition. These products are key enablers for fuel economy, energy efficiency, thermal management, and compliance with emissions standards and overall greenhouse gas and other emission reduction targets. Basis of Presentation The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All amounts presented are in millions, except per share amounts. We evaluate segment reporting in accordance with ASC 280, Segment Reporting . We concluded that Garrett operates in a single operating segment and a single reportable segment based on the operating results available and evaluated regularly by the chief operating decision maker (“CODM”), who is our Chief Executive Officer, to make decisions about resource allocation and performance assessment. The CODM makes operational performance assessments and resource allocation decisions on a consolidated basis, inclusive of all of the Company’s products across channels and geographies. Note 2. Summary of Significant Accounting Policies Use of Estimates The preparation of the Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of changes are reflected in the Consolidated Financial Statements in the period they are determined to be necessary. Principles of Consolidation and Combination The Consolidated Financial Statements include the accounts of Garrett Motion Inc. and all of its subsidiaries in which a controlling financial interest is maintained. We consolidate entities that we control due to ownership of a majority voting interest, and we consolidate variable interest entities when we have variable interests and are the primary beneficiary. Our consolidation policy requires equity investments that we exercise significant influence over but in which we do not have a controlling financial interest to be accounted for using the equity method. Investments through which we are not able to exercise significant influence over the investee and which we do not have readily determinable fair values are accounted for under the cost method. All intercompany transactions and balances are eliminated in consolidation. Cash and Cash Equivalents Cash and cash equivalents include cash on hand and highly liquid investments having an original maturity of three months or less. Restricted Cash Restricted cash primarily consists of bank deposits pledged as collateral to issue bank notes (refer to Note 8, Factoring and Notes Receivable ). Trade Receivables and Allowance for Doubtful Accounts 54 Trade accounts receivable are recorded at the invoiced amount as a result of transactions with customers. In accordance with ASC 326, Financial Instruments - Credit Losses , the Company maintains allowances for doubtful accounts for losses as a result of a customer’s inability to make required payments, estimated based on the expected credit losses over the contractual life of the receivables based on days past due as measured from the contractual due date and collection history. The Company also takes into consideration changes in economic conditions that may not be reflected in historical trends (for example, customers in bankruptcy, liquidation or reorganization). Receivables are written-off against the allowance for doubtful accounts when they are determined uncollectible. Such determination includes analysis and consideration of the particular conditions of the account, including time intervals since last collection, customer performance against agreed upon payment plans, solvency of customer and any bankruptcy proceedings. Transfer of Financial Instruments Sales and transfers of financial instruments are accounted for under ASC 860, Transfers and Servicing. The Company may discount and sell accounts receivables during the normal course of business. These receivables which are transferred to a third party without recourse to the Company and that meet the criteria of sales accounting as per ASC 860, are excluded from the amounts reported in the Consolidated Balance Sheets. The cash proceeds received from such sales are included in operating cash flows. The expenses associated with the factoring of receivables are recorded within Other expense, net in the Consolidated Statements of Operations. The Company may also receive bank notes in settlement of accounts receivables, primarily in the Asia Pacific region. Such bank notes are classified as notes receivables under Accounts, notes and other receivables – net in the Consolidated Balance Sheets. The collections of such bank notes are included in operating cash flows and any expenses related to discounting these are included within Other expense, net in the Consolidated Statements of Operations. 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. Inventories Inventories are stated at the lower of cost, determined on a first-in, first-out basis, including direct material costs and direct and indirect manufacturing costs, or net realizable value. Obsolete inventory is identified based on analysis of inventory for known obsolescence issues. The original equipment inventory on hand in excess of forecasted usage and lack of consumption in the previous 12 months is fully reserved, unless the value of such material is recoverable from either the vendor or the customer. Property, Plant and Equipment, Net Property, plant and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of assets, which are 10 to 50 years for buildings and improvements, 2 to 16 years for machinery and equipment, 3 to 10 years for tooling equipment, and 5 to 7 years for software. Maintenance and repairs are expensed as incurred. Impairment testing of long lived assets is completed by the Company in accordance with ASC 360, Property, Plant and Equipment . The testing is completed when a triggering event occurs, or at least on an annual basis to assess if any impairment triggering events existed during the year. If a triggering event occurs or is identified, the impairment testing is completed using the two-step impairment model. Asset classes are identified and tested for recoverability by comparing the net carrying value of the asset group to the undiscounted net cash flows to be generated from the use and eventual disposition of that asset group. If the carrying amount of an asset group is not recoverable, an impairment loss is recognized if the carrying amount exceeds the fair value. The impairment analysis was completed in 2025 with no triggering events identified. Leases Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of a lease (the “commencement date”) based on the present value of lease payments over the lease term. We determine if an arrangement is a lease at inception. Operating leases are included in Other assets, Accrued liabilities, and Other liabilities in our Consolidated Balance Sheets. Finance leases are included in Property, plant and equipment - net in our Consolidated Balance Sheets. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The lease ROU asset also includes any lease payments 55 made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease where it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are expensed in the period in which they occur. We have lease agreements with lease and non-lease components, which are generally accounted for separately. For machinery and equipment, we account for the lease and non-lease components as a single lease component. We account for short-term leases by recognizing lease payments in net income on a straight-line basis over the lease term and will not recognize any ROU assets and lease liabilities on the Consolidated Balance Sheet. Goodwill Goodwill is subject to impairment testing annually, and whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. This testing compares carrying value to fair value of our single reporting unit. The Company recognizes an impairment charge for the amount by which the carrying value of the reporting unit exceeds the reporting unit´s fair value. However, any impairment should not exceed the amount of goodwill allocated to the reporting unit. Because we have a single reporting unit with a negative carrying value, no impairment was recognized. Warranties and Guarantees Expected warranty costs for products sold are recognized based on an estimate of the amount that eventually will be required to settle such obligations. These accruals are based on factors such as past experience, length of the warranty and various other considerations. Costs of product recalls, which may include the cost of the product being replaced as well as the customer’s cost of the recall, including labor to remove and replace the recalled part, are accrued as part of our warranty accrual at the time an obligation becomes probable and can be reasonably estimated. These estimates are adjusted from time to time based on facts and circumstances that impact the status of existing claims. For additional information, see Note 23, Commitments and Contingencies . Sales Recognition Product sales are recognized when we transfer control of the promised goods to our customer, which is based on shipping terms. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the promised goods, adjusted for any variable consideration such as price concessions or annual price adjustments as estimated at contract inception. Amounts billed but ultimately expected to be refunded to the customer are recorded as part of the customer pricing reserve within Accrued liabilities on the Consolidated Balance Sheet. In the sale of products in the OEM channel, the transaction price for these goods is generally equal to the agreed price of each unit and represents the standalone selling price for the unit. In the sale of products in the aftermarket channel, the terms of a contract or the historical business practice can give rise to variable consideration due to, but not limited to, discounts and rebates. We estimate variable consideration at the most likely amount we will receive from customers and reduce revenues recognized accordingly. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. We adjust our estimate of revenue at the earlier of when the value of consideration we expect to receive changes or when the consideration becomes fixed. Research, Development and Engineering Garrett conducts research, development and engineering (“RD&E”) activities which consist primarily of the development of new products and product applications. RD&E costs are included in Cost of goods sold. Customer reimbursements are netted against gross RD&E expenses as they are considered a recovery of cost. RD&E costs are charged to expense as incurred unless the Company has a contractual guarantee of reimbursement from the customer, in which case the related costs are capitalized. Total RD&E expenses, net of customer reimbursements, amounted to $ 151 million, $ 161 million and $ 163 million for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025 and 2024 , $ 52 million and $ 29 million, respectively, of contractually reimbursable costs were capitalized. These amounts are recorded within Other current assets and Other assets in the Consolidated Balance Sheets. 56 Government Incentives The Company receives incentives from governmental entities related to expenses, assets, and other activities. The associated terms of the incentives can vary by country. Government incentives are recorded in the financial statements in accordance with their purpose as a reduction of expense, a reduction of asset cost or other operating or non-operating income. Incentives are recognized when there is probable assurance that the Company will comply with the conditions for the incentives and a reasonable expectation that the funds will be received. Government incentives received prior to being earned are recognized as deferred income whereas incentives earned prior to being received are recognized as receivables. The Company recognized government incentives of $ 18 million, $ 19 million and $ 14 million for the years ended December 31, 2025, 2024 and 2023, respectively. These amounts are recorded in Cost of goods sold and Selling, general and administrative expenses in the Consolidated Statements of Operations. Supplier Financing The Company has supplier financing arrangements with two third-party financial institutions under which certain suppliers may factor their receivables from Garrett. 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. 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. Supplier financing obligations outstanding and guaranteed bank notes outstanding are recorded within Accounts payable. The following table summarizes the activity related to our supplier financing obligations and guaranteed bank notes: Supplier Financing Obligations Outstanding Guaranteed Bank Notes Outstanding (Dollars in millions) Balance at December 31, 2023 $ 68 $ 193 Obligations added to the program 249 340 Obligations settled ( 250 ) ( 386 ) Foreign currency translation ( 3 ) ( 6 ) Balance at December 31, 2024 64 141 Obligations added to the program 279 337 Obligations settled ( 271 ) ( 326 ) Foreign currency translation ( 3 ) 6 Balance at December 31, 2025 $ 69 $ 158 Environmental Matters The Company records liabilities for environmental assessments and remediation activities in the period in which it is probable that a liability has been incurred and the amount of that liability can be reasonably estimated. Estimated costs are recorded at undiscounted amounts, based on experience and assessments and are regularly evaluated. To the extent that the required remediation procedures change, or additional contamination is identified, the Company’s estimated environmental liabilities may also change. The liabilities are recorded in Accrued liabilities and Other liabilities in the Consolidated Balance Sheets. Stock-Based Compensation The principal awards issued under our stock-based compensation plans, which are described in Note 21, Stock-Based Compensation , are performance stock units and restricted stock units. The cost for such awards is measured at the grant date based on the fair value of the award. Compensation expense is recognized over the requisite service periods (generally the vesting period of the equity award) based on the Company's best estimate of ultimate performance against the award targets, and is included in Selling, general and administrative expenses in the Consolidated Statements of Operations. The Company accounts for forfeitures as they occur. 57 Pension Benefits We sponsor defined benefit pension plans covering certain employees, primarily in Switzerland, the U.S. and Ireland. For such plans, we are required to disaggregate the service cost component of net benefit costs and report those costs in the same line item or items in the Consolidated Statements of Operations as other compensation costs arising from services rendered by the pertinent employees during the period. The other non-service components of net benefit costs are required to be presented separately from the service cost component. We record the service cost component of Pension expense (income) in Cost of goods sold or Selling, general and administrative expenses. The remaining components of net benefit costs within Pension expense (income), primarily interest costs and assumed return on plan assets, are recorded in Non-operating expense (income). We recognize net actuarial gains or losses in excess of 10 % of the greater of the fair value of plan assets or the plans’ projected benefit obligation (the corridor) annually in the fourth quarter each year (the “MTM Adjustment”). The MTM Adjustment is recorded in Non-operating expense (income). Foreign Currency Translation Assets and liabilities of subsidiaries operating outside the United States with a functional currency other than U.S. Dollars are translated into U.S. Dollars using year-end exchange rates. Sales, costs and expenses are translated at the average exchange rates in effect during the year. Foreign currency translation gains and losses are included as a component of Accumulated other comprehensive income ("AOCI"). Derivative Financial Instruments We minimize our risks from foreign currency exchange rate fluctuations through our normal operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. Derivative financial instruments are used to manage risk and are not used for trading or other speculative purposes. Derivative financial instruments that qualify for hedge accounting must be designated and effective as a hedge of the identified risk exposure at the inception of the contract. Accordingly, changes in fair value of the derivative contract must be highly correlated with changes in fair value of the underlying hedged item at inception of the hedge and over the life of the hedge contract. All derivatives are recorded on the Consolidated Balance Sheets as assets or liabilities and measured at fair value. For derivatives designated as cash flow hedges, the effective portion of the changes in fair value of the derivatives are recorded in AOCI and subsequently recognized in earnings when the hedged items impact earnings. Cash flows of such derivative financial instruments are classified consistent with the underlying hedged items. For derivatives designated as net investment hedges, provided the hedging relationship is highly effective, the changes in fair value of the derivatives are recorded in AOCI until the net investment is liquidated or sold. Income Taxes We account for income taxes pursuant to the asset and liability method which requires us to recognize current tax liabilities or receivables for the amount of taxes we estimate are payable or refundable for the current year and deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts and their respective tax bases of assets and liabilities and the expected benefits of net operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period enacted. A valuation allowance is provided when it is more likely than not that a portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred tax liabilities during the period in which related temporary differences become deductible. We reclassify taxes from AOCI to earnings as the items to which the tax effects relate are similarly reclassified. Earnings per share Basic earnings per share for the years ended December 31, 2025, 2024 and 2023 are calculated using the two-class method. In 2025 and 2024, the deferred stock units related to the stock-based compensation plan contain non-forfeitable rights to dividends and are considered as participating securities, while in 2023 our Series A Preferred Stock was considered a participating security prior to its conversion into Common Stock and cancellation pursuant to the Transaction. The two-class method requires an allocation of earnings to all securities that participate in dividends with common shares 58 to the extent that each such security may share in the Company's earnings. Basic earnings per share are calculated by dividing undistributed earnings allocated to Common Stock by the weighted average number of common shares. Diluted earnings per share for the years ended December 31, 2025 and 2024 are calculated by applying the two-class method for participating securities and then incorporating the dilutive effects of other potential common shares, determined using methods such as the treasury stock method, to arrive at the most dilutive EPS. Diluted earnings per share for the year ended December 31, 2023 are calculated by evaluating the more dilutive impact of both the two-class method and the if-converted method. 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. See Note 22, Earnings Per Share for further details. Related Party Transactions We contract with Trane Technologies ("Trane") for the occasional purchase of goods and services. Mr. Paul Camuti, a director on our Board of Directors, served as an executive officer of Trane through December 31, 2024, and was considered a related party until that time. Our payments under the agreements with Trane amounted to $ 1 million for the year ended December 31, 2024, and were included in Cost of goods sold in our Consolidated Statement of Operations. The liability balance due to Trane as of December 31, 2024, was immaterial . We lease certain facilities and receive property maintenance services from Honeywell International ("Honeywell") which, as of April 30, 2021 was the owner of our Series B Preferred Stock that has since been fully redeemed by the Company, is a holder of our Common Stock and was also a holder of our Series A Preferred Stock prior to the Transaction, as discussed below and in Note 19, Equity . 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 Transaction, which occurred on June 6, 2023. Our payments under the agreements with Honeywell during the period that they were considered a related party amounted to $ 2 million for the year ended December 31, 2023 and were included in Cost of goods sold, and Selling, general and administrative expenses, in our Consolidated Statements of Operations. As discussed in Note 19, Equity , in order to effect the Transaction, on April 12, 2023 (the "Transaction Date"), the Company entered into separate definitive agreements (the "Series A Preferred Stock Agreements") with each of Centerbridge Partners, L.P. (“Centerbridge”) and funds managed by Oaktree Capital Management, L.P. (“Oaktree”), to effect a series of integrated transactions (collectively, the "Transaction") designed to simplify the Company's capital structure by converting all outstanding shares of Series A Preferred Stock into a single class of Common Stock, subject to certain conditions. Each of Centerbridge and Oaktree is a holder of our Common Stock and appoints a director to our Board of Directors. Mr. Kevin Mahony, who serves as a Senior Managing Director of Centerbridge, and Mr. Steven Tesoriere, who serves as a Managing Director and Co-Portfolio Manager of Oaktree, have been appointed to our Board of Directors as designees of Centerbridge and Oaktree, respectively. As described more fully in Note 19, Equity , in connection with the Transaction, we paid to Centerbridge and Oaktree an aggregate of approximately $ 570 million for the repurchase of shares of Series A Preferred Stock, plus an aggregate of approximately $ 10 million and 7,276,036 shares of Common Stock representing the Additional Amounts and Accumulated Dividends in respect of the repurchased shares of Series A Preferred Stock. Additionally, in connection with the conversion of the Series A Preferred Stock that each of Centerbridge and Oaktree held as of the conversion date, we issued to Centerbridge and Oaktree an aggregate of 65,334,277 shares of Common Stock upon the conversion of an equivalent number of shares of Series A Preferred Stock, plus Additional Amounts and Accumulated Dividends of approximately $ 9 million and 6,819,540 shares of Common Stock. In connection with the conversion of our Series A Preferred Stock, we issued to Honeywell, as a holder of our Series A Preferred Stock, 4,196,330 shares of Common Stock upon the conversion of an equivalent number of shares of Series A Preferred Stock, plus Additional Amounts and Accumulated Dividends of approximately $ 1 million and 438,009 shares of Common Stock. Additionally, Mr. John Petry, a director on our Board in 2023, serves as Managing Member of Sessa Capital (Master), L.P., which indirectly held shares of our Series A Preferred Stock prior to the conversion. In connection with the conversion of our Series A Preferred Stock, we issued to Sessa Capital and its affiliates, as holder of our Series A Preferred Stock, 16,592,384 shares of Common Stock upon the conversion of an equivalent number of shares of Series A Preferred Stock, plus Additional Amounts and Accumulated Dividends of approximately $ 2 million and 1,731,900 shares of Common Stock. 59 During 2024, we repurchased from Centerbridge a total of 2,808,988 shares of Common Stock for $ 25 million under our share repurchase program. During 2025, we also repurchased from Oaktree a total of 7,500,000 shares of Common Stock for $ 103 million under our share repurchase program. The repurchased shares are held as treasury stock. Recently Issued Accounting Pronouncements Recently Adopted Accounting Standards In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . The amendments in this update increase the transparency around income tax information through improvements to disclosures primarily related to the rate reconciliation and income taxes paid information. The Company adopted the new guidance as of January 1, 2025, and applied the amendments retrospectively to all prior periods presented in our financial statements. Accounting Standards Issued But Not Yet Adopted In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in this update require disclosure of specified information about certain costs and expenses. In January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date . The guidance, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026 on a prospective basis, with early adoption permitted. The Company is currently evaluating the guidance to determine the impact on its disclosures. In September 2025, the FASB issued ASU 2025-06, Intangibles — Goodwill and Other — Internal Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments revise the capitalization criteria for internal-use software costs and eliminate stage-based development guidance. The update is effective for fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the guidance to determine the impact on its accounting policies and disclosures. In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities . The amendments in this update establish the accounting for a government grant received by a business entity. The guidance is effective for fiscal years beginning after December 15, 2029, with early adoption permitted. The Company is currently evaluating the guidance to determine the impact on its accounting policies and disclosures. There are no other recently issued, but not yet adopted, accounting pronouncements which are expected to have a material impact on the Company’s Consolidated Financial Statements and related disclosures. Note 3. Revenue Recognition and Contracts with Customers The Company generates revenue through the sale of products to customers in the OEM and aftermarket channels. OEM and aftermarket contracts generally include scheduling agreements that stipulate the pricing and delivery terms that identify the quantity and timing of the product to be transferred. Disaggregated Revenue For Net sales by region (determined based on country of shipment) and channel, refer to Note 25, Segments and Concentrations . We recognize virtually all of our revenues arising from performance obligations at a point in time. Less than 1 % of our revenue is satisfied over time. Contract Balances The timing of revenue recognition, billings and cash collections results in unbilled receivables (contract assets) and billed accounts receivable, reported in Accounts, notes and other receivables – net, and customer advances and deposits (contract liabilities), reported in Accrued Liabilities, on the Consolidated Balance Sheets. Contract assets arise when the timing of billing to customers differs from the timing of revenue recognition. Contract assets are recognized when the revenue associated with the contract is recognized prior to billing and derecognized once invoiced in accordance with the terms of the contract. Contract liabilities are recorded in scenarios where we enter into arrangements where customers are 60 contractually obligated to remit cash payments in advance of us satisfying performance obligations and recognizing revenue. Contract liabilities are generally derecognized when revenue is recognized. These assets and liabilities are reported on the Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period. The following table summarizes our contract assets and liabilities balances: 2025 2024 (Dollars in millions) Contract assets—January 1 $ 40 $ 38 Contract assets—December 31 48 40 Change in contract assets—Increase/(Decrease) $ 8 $ 2 Contract liabilities—January 1 $ ( 8 ) $ ( 11 ) Contract liabilities—December 31 ( 10 ) ( 8 ) Change in contract liabilities—(Increase)/Decrease $ ( 2 ) $ 3 Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is defined as the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For product sales, typically each product sold to a customer represents a distinct performance obligation. Performance obligations are supported by contracts with customers, providing a framework for the nature of the distinct goods, services or bundle of goods and services. The timing of satisfying the performance obligation is typically indicated by the terms of the contract. All performance obligations are expected to be satisfied within one year , with substantially all performance obligations being satisfied within a month. The timing of satisfaction of our performance obligations does not significantly vary from the typical timing of payment, with most cash advances (contract liabilities) and unbilled receivables (contract assets) being settled within 3 months. For some contracts, we may be entitled to receive an advance payment. We have applied the practical expedient to not disclose the value of remaining performance obligations for contracts with an original expected term of one year or less. Note 4. Other Expense, Net Year Ended December 31, 2025 2024 2023 (Dollars in millions) Factoring and notes receivables discount fees $ 3 $ 4 $ 4 Supplier financing fees 1 1 1 Debt refinancing costs $ 6 $ — $ — Other $ — $ 1 $ — $ 10 $ 6 $ 5 Note 5. Non-Operating Income, Net 61 Year Ended December 31, 2025 2024 2023 (Dollars in millions) Equity income of affiliated companies $ — $ ( 2 ) $ ( 7 ) Interest income ( 4 ) ( 3 ) ( 7 ) Pension income — non service ( 15 ) ( 13 ) ( 7 ) Foreign exchange (income) loss ( 1 ) 4 6 Loss on remeasurement (1) — — 13 Others, net 1 1 — $ ( 19 ) $ ( 13 ) $ ( 2 ) (1) Relates to the loss on remeasurement of the Series A Preferred Stock Agreements related to the Transaction. Refer to Note 19, Equity. Note 6. Income Taxes The sources of income (loss) from continuing operations, before income taxes, classified between domestic entities and those entities domiciled outside of the U.S., are as follows: Year Ended December 31, 2025 2024 2023 (Dollars in millions) Domestic entities $ ( 40 ) $ ( 65 ) $ ( 94 ) Entities outside the U.S. 432 408 441 $ 392 $ 343 $ 347 Tax expense (benefit) Tax expense (benefit) consists of: Year Ended December 31, 2025 2024 2023 (Dollars in millions) Current tax expense (benefit): Federal $ 18 $ ( 3 ) $ 12 State 1 1 — Foreign 54 56 50 Total current tax expense (benefit) $ 73 $ 54 $ 62 Deferred tax expense (benefit): Federal $ ( 6 ) $ ( 9 ) $ ( 14 ) State — ( 1 ) 1 Foreign 15 17 37 Total deferred tax expense (benefit) $ 9 $ 7 $ 24 Total income tax expense (benefit): Federal $ 12 $ ( 12 ) $ ( 2 ) State 1 — 1 Foreign 69 73 87 Total income tax expense (benefit) $ 82 $ 61 $ 86 Effective Tax Rate Effective tax rate includes: 62 Year Ended December 31, 2025 2024 2023 Amount Percent Amount Percent Amount Percent (Dollars in millions) U.S. federal statutory tax rate $ 82 21.0 % $ 72 21.0 % $ 73 21.0 % Domestic state and local income taxes, net of federal income tax effect (1) — 0.1 % — ( 0.1 ) % 1 0.3 % Tax credits ( 1 ) ( 0.3 ) % ( 2 ) ( 0.7 ) % ( 2 ) ( 0.5 ) % Nontaxable or nondeductible items — ( 0.1 ) % — ( 0.1 ) % 1 0.3 % Effect of cross-border tax laws (2) Global intangible low-taxed income 17 4.3 % 11 3.3 % 19 5.6 % US effects of foreign partnership ( 1 ) ( 0.2 ) % 6 1.8 % ( 1 ) ( 0.4 ) % Other ( 2 ) ( 0.4 ) % 3 0.8 % 1 0.2 % Changes in valuation allowances 3 0.8 % — — % 1 0.4 % Other ( 4 ) ( 1.0 ) % 1 0.3 % ( 2 ) ( 0.7 ) % Foreign tax effects China Enacted changes in tax laws or rates — — % — — % 28 7.9 % Remeasurement deferred taxes ( 11 ) ( 2.9 ) % — — % — — % Tax on distributions 3 0.8 % 8 2.5 % 2 0.6 % Other 6 1.6 % — ( 0.1 ) % ( 4 ) ( 1.1 ) % Switzerland Statutory tax rate difference between Switzerland and US ( 30 ) ( 7.7 ) % ( 26 ) ( 7.7 ) % ( 27 ) ( 7.8 ) % Changes in valuation allowances 1 0.2 % — 0.1 % 8 2.3 % Enacted changes in tax laws or rates — — % — — % ( 20 ) ( 5.8 ) % Tax on distributions 1 0.2 % 7 2.2 % — ( 0.1 ) % Investment in JVs — — % 3 1.0 % ( 2 ) ( 0.5 ) % Cantonal tax 11 2.8 % 15 4.5 % 4 1.0 % Statutory impairment of investment in subsidiary - 2024 RTP ( 7 ) ( 1.7 ) % — — % — — % Other — — % ( 6 ) ( 1.7 ) % 3 0.8 % India 8 2.0 % 7 1.9 % 3 0.8 % Thailand — — % 5 1.3 % — — % Brazil Changes in valuation allowances — — % ( 19 ) ( 5.6 ) % — 0.1 % Other 3 0.7 % ( 2 ) ( 0.5 ) % 1 0.2 % Korea Tax refund — — % — — % ( 4 ) ( 1.2 ) % Other 1 0.2 % 1 0.3 % — ( 0.1 ) % Stateless — — % ( 6 ) ( 1.7 ) % — — % Other foreign jurisdictions 4 1.0 % 5 1.5 % 7 2.6 % Changes in unrecognized tax benefits ( 2 ) ( 0.5 ) % ( 22 ) ( 6.5 ) % ( 4 ) ( 1.1 ) % Effective Tax Rate $ 82 20.9 % $ 61 17.8 % $ 86 24.8 % (1) State taxes in Michigan and Indiana make up the majority (greater than 50 percent) of the tax effect in this category. (2) Amounts reflected as net of related foreign tax credits. The effective tax rate increased by 3.1 percentage points in 2025 compared to 2024. The increase was primarily due to additional unrecognized tax benefits in Switzerland and China as well as prior year benefits associated with the release 63 of valuation allowance related to deferred tax assets in Brazil (net of U.S. branch taxes) and prior year benefits associated with statute of limitation expiration and settlement of audits in Switzerland and Korea. These increases were partially offset by the revaluation of deferred tax assets related to intellectual property transferred within China which was subject to tax at different rates. The effective tax rate decreased by 7.0 percentage points in 2024 compared to 2023. The decrease was primarily due to releases of reserves due to statute of limitation expirations and settlements with taxing authorities and release of valuation allowance related to deferred tax assets in Brazil (net of U.S. branch taxes). In addition, there was prior year expense due to rate change impact on deferred tax assets attributable to the certification by the Chinese government of the High and New Technology Enterprise status of the Company’s China operations, which reduced the tax rate to 15% for the respective entity. These increases were partially offset by prior year tax benefits in Switzerland due to law changes (net of valuation allowance) and in Korea for prior year tax settlements. Deferred tax assets (liabilities) The tax effects of temporary differences and tax carryforwards which give rise to future income tax benefits and payables are as follows: December 31, 2025 2024 (Dollars in millions) Deferred tax assets: Intangibles and fixed assets $ 114 $ 112 Accruals and reserves 31 29 Net operating losses and other tax attribute carryforwards 42 34 Outside basis differences 1 29 Other 94 70 Total deferred tax assets 282 274 Valuation allowance ( 37 ) ( 29 ) Net deferred tax assets $ 245 $ 245 Deferred tax liabilities: Outside basis differences $ ( 41 ) $ ( 18 ) Other ( 26 ) ( 45 ) Total deferred tax liabilities ( 67 ) ( 63 ) Net deferred tax asset $ 178 $ 182 As of December 31, 2025, the Company had foreign net operating loss carryforwards of approximately $ 67 million with the majority in the below jurisdictions: Jurisdiction Expiration Period Net Operating Loss Carryforwards (Dollars in millions) Brazil Indefinite $ 54 Luxembourg 2039 10 Other Various 3 $ 67 We also have net operating loss carryforwards in certain U.S. state jurisdictions, the tax effect of which is not significant. We maintain a valuation allowance of $ 37 million against a portion of total deferred tax assets. In the event we determine that we will not be able to realize our net deferred tax assets in the future, we will reduce such amounts through an increase to tax expense in the period such determination is made. Conversely, if we determine that we will be able to 64 realize net deferred tax assets in excess of the carrying amounts, we will decrease the recorded valuation allowance through a reduction to tax expense in the period that such determination is made. Our valuation allowance increased $ 8 million from last year. Our balance sheet presents a deferred tax asset of $ 210 million and a deferred tax liability of $ 32 million after considering jurisdictional netting. The Company does not intend to permanently reinvest the undistributed earnings of our foreign subsidiaries and have recorded a deferred tax liability, mainly consisting of withholding taxes, of $ 23 million as of December 31, 2025. The following table summarizes the activity related to the Company’s uncertain tax positions (excluding interest and penalties and related tax attributes): December 31, 2025 2024 2023 (Dollars in millions) Change in unrecognized tax benefits: Balance at beginning of year $ 48 $ 66 $ 71 Gross increases related to current period tax positions 10 5 3 Gross increases related to prior periods tax positions 7 2 — Gross decreases related to prior periods tax positions — — — Decrease related to resolutions of audits with tax authorities — ( 6 ) — Expiration of the statute of limitations for the assessment of taxes ( 11 ) ( 17 ) ( 8 ) Foreign currency translation 1 ( 2 ) — Balance at end of year $ 55 $ 48 $ 66 As of December 31, 2025, 2024, and 2023 there were $ 55 million, $ 48 million, and $ 66 million, respectively, of unrecognized tax benefits that, if recognized, would be recorded as a component of tax expense. Estimated interest and penalties related to uncertain tax benefits are classified as a component of tax expense in the Consolidated Statements of Operations and totaled $ 4 million of expense, $ 2 million of benefit, and $ 5 million of expense for the years ended December 31, 2025, 2024, and 2023, respectively. Accrued interest and penalties were $ 36 million, $ 32 million, and $ 34 million, as of December 31, 2025, 2024, and 2023, respectively. We are currently under audit in multiple jurisdictions, primarily India for tax years 2022 through 2024 and U.S. for tax years 2018 through 2020. Based on the outcome of these examinations, or as a result of the expiration of statutes of limitations for specific jurisdictions, it is possible that certain unrecognized tax benefits for tax positions taken on previously filed tax returns will significantly change from those recorded as liabilities in our financial statements. Income Taxes Paid (Net of Refunds Received) 65 Year Ended December 31, 2025 2024 2023 (Dollars in millions) U.S. Federal $ 4 $ 15 $ 17 U.S. State & Local 1 — 1 Foreign Brazil 7 — — China 16 20 11 India 9 10 8 Japan 5 7 3 Korea 2 ( 1 ) 4 Switzerland - Federal 6 5 9 Switzerland - Cantonal 4 3 6 Other 8 12 12 Total Foreign 57 56 53 Balance at end of year $ 62 $ 71 $ 71 Note 7. Accounts, Notes and Other Receivables—Net December 31, 2025 2024 (Dollars in millions) Trade receivables $ 533 $ 521 Notes receivables 113 96 Other receivables 66 74 712 691 Less — Allowance for expected credit losses ( 9 ) ( 4 ) $ 703 $ 687 Trade receivables include $ 48 million and $ 40 million of unbilled balances as of December 31, 2025 and 2024, respectively. Other receivables includes VAT receivables of $ 47 million and $ 50 million as of December 31, 2025 and 2024, respectively. Note 8. Factoring and Notes Receivable The Company enters into arrangements with financial institutions to sell eligible trade receivables. The receivables are sold without recourse and the Company accounts for these arrangements as true sales. 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. Bank notes sold to third-party financial institutions without recourse are likewise accounted for as true sales. 66 Year Ended December 31, 2025 2024 2023 (Dollars in millions) Eligible receivables sold without recourse $ 714 $ 701 $ 783 Guaranteed bank notes sold without recourse 176 161 92 The expenses related to the sale of trade receivables and guaranteed bank notes are recognized within Other expense, net in the Consolidated Statements of Operations, and were $ 3 million, $ 4 million and $ 4 million for the years ended December 31, 2025, 2024 and 2023, respectively. December 31, 2025 2024 (Dollars in millions) Receivables sold but not yet collected by the bank from the customer $ — $ 6 Guaranteed bank notes sold but not yet collected by the bank from the customer — — As of December 31, 2025 and 2024, the Company has no guaranteed bank notes pledged as collateral. Note 9. Inventories—Net December 31, 2025 2024 (Dollars in millions) Raw materials $ 268 $ 230 Work in process 20 18 Finished products 93 79 $ 381 $ 327 Less — Reserves ( 42 ) ( 41 ) $ 339 $ 286 Note 10. Other Current Assets December 31, 2025 2024 (Dollars in millions) Prepaid expenses $ 18 $ 16 Taxes receivable 31 18 Advanced discounts to customers, current 13 18 Customer reimbursable engineering 18 29 Foreign exchange forward contracts 16 13 Other 2 — $ 98 $ 94 67 Note 11. Other Assets December 31, 2025 2024 (Dollars in millions) Advanced discounts to customers, non-current $ 31 $ 29 Operating right-of-use assets (Note 16) 49 52 Income tax receivable 21 21 Pension and other employee related 28 23 Customer reimbursable engineering costs 34 — Derivatives designated as net investment hedges — 70 Designated and undesignated derivatives — 20 Other 9 9 $ 172 $ 224 Note 12. Property, Plant and Equipment, Net December 31, 2025 2024 (Dollars in millions) Land and improvements $ 14 $ 13 Buildings and improvements 174 150 Machinery and equipment 784 702 Tooling 502 433 Software 110 90 Construction in progress 76 98 Others 28 25 1,688 1,511 Less — Accumulated depreciation and amortization ( 1,226 ) ( 1,062 ) $ 462 $ 449 Depreciation and amortization expense amounted to $ 99 million, $ 90 million and $ 90 million for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, 2024 and 2023, capital expenditures included in accounts payable totaled $ 53 million, $ 60 million and $ 61 million, respectively. Note 13. Goodwill There were no changes to the carrying amount of goodwill for the years ended December 31, 2025 and 2024 : December 31, 2025 2024 (Dollars in millions) Goodwill $ 193 $ 193 68 Note 14. Accrued Liabilities December 31, 2025 2024 (Dollars in millions) Customer pricing reserve $ 88 $ 77 Compensation, benefits and other employee related 81 74 Repositioning 6 12 Product warranties and performance guarantees - Short-term 13 15 Income and other taxes 32 32 Customer advances and deferred income (1) 17 16 Accrued interest 12 14 Short-term lease liability (Note 16) 13 11 Freight accrual 9 9 Dividends payable (Note 19) 1 12 Designated and undesignated derivatives 11 8 Environmental liabilities 3 6 Other (primarily operating expenses) 9 13 $ 295 $ 299 (1) Customer advances and deferred income include $ 10 million and $ 8 million of contract liabilities as of December 31, 2025 and 2024 , respectively. See Note 3, Revenue Recognition and Contracts with Customers . The Company incurs repositioning costs related to projects to optimize our product costs and to right-size our organizational structure. Expenses related to the repositioning costs are included in Cost of goods sold and Selling, general and administrative expenses in our Consolidated Statements of Operations. Severance Costs Other Costs Total (Dollars in millions) Balance at December 31, 2023 $ 9 $ — $ 9 Charges 21 — 21 Usage—cash ( 18 ) — ( 18 ) Balance at December 31, 2024 12 — 12 Charges 12 — 12 Usage—cash ( 18 ) — ( 18 ) Balance at December 31, 2025 $ 6 $ — $ 6 Note 15. Long-term Debt and Credit Agreements Long Term Debt Senior Notes On May 21, 2024, Garrett Motion Holdings Inc. and Garrett LX I S.à.r.l. (the "Issuers"), wholly owned subsidiaries of the Company, completed an offering of $ 800 million in aggregate principal amount of 7.75 % Senior Unsecured Notes due 2032 (the "2032 Senior Notes"). The 2032 Senior Notes mature on May 31, 2032. The Company incurred $ 12 million of debt issuance costs, which have been capitalized and will be amortized on a straight-line basis. The 2032 Senior Notes are guaranteed by the Company and each of the Company's wholly owned subsidiaries that guarantee obligations under the existing Credit Agreement (as defined below), subject to certain exceptions. The proceeds 69 from the sale of the 2032 Senior Notes, together with cash on hand, were used to repay approximately $ 800 million of term loan indebtedness, as described below, and to pay related fees and expenses. Term Loans On January 30, 2025, the Company entered into the Restatement Agreement, which amended and restated the Existing Credit Agreement. Pursuant to the Restatement Agreement, the Company refinanced in full its $ 692 million U.S. Dollar term loan facility (the "2021 Dollar Term Facility") under the Existing Credit Agreement with a new $ 692 million term loan (the "2025 Dollar Term Facility") in an aggregate principal amount of $ 692 million. The 2025 Dollar Term Facility will mature on January 30, 2032. The principal outstanding and carrying amounts of our long-term debt as of December 31, 2025 and 2024 are as follows: December 31, (Dollars in millions) Maturity Date Interest Rate 2025 2024 2021 Dollar Term Facility April 30, 2028 SOFR plus 275 bps $ — $ 692 2025 Dollar Term Facility January 30, 2032 SOFR plus 200 bps 637 — 2032 Senior Notes May 31, 2032 7.75 % 800 800 Other 2 1 Total principal outstanding 1,439 1,493 Less: unamortized deferred financing costs ( 21 ) ( 22 ) Less: current portion of long-term debt ( 7 ) ( 7 ) Total long-term debt $ 1,411 $ 1,464 The following table summarizes the minimum scheduled principal repayments of long-term debt as of December 31, 2025: December 31, (Dollars in millions) 2026 $ 7 2027 7 2028 9 2029 7 2030 7 Thereafter 1,402 Total payments on long-term debt $ 1,439 New Revolving Facility and Letters of Credit Also on January 30, 2025, pursuant to the Restatement Agreement, the Company replaced its existing $ 600 million revolving commitments under the Existing Credit Agreement with new revolving commitments under the Credit Agreement in an aggregate principal amount of $ 630 million (the "New Revolving Facility" and, together with the New Term Loans, the "Credit Facilities"). The maturity date of the New Revolving Facility is January 30, 2030. Under the New Revolving Facility, the Company may use up to $ 125 million for the issuance of letters of credit to its subsidiaries. Letters of credit are available for issuance under the Credit Agreement on terms and conditions customary for financings of this kind, which issuances will reduce availability under the New Revolving Facility. As of December 31, 2025, the Company had no borrowings outstanding under the New Revolving Facility, no outstanding letters of credit, and available borrowing capacity of $ 630 million. As of December 31, 2024, the Company had no borrowings outstanding under the Revolving Facility, no outstanding letters of credit, and available borrowing capacity of $ 600 million. Separate from the New Revolving Facility, the Company has a bilateral letter of credit facility with outstanding letters of credit of $ 10 million and $ 8 million at December 31, 2025 and 2024, respectively. The letters of credit typically support customs arrangements and other obligations at its local affiliates. 70 Amendments to the Credit Agreement On August 6, 2025, the Company entered into Amendment No. 1 (the "First Amendment") to the Credit 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. Security The Credit Facilities are secured on a first-priority basis by: (i) a perfected security interest in the equity interests of each direct material subsidiary of each guarantor under the Credit Facilities and (ii) perfected security interests in, and mortgages on, substantially all tangible and intangible personal property and material real property of each of the guarantors under the Credit Facilities, subject, in each case, to certain exceptions and limitations, including the agreed guaranty and security principles. Interest Rate and Fees The 2032 Senior Notes bear interest at a rate of 7.75 % per annum. Interest on the 2032 Senior Notes is payable semi-annually in arrears on May 31 and November 30 of each year, commencing on November 30, 2024. The 2025 Dollar Term Facility is subject to an interest rate equal to, at the Company's option, 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. The New Revolving Facility, when drawn, will bear interest at a rate equal to the applicable benchmark plus an applicable margin that varies based on the Company's leverage ratio. The applicable margin for revolving borrowings ranges from 2.25 % to 1.75 % per annum in the case of Term Benchmark Loans and 1.25 % to 0.75 % per annum in the case of ABR Loans. Accordingly, the interest rates for the Credit Facilities will fluctuate during the term of the Credit Agreement based on changes in the ABR, SOFR and other applicable benchmark rates or future changes in our leverage ratio. Interest payments with respect to the Term Loan Facilities are required either on a quarterly basis (for ABR loans) or at the end of each interest period (for SOFR loans) or, if the duration of the applicable interest period exceeds three months, then every three months . In addition to paying interest on outstanding borrowings under the Revolving Facility, the Company is required to pay a quarterly commitment fee based on the unused portion of the New Revolving Facility, which is determined by our leverage ratio and ranges from 0.25 % to 0.50 % per annum. Prepayments 2032 Senior Notes The Issuers may redeem some or all of the 2032 Senior Notes at its option prior to May 31, 2027, at a redemption price equal to 100 % of the principal amount of the 2032 Senior Notes redeemed, plus a customary "make-whole" premium, plus accrued and unpaid interest excluding, the redemption date. At any time prior to May 31, 2027, the Issuers may also redeem up to 40 % of the aggregate principal amount of the 2032 Senior Notes with funds in an aggregate amount not to exceed the net cash proceeds from certain equity offerings at a redemption price equal to 107.750 % of principal plus accrued and unpaid interest. The issuers may redeem the 2032 Senior Notes at its option, in whole at any time or in part from time to time, at the following redemption prices: • from May 31, 2027 to May 30, 2028: Redemption Price equal to 103.875 % of principal plus accrued and unpaid interest; • from May 31, 2028 to May 30, 2029: Redemption Price equal to 101.938 % of principal plus accrued and unpaid interest; and • from May 31, 2029 and Thereafter: Redemption Price equal to 100 % of principal plus accrued and unpaid interest 71 Additionally, the Issuers may redeem all, but not part, of the 2032 Senior Notes upon the occurrence of specified tax events as described in the indenture. Term Loans The Company is obligated to make quarterly principal payments throughout the term of the 2025 Dollar Term Facility according to the amortization provisions in the Credit Agreement. Such payments may be reduced from time to time in accordance with the terms of the Credit Agreement as a result of the application of loan prepayments made by us, if any, prior to the scheduled date of payment thereof. We may voluntarily prepay borrowings under the Credit Agreement without premium or penalty, subject to a 1.00 % prepayment premium in connection with certain repricing events in connection with the 2025 Dollar Term facility during the period from the Credit Agreement Closing Date to the date that is six months following the First Amendment Closing Date and customary "breakage” costs with respect to SOFR and EURIBOR loans. We may also reduce the commitments under the New Revolving Facility, in whole or in part, in each case, subject to certain minimum amounts and increments. The Credit Agreement also 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, starting with the fiscal year ending on December 31, 2024, 0.50 % of excess cash flow on an annual basis (with step-downs to 25 % and 0 % subject to compliance with certain leverage ratios), in each case subject to terms and conditions customary for financings of this kind. During the year ended December 31, 2024, we made early debt repayments totaling $ 985 million on our € 450 million secured first-lien Euro term loan facility and our $ 700 million secured first-lien U.S. Dollar term loan facility. Both term loans were fully repaid as of December 31, 2024. The early repayments resulted in incremental amortization of debt issuance costs of $ 27 million, included within Interest expense in the Consolidated Statement of Operations. During the year ended December 31, 2025, we made an early debt repayment of $ 50 million on our 2025 Dollar Term Facility. The early repayment resulted in incremental amortization of debt issuance costs of $ 1 million, included within Interest expense in the Consolidated Statement of Operations. Representations and Warranties The Credit Agreement contains certain representations and warranties (subject to certain agreed qualifications) that are customary for financings of this kind. Certain Covenants 2032 Senior Notes The 2032 Senior Notes contain certain covenants that limit the ability of the Company and its restricted subsidiaries to incur certain additional debt, incur certain liens securing debt, pay certain dividends or make other restricted payments, make certain investments, make certain asset sales, and enter into certain transactions with affiliates. These covenants are subject to a number of exceptions, limitations, and qualifications as set forth in the 2032 Senior Notes indenture. Additionally, the indenture contains certain change of control provisions that, under certain conditions, would require the Company to make an offer to repurchase all of the outstanding 2032 Senior Notes at a price equal to 101 % of the aggregate principal amount, plus accrued and unpaid interest. The indenture also contains customary events of default. Term Loans The Credit Agreement contains certain affirmative and negative covenants customary for financing of this type. The New 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 New Revolving Facility exceeds 35 % of the aggregate commitments thereunder. As of December 31, 2025, the Company was in compliance with all its financing covenants. 72 Note 16. Leases We have opera ting leases that primarily consist of real estate, machinery and equipment. As of December 31, 2025, the Company does not have any material finance leases. Our leases have remaining lease terms of up to 12 years, some of which include options to extend the leases for up to two years , and some of which include options to terminate the leases within the year. The components of lease expense are as follows: Year Ended December 31, 2025 2024 2023 (Dollars in millions) Operating lease cost $ 17 $ 17 $ 16 Short-term lease cost 3 — — Total lease cost $ 20 $ 17 $ 16 Supplemental cash flow information related to leases is as follows: Year Ended December 31, 2025 2024 2023 (Dollars in millions) Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 17 $ 33 $ 13 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 7 $ 11 $ 3 Finance leases $ 1 $ — $ — Supplemental balance sheet information related to operating leases is as follows: Year Ended December 31, 2025 2024 (Dollars in millions) Other assets $ 49 $ 52 Accrued liabilities 13 11 Other liabilities 38 42 Year Ended December 31, 2025 2024 Weighted-average lease term (in years) 6.43 6.89 Weighted-average discount rate 6.25 % 6.71 % 73 Maturities of operating lease liabilities are as follows: Year Ended December 31, 2025 (Dollars in millions) 2026 $ 15 2027 13 2028 8 2029 5 2030 3 Thereafter 16 Total lease payments 60 Less imputed interest ( 9 ) $ 51 Note 17. Financial Instruments and Fair Value Measures Credit and Market Risk We continually monitor the creditworthiness of our customers to which we grant credit terms in the normal course of business. The terms and conditions of our credit sales are designed to mitigate or eliminate concentrations of credit risk with any single customer. Foreign Currency Risk Management The Company is exposed to market risks from changes in currency exchange rates. These exposures may impact future earnings and/or operating cash flows. Our exposure to market risk for changes in foreign currency exchange rates arises from international financing activities between subsidiaries, foreign currency denominated monetary assets and liabilities and transactions arising from international trade. We hedge currency exposures with natural offsets to the fullest extent possible and, once these opportunities have been exhausted, through foreign currency exchange forward contracts. The forward currency exchange contracts are intended to mitigate exposure to foreign exchange rate volatility and the associated impact on earnings related to forecasted foreign currency commitments. Certain of these forward currency exchange contracts are designated as cash flow hedges, whereby the gains and losses on these derivatives are recorded in AOCI until the underlying transactions are recognized in earnings. As of December 31, 2025 and 2024, we had outstanding designated and undesignated forward currency exchange contracts with aggregate gross notional amounts of $ 1,374 million and $ 928 million, respectively, to hedge 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. The Company uses fixed-to-fixed cross-currency swap contracts to mitigate the foreign currency risk on its 2032 Senior Notes. The cross-currency swap contracts are designated as cash flow hedges, with changes in the fair value of the derivatives recorded in AOCI and reclassified into earnings based upon changes in the spot rate remeasurement of the underlying debt. The Company also uses cross-currency swap contracts to hedge net investments in foreign subsidiaries. These cross-currency swap contracts are designated as net investment hedges, and the gains and losses on these derivatives are recorded in AOCI until the net investment is liquidated or sold. Interest Rate Risk Management The Company is also exposed to market value risk associated with interest rate fluctuations on its variable rate term loan debt. To manage interest rate exposure, the Company enters into interest rate swap contracts. Certain of these interest rate swap contracts are designated as cash flow hedges, whereby the gains and losses on these derivatives are recorded in AOCI until the underlying transactions are recognized in earnings. Fair Value of Financial Instruments 74 The FASB’s accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). 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 December 31, 2025 and 2024: Fair Value Notional Amounts Assets Liabilities December 31, 2025 December 31, 2024 December 31, 2025 December 31, 2024 December 31, 2025 December 31, 2024 (Dollars in millions) Designated instruments: Forward currency exchange contracts $ 637 $ 331 $ 15 $ 4 (a) $ 8 $ 6 (c) Cross-currency swaps 1,775 1,515 — 82 (b) 169 — (d) Interest rate swaps 625 — — — (b) 16 — (d) Subtotal 3,037 1,846 15 86 193 6 Undesignated instruments: Interest rate swaps — 470 — 9 (b) — 3 (d) Forward currency exchange contracts 737 597 2 9 (a) 3 2 (c) Subtotal 737 1,067 2 18 3 5 Total designated and undesignated instruments $ 3,774 $ 2,913 $ 17 $ 104 $ 196 $ 11 (a) Recorded within Other current assets in the Company’s Consolidated Balance Sheets (b) Recorded within Other assets in the Company’s Consolidated Balance Sheets (c) Recorded within Accrued liabilities in the Company’s Consolidated Balance Sheets (d) Recorded within Other liabilities in the Company's Consolidated Balance Sheets Cash Flow Hedges During 2023, the Company entered into float-to-fixed interest rate swap contracts with an aggregate notional amount of $ 200 million and maturities in July 2024 and October 2024. The Company also entered into a float-to-fixed cross-currency swap contract comprised of an amortizing swap with an aggregate notional amount of € 280 million ($ 300 million) and notional exchanges in June 2026, June 2027, and June 2028. The interest rate swap and cross-currency swap contracts were early settled in 2024, resulting in net gains of $ 18 million recorded to Interest expense and a $ 4 million loss recorded to Non-operating expense in the Consolidated Statement of Operations. During 2024, in order to mitigate foreign currency risk on its 2032 Senior Notes, the Company entered into fixed-to-fixed cross-currency swap contracts with an aggregate notional amount of € 507 million ($ 550 million) and notional exchanges in May 2027, May 2028, May 2029 and May 2030. Changes in the fair value of the cross-currency swap contracts are recognized in AOCI and reclassified to Non-operating income in the Consolidated Statement of Operations, based upon changes in the spot rate remeasurement of the underlying debt. The net interest settlements on the cross-currency swap contract are recorded in Interest expense in the Consolidated Statements of Operations. In 2025, the Company entered into float-to-fixed interest rate swap contracts with an aggregate notional amount of $ 675 million and maturities in January 2028, January 2029, January 2030 and January 2031, of which an interest rate swap contract with a notional amount of $ 50 million was early settled during the year. Changes in the fair value of the interest rate swap contracts are recorded in AOCI and will be reclassified to Interest expense in the Consolidated Statement of Operations upon maturity. Amounts recognized related to the early settlement of the interest rate swap contract during the year were immaterial. The Company also has outstanding forward currency exchange contracts with maturities up to 18 months and an aggregate notional amount of $ 637 million and $ 331 million as of December 31, 2025 and 2024, respectively. These forward currency exchange contracts have been designated as cash flow hedges to mitigate foreign currency exposures 75 primarily on our inventory purchases and manufacturing costs. The gains and losses on the forward currency exchange contracts are recorded in AOCI and reclassified to Cost of goods sold in the Consolidated Statement of Operations when the underlying transactions are recognized in earnings. All of the Company’s cash flow hedges are assessed as highly effective. Net Investment Hedges The Company has designated cross-currency swaps with an aggregate notional amount of € 1,157 million ($ 1,225 million) and € 858 million ($ 965 million) as of December 31, 2025 and 2024, respectively, as net investment hedges of the Company’s Euro-denominated operations. In 2025, a cross-currency swap contract with a notional amount of € 224 million ($ 265 million) was early settled. The fair values of the net investment hedges were net liabilities of $ 124 million and net assets of $ 70 million as of December 31, 2025 and 2024, respectively. No ineffectiveness has been recorded on the net investment hedges. Non-Designated Derivatives As of December 31, 2024, the Company had outstanding float-to-fixed interest rate swap contracts with an aggregate notional amount of € 450 million ($ 470 million) and maturities of April 2025, April 2026 and April 2028. Changes in the fair value of the undesignated interest rate swap contracts are recorded in Interest expense in the Consolidated Statements of Operations. These interest rate swap contracts were early settled in 2025. The Company also has outstanding forward currency exchange contracts with maturities generally up to 3 months and an aggregate notional amount of $ 737 million and $ 597 million as of December 31, 2025 and 2024, respectively. These derivatives are not designated as hedging instruments and are adjusted to fair value through Non-operating (income) expense in the Consolidated Statements of Operations. Effect of Derivatives on the Statements of Operations and Statements of Comprehensive Income (Loss) The following tables present the pretax impact that changes in the fair values of derivatives designated as cash flow hedges and net investment hedges had on OCI, AOCI and earnings: Year Ended December 31, 2025 2024 2023 (Dollars in millions) Cash flow hedges Gain (loss) reclassified from AOCI to income: Cost of goods sold $ 4 $ 3 $ 23 Interest expense (1) 7 4 3 Non-operating income (2) ( 65 ) 26 ( 10 ) Gain (loss) recognized in other comprehensive income (loss) 1 ( 7 ) ( 18 ) Net investment hedges Gain (loss) recognized in other comprehensive income (loss) ( 165 ) 63 ( 8 ) (1) Includes a settlement loss of $ 3 million for the year ended December 31, 2024. (2) Includes a settlement loss of $ 4 million for the year ended December 31, 2024. The following table summarizes the pretax gain (loss) that changes in the fair values of derivatives not designated as hedging instruments had on earnings: Year Ended December 31, 2025 2024 2023 Contract Type Location (Dollars in millions) Interest rate swaps Interest expense (1) $ — $ 9 $ ( 9 ) Forward currency exchange contracts Non-operating income 24 27 ( 11 ) 76 (1) Includes interest income of $ 6 million offset by marked-to-market remeasurement losses of $ 6 million for the year ended December 31, 2025. Includes settlement gain of $ 22 million and interest income of $ 24 million partially offset by marked-to-market remeasurement losses of $ 37 million, for the year ended December 31, 2024. Includes marked-to-market remeasurement losses of $ 33 million partially offset by interest income of $ 24 million for the year ended December 31, 2023. Fair Value Measurement The foreign currency exchange, interest rate swap and cross-currency swap contracts are valued using market observable inputs. As such, these derivative instruments are classified within Level 2. The assumptions used in measuring fair value of the cross-currency swap contracts are considered Level 2 inputs, which are based upon market observable interest rate curves, cross currency basis curves, credit default swap curves, and foreign exchange rates. The carrying value of Cash, cash equivalents and restricted cash, Account receivables and Notes and Other receivables contained in the Consolidated Balance Sheets approximates fair value. The following table sets forth the Company’s financial assets and liabilities that were not carried at fair value: December 31, 2025 Carrying Value Fair Value (Dollars in millions) Term Loan Facilities $ 626 $ 639 2032 Senior Notes 790 850 The Company determined the fair value of its long-term debt and related current maturities utilizing transactions in the listed markets for similar liabilities. As such, the fair value of the Term Loan Facilities and related current maturities is considered Level 2. The fair value of the 2032 Senior Notes was determined using quoted prices from daily exchange traded markets and is classified as a Level 1 measurement. Note 18. Other liabilities December 31, 2025 2024 (Dollars in millions) Income taxes $ 90 $ 79 Derivatives designated as net investment hedges 124 — Designated and undesignated derivatives 61 3 Pension and other employee related 9 18 Long-term lease liability (Note 16) 38 42 Advanced discounts from suppliers 2 2 Product warranties and performance guarantees – Long-term 8 8 Environmental Remediation – Long-term 11 10 Long-term accounts payable 4 5 Asset retirement obligation 8 8 Other 8 7 $ 363 $ 182 Note 19. Equity Series A Preferred Stock On April 30, 2021, in connection with emergence from bankruptcy, the Company issued 247,757,290 shares of the Company's Series A Preferred Stock to affiliated funds of Centerbridge, affiliated funds of Oaktree (together with Centerbridge, the "C&O Investors"), and certain other investors and parties. 77 On the Transaction Date, the Company entered into separate definitive agreements (the “Agreements”) with each of Centerbridge and Oaktree to effect the “Transaction designed to simplify the Company’s capital structure by converting all outstanding shares of Series A Preferred Stock into a single class of Common Stock, subject to certain conditions. Under the terms of the Agreements, the Company agreed to purchase a total of $ 570 million in shares of Series A Preferred Stock from the C&O Investors at a cash price per share to be based on 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. Additionally, under the terms of the Agreements, all holders of Series A Preferred Stock, including the C&O Investors, were entitled to receive (i) $ 0.853509 per share of Series A Preferred Stock, representing accumulated and unpaid preference dividends through June 30, 2023 on each share of Series A Preferred Stock (the “Accumulated Dividends”), which would be paid out in shares of Common Stock valued at the 15 Days VWAP, and (ii) $ 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”), which would be paid out in cash. In the second quarter of 2023, the Company completed the following steps in connection with the Transaction: • The Company issued 25,577,517 shares of Common Stock to holders of the Series A Preferred Stock in respect of the Accumulated Dividends, with immaterial cash payments made in lieu of issuing fractional shares; • The Company paid approximately $ 35 million in aggregate to holders of the Series A Preferred Stock in respect of the Additional Amounts, consisting of $ 10 million to the C&O Investors in consideration of shares to be repurchased and $ 25 million to all holders in consideration of shares to be converted, which Additional Amounts were considered to be a deemed dividend; • The Company repurchased 69,707,719 shares of Series A Preferred Stock from the C&O Investors at the 15 Days VWAP for an aggregate purchase price of $ 570 million; and • The remaining 175,337,712 shares of Series A Preferred Stock were converted into 175,337,712 shares of Common Stock, and trading of the Series A Preferred Stock on Nasdaq was subsequently suspended. The Agreements were accounted for as freestanding physically settled forward purchase contracts. The Agreements were initially recorded at fair value and then remeasured through earnings until the establishment of the 15 Days VWAP, whereupon the Agreements were subsequently measured based on the amount of consideration to be paid at settlement. A Monte-Carlo simulation model was used to determine the Transaction Date fair value of the Agreements by simulating a range of possible future stock prices for the Company through the expected settlement date of the Agreements. The significant assumptions utilized in estimating the fair value of the Agreements include: (i) a dividend yield of 0.0 %; (ii) an expected volatility of 40.0 %; (iii) a risk-free interest rate of 4.23 % based on observed interest rates from the Treasury Constant Maturity yield curve consistent with the simulation term; and (iv) a starting share price of $ 8.25 based on the market price of the Common Stock as of the Transaction Date. The initial fair value of the Agreements represented a forward purchase liability of $ 4 million. A loss of $ 13 million was recognized in Non-operating expense in the Consolidated 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. A liability for excise tax, amounting to $ 6 million, was also recorded to Retained Deficit as a deemed dividend. The following table summarizes the effects of the Transaction on the Consolidated Financial Statements as of and for the year ended December 31, 2023 : 78 Series A Repurchase 2023 Conversion Settlement of Accumulated Dividends Excise tax on Series A Repurchase Total (Dollars in millions) Consolidated Balance Sheet - increase/(decrease): Cash and cash equivalents $ ( 580 ) $ ( 25 ) $ — $ — $ ( 605 ) Accrued liabilities — — — 6 6 Preferred Stock — — — — — Common Stock — — — — — Additional Paid-in capital ( 366 ) — 209 — ( 157 ) Retained earnings ( 201 ) ( 25 ) ( 209 ) ( 6 ) ( 441 ) Consolidated Statement of Operations: Non-operating expenses 13 — — — 13 Consolidated Statement of Cash Flows Repurchases of Series A Preferred Stock ( 580 ) — — — ( 580 ) Payments for Additional Amounts for conversion of Series A Preferred Stock — ( 25 ) — — ( 25 ) The Company incurred $ 9 million of Transaction-related costs for the year ended December 31, 2023, primarily for legal and advisory services that are included in Selling, general and administrative expenses in the Consolidated Statement of Operations. Common Stock Cash dividends paid to shareholders of our Common Stock for the year ended December 31, 2025 were as follows (in millions, except per share amounts): Quarterly Dividends 2025 Per Share Total First quarter $ 0.06 $ 12 Second quarter 0.06 13 Third quarter 0.06 11 Fourth quarter 0.08 16 Dividends payable on shares of Common Stock to be distributed under the Company's Long-Term Incentive Plan will be paid if and when such shares are distributed. See also Note 21, Stock-Based Compensation for further discussion. Treasury Stock Treasury stock represents shares of the Company's Common Stock that have been issued and subsequently repurchased by the Company or withheld to satisfy withholding tax obligations in connection with equity award vestings, and that have not been retired or cancelled. The Company accounts for treasury stock under the cost method and includes treasury stock as a component of Equity (Deficit) on the Consolidated Balance Sheet. The Company accounts for the reissuance of treasury stock using the average cost method. The Company did not reissue or retire any shares of treasury stock during the year ended December 31, 2025. Share Repurchase Program On December 4, 2024, the Company announced that the Board of Directors had authorized a $ 250 million share repurchase program valid January 1, 2025 until December 31, 2025. During the year ended December 31, 2025, the Company repurchased 16,890,791 shares of Common Stock for $ 208 million under the program. These repurchases include a total of 7,500,000 shares of Common Stock for $ 103 million from funds affiliated with Oaktree Capital Management, L.P., a related party. The repurchased shares are held as treasury stock. The 2025 share repurchase program expired on December 31, 2025. 79 On December 3, 2025, the Board of Directors authorized a new $ 250 million share repurchase program valid January 1, 2026 until December 31, 2026. 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 repurchase program, and the program may be suspended, modified, or discontinued at any time without prior notice. Note 20. Accumulated Other Comprehensive Income (Loss) The changes in AOCI by component are shown below: Year Ended December 31, 2025 2024 2023 (Dollars in millions) Foreign Exchange Translation Adjustment Balance at beginning of year $ ( 27 ) $ ( 57 ) $ ( 44 ) Other comprehensive income (loss) before reclassifications ( 83 ) 35 ( 13 ) Amounts reclassified from AOCI — ( 5 ) — Balance at end of year ( 110 ) ( 27 ) ( 57 ) Pension Adjustments Balance at beginning of year ( 15 ) ( 20 ) ( 18 ) Other comprehensive income (loss) before reclassifications (1) 8 15 — Income tax benefit (expense) associated with comprehensive income (loss) before reclassifications — ( 1 ) 1 Amounts reclassified from AOCI ( 10 ) ( 10 ) ( 3 ) Income taxes associated with reclassifications from AOCI 1 1 — Balance at end of year ( 16 ) ( 15 ) ( 20 ) Changes in Fair Value of Effective Cash Flow Hedges Balance at beginning of year ( 10 ) ( 2 ) 13 Other comprehensive income (loss) before reclassifications ( 45 ) 20 1 Income tax benefit (expense) associated with comprehensive income (loss) before reclassifications 2 1 ( 3 ) Amounts reclassified from AOCI 54 ( 33 ) ( 16 ) Income taxes associated with reclassifications from AOCI ( 7 ) 4 3 Balance at end of year ( 6 ) ( 10 ) ( 2 ) Changes in Fair Value of Net Investment Hedges Balance at beginning of year 125 76 85 Other comprehensive income (loss) before reclassifications ( 165 ) 63 ( 8 ) Income tax benefit (expense) associated with comprehensive income (loss) before reclassifications 34 ( 14 ) ( 1 ) Balance at end of year ( 6 ) 125 76 Accumulated other comprehensive income (loss), end of year $ ( 138 ) $ 73 $ ( 3 ) (1) Amounts are included in the computation of net periodic benefit cost. See Note 24, Defined Benefit Pension and Post-Employment Plans. 80 Reclassifications from accumulated other comprehensive income (loss) to income were as follows: Year Ended December 31, 2025 2024 2023 (Dollars in millions) Foreign Exchange Translation Adjustment Reclassification adjustments recognized in income (1) $ — $ ( 5 ) $ — Amounts reclassified from AOCI — ( 5 ) — Pension Adjustments Reclassification to Non-operating (income) expense $ ( 10 ) $ ( 10 ) $ ( 3 ) Tax effect on reclassification to income 1 1 — Amounts reclassified from AOCI, net ( 9 ) ( 9 ) ( 3 ) Changes in Fair Value of Effective Cash Flow Hedges Reclassification forward currency exchange contracts to Cost of goods sold $ ( 4 ) $ ( 3 ) $ ( 23 ) Reclassification cross-currency swaps to Interest expense ( 7 ) ( 4 ) ( 3 ) Reclassification cross-currency swaps to Non-operating expense (income) 65 ( 26 ) 10 Tax effect on reclassification to income ( 7 ) 4 3 Amounts reclassified from AOCI, net 47 ( 29 ) ( 13 ) Total reclassifications for the year $ 38 $ ( 43 ) $ ( 16 ) (1) Cumulative translation losses reclassified to Net income related to the sale of an equity interest in an unconsolidated joint venture. See Note 26, Acquisitions and Divestitures for discussion. Note 21. Stock-Based Compensation 2021 Long-Term Incentive Plan On May 25, 2021, the Garrett Motion Inc. 2021 Long-Term Incentive Plan (the “Long-Term Incentive Plan”) was adopted. The Long-Term Incentive Plan provides for the grant of stock options, stock appreciation rights, performance awards, restricted stock units, restricted stock, other stock-based awards, and cash-based awards to employees and non-employee directors of Garrett or its affiliates, and independent contractors or consultants of Garrett. The maximum aggregate number of shares of our Common Stock that may be issued under the Long-Term Incentive Plan is 31,280,476 shares. As of December 31, 2025, an aggregate of 11,011,551 shares of our Common Stock were awarded, net of forfeitures and 20,268,925 shares of our Common Stock were available for future issuance under the Long-Term Incentive Plan. Restricted Stock Units ("RSUs") and Deferred Stock Units ("DSUs") RSUs are issued to certain key employees and directors at fair market value at the date of grant. RSUs typically vest over 3 to 5 years and when vested, each unit entitles the holder to one share of our Common Stock. In addition, non-employee directors may elect to receive all or part of their annual retainer fees in the form of DSUs which vest upon grant. Each DSU represents the right to receive one share of our Common Stock. DSUs are settled on the earlier of (1) a change in control, or (2) the six months after the director ceases serving on the Board. The following table summarizes information about RSU and DSU activity: 81 Number of Restricted and Deferred Stock Units Weighted Average Grant Date Fair Value Per Share Non-vested at December 31, 2023 3,035,445 $ 7.86 Granted 1,391,412 9.45 Vested ( 1,428,791 ) 7.54 Forfeited ( 152,195 ) 8.46 Non-vested at December 31, 2024 2,845,871 $ 8.76 Granted 1,316,459 9.95 Vested ( 1,331,324 ) 8.61 Forfeited ( 232,355 ) 8.91 Non-vested at December 31, 2025 2,598,651 $ 9.43 As of December 31, 2025, there was $ 13 million of total unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a weighted-average period of 1.70 years. Performance Stock Units ("PSUs") As of December 31, 2025, an aggregate of 5,346,162 PSU awards were granted to officers and certain key employees under the Long-Term Incentive Plan, which, upon vesting, entitles the holder to shares of our Common Stock. The actual number of shares an employee receives for each PSU depends on the Company’s performance against various measures. PSUs are generally earned based on the Company's performance over a three-year period, measured in terms of Adjusted EBITDA and Adjusted EBITDA margin, with some PSUs earned based on achieving certain criteria over new business awards. PSU payouts may range from 0 % to 200 % of the target award, depending on the level of achievement of these financial and operational metrics. Additionally, certain PSUs were also granted in 2023, 2024 and 2025 that included a performance measure for relative total shareholder return (“rTSR”) with stock price hurdles measured over a three-year performance period. Each grantee is granted a target level of PSUs and may earn between 0 % and 200 % of the target level depending on the achievement of the rTSR. The awards associated with the rTSR performance measures are considered to have a market condition. A Monte-Carlo simulation model was used to determine the grant date fair value by simulating a range of possible future stock prices for the Company over the performance period. This model requires an input of assumptions including the simulation term, the risk-free interest rate, a volatility estimate for the Company’s shares, and a dividend yield estimate. The simulation term was the period of time between performance period start date and the performance end date. The risk-free interest rate assumption was based on observed interest rates from the Treasury Constant Maturity yield curve consistent with the simulation term. The Company’s volatility estimate was based on the historical volatilities of peers over a historical period consistent with the simulation term. The dividend yield in the model is set to zero as recipients of the award are entitled to dividend equivalents on shares that vest. The fair value of the PSUs granted in 2023, 2024 and 2025 were estimated using the following assumptions: Monte Carlo Assumptions PSUs Granted in 2025 PSUs Granted in 2024 PSUs Granted in 2023 Volatility 38.02 % 41.35 % 85.01 % Dividend yield 0.00 % 0.00 % 0.00 % Risk-free interest rate 3.93 % 4.25 % 4.26 % The following table summarizes information about PSU activity related to both the Stock Incentive Plan and the Long-Term Incentive Plan for each of the periods presented: 82 Number of Performance Stock Units Weighted Average Grant Date Fair Value Per Share Non-vested at December 31, 2023 2,828,787 $ 8.80 Granted 1,171,883 10.89 Vested ( 1,031,104 ) 8.67 Forfeited ( 499,160 ) 8.61 Non-vested at December 31, 2024 2,470,406 $ 9.89 Granted 1,243,166 10.88 Vested ( 276,338 ) 6.79 Forfeited ( 199,576 ) 9.67 Non-vested at December 31, 2025 3,237,658 $ 10.49 The fair value of the TSR-based PSUs is based on the output of the Monte Carlo simulation model noted above. The fair values of the PSUs not containing a market condition are based on the fair market value of the Company’s common stock at the grant date. The number of underlying shares to be issued will be based on actual performance achievement over the performance period. The fair value of each PSU grant is amortized monthly into compensation expense on a graded vesting (accelerated) basis over a vesting period of 36 months. The accrual of compensation costs is based on our estimate of the final expected value of the award and is adjusted as required for the performance-based conditions. As of December 31, 2025, there was $ 13 million of total unrecognized compensation cost related to unvested PSUs, which is expected to be recognized over a weighted average period of 1.74 years. Dividend Equivalents All RSUs, DSUs and PSUs granted contain rights that entitle the recipient of an award to a dividend equivalent in the amount and form equal to any dividends that would have been paid on the shares of Common Stock underlying the awards had such shares been outstanding on the record dates. Dividend equivalents are accrued on each award from the grant date until the award vests (or the underlying shares are issued in the case of DSUs). The accrual is based on the dividends declared on the Company's Common Stock during the vesting period. The dividend equivalents are not paid out until the underlying award has vested and settled. The dividend equivalents are subject to the same vesting and settlement conditions as the awards. If the award does not vest, the accrued dividend equivalent is forfeited. Stock-Based Compensation Expense The following table summarizes the impact to the Consolidated Statement of Operations from the Company's incentive awards: Year Ended December 31, 2025 2024 2023 (Dollars in millions) RSUs and DSUs $ 13 $ 11 $ 9 PSUs 14 12 5 Stock-based compensation expense 27 23 14 Future income tax benefits recognized 3 3 2 Note 22. Earnings Per Share Basic earnings per share ("EPS") for the years ended December 31, 2025, and 2024, and 2023 is computed using the two-class method. In 2025 and 2024, the DSUs related to the stock-based compensation plan contain non-forfeitable rights to dividends and are considered as participating securities, while in 2023 our Series A Preferred Stock was considered a participating security prior to its conversion into Common Stock and cancellation pursuant to the Transaction. The two- 83 class method requires an allocation of earnings to all securities that participate in dividends with common shares to the extent that each such security may share in the Company's earnings. Basic EPS is then calculated by dividing undistributed earnings allocated to common stock by the weighted average number of common shares outstanding for the period. Under the two-class method, the impact of these participating securities was immaterial for the years ended December 31, 2025 and 2024. Diluted EPS for the years ended December 31, 2025 and 2024 is calculated by applying the two-class method for participating securities and then incorporating the dilutive effect of other potential common shares, determined using methods such as the treasury stock method, to arrive at the most dilutive EPS. Diluted EPS for the year ended December 31, 2023 was calculated by evaluating the impact of both the two-class method and the if-converted method. 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. Diluted EPS for the year ended December 31, 2023 was disclosed under the two-class method. The details of the EPS calculations for the years ended December 31, 2025, 2024 and 2023 are as follows: Year Ended December 31 2025 2024 2023 (Dollars in millions except per share amounts) Basic earnings per share: Net Income $ 310 $ 282 $ 261 Less: preferred stock dividend — — ( 80 ) Less: preferred stock deemed dividends — — ( 232 ) Net income (loss) available for distribution 310 282 ( 51 ) Weighted average common shares outstanding - Basic 199,758,058 222,316,484 166,595,397 EPS – Basic $ 1.55 $ 1.27 $ ( 0.31 ) Diluted earnings per share: Weighted average common shares outstanding - Basic 199,758,058 222,316,484 166,595,397 Dilutive effect of unvested RSUs and other contingently issuable shares 3,865,940 1,804,672 — Weighted average common shares outstanding – Diluted 203,623,998 224,121,156 166,595,397 EPS – Diluted $ 1.52 $ 1.26 $ ( 0.31 ) 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 year ended December 31, 2023, the weighted-average number of unvested RSUs and other contingently issuable shares excluded from the computations was 1,490,117 shares. Note 23. Commitments and Contingencies We are involved in various lawsuits, claims and proceedings incident to the operation of our businesses, including those pertaining to product liability, product safety, environmental, health and safety, intellectual property, employment, commercial and contractual matters and various other matters. We regularly assess the likelihood of adverse judgments or outcomes in these matters, as well as potential ranges of possible losses based on a careful analysis of each matter. We identify below the individual proceedings where we believe a material loss is reasonably possible or probable, and we accrue for matters when we believe that losses are probable and the amount of the potential loss is reasonably estimable. It is inherently difficult to determine whether a loss is probable or reasonably possible or to estimate the size or range of the potential loss. Accordingly, while we believe that appropriate accruals have been established for losses that are probable and can be reasonably estimated, it is possible that adverse outcomes from such proceedings could exceed the amounts accrued by an amount that could be material to our financial position, results of operations or cash flows. 84 Brazilian Tax Matters In September 2020, the Brazilian tax authorities issued an infraction notice against Garrett Motion Industria Automotiva Brasil Ltda, challenging the use of certain tax credits (“Befiex Credits”) between January 2017 and February 2020. 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 December 31, 2025, was $ 26 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. Accordingly, no accrual has been taken at this time. Warranties and Guarantees In the normal course of business, we issue product warranties and product performance guarantees. We accrue for the estimated cost of product warranties and performance guarantees based on contract terms and historical experience at the time of sale to the customer. Adjustments to initial obligations for warranties and guarantees are made as changes to the obligations become reasonably estimable. Product warranties and product performance guarantees are included in Accrued liabilities and Other Liabilities. The following table summarizes information concerning our recorded obligations for product warranties and product performance guarantees. Year Ended December 31, 2025 2024 (Dollars in millions) Warranty and product performance guarantees at beginning of year $ 23 $ 27 Accruals for warranties/guarantees issued during the year 16 10 Settlement of warranty/guarantee claims ( 20 ) ( 13 ) Foreign currency translation 2 ( 1 ) Warranty and product performance guarantees at end of year $ 21 $ 23 Note 24. Defined Benefit Pension and Post-Employment Plans We sponsor several funded U.S. and non-U.S. defined benefit pension and post-employment plans. Pension benefits for many of our U.S. employees are provided through a non-contributory, qualified defined benefit plan. We also sponsor defined benefit pension plans in Switzerland and Ireland. Other pension and post-employment plans outside of the U.S. are not material to the Company either individually or in the aggregate. The following tables summarize the balance sheet impact, including the benefit obligations, assets and funded status associated with our pension and post-employment plans. 85 Pension and Post-Employment Benefits U.S. Plans U.S. Plans Non-U.S. Plans Non-U.S. Plans 2025 2024 2025 2024 (Dollars in millions) Change in benefit obligation: Benefit obligation at beginning of the year $ 159 $ 171 $ 180 $ 186 Service cost — — 8 7 Interest cost 8 8 5 4 Actuarial losses (gains) 5 ( 10 ) ( 20 ) ( 1 ) Benefits paid and employee contributions ( 11 ) ( 10 ) ( 10 ) — Settlements and curtailments (1) — — ( 1 ) ( 12 ) Foreign currency translation — — 23 ( 12 ) Other — — 6 8 Benefit obligation at end of the year 161 159 191 180 Change in plan assets: Fair value of plan assets at beginning of the year 164 173 183 175 Actual return on plan assets 12 1 ( 2 ) 16 Employer contributions — — 6 5 Benefits paid and employee contributions ( 11 ) ( 10 ) ( 10 ) 1 Settlements and curtailments (1) — — — ( 11 ) Foreign currency translation — — 24 ( 11 ) Other — — 6 8 Fair value of plan assets at end of year 165 164 207 183 Funded status of plans $ 4 $ 5 $ 16 $ 3 Amounts recognized in Consolidated Balance Sheet consist of: Non-current assets (2) 4 5 25 18 Non-current liabilities (3) — — ( 9 ) ( 15 ) Net amount recognized $ 4 $ 5 $ 16 $ 3 (1) In Switzerland, the total lump sum benefit payments of $ 11 million were greater than the service cost and interest cost for the year ended December 31, 2024, therefore settlement accounting was applied. Following the settlement accounting, part of the previously unrecognized gain amounting to approximately $ 1 million was recognized as a gain on pension settlement. (2) Included in Other assets in the Consolidated Balance Sheets. (3) Included in Other liabilities in the Consolidated Balance Sheets. Amounts recognized in AOCI associated with our pension and other post-employment benefit plans as of December 31, 2025 and 2024 are as follow: Pension Benefits U.S. Plans U.S. Plans Non-U.S. Plans Non-U.S. Plans 2025 2024 2025 2024 (Dollars in millions) Prior service (credit) cost $ — $ — $ ( 6 ) $ ( 7 ) Net actuarial loss (gain) 10 9 ( 16 ) ( 14 ) Net amount recognized $ 10 $ 9 $ ( 22 ) $ ( 21 ) 86 The components of net periodic benefit (income) cost for our pension and other post-employment benefit plans are as follow: Pension and Post-Employment Benefits U.S. Plans Non-U.S. Plans Net Periodic Benefit Cost 2025 2024 2023 2025 2024 2023 (Dollars in millions) Service cost $ — $ — $ — $ 8 $ 7 $ 6 Interest cost 8 8 8 5 4 5 Expected return on plan assets ( 9 ) ( 8 ) ( 8 ) ( 8 ) ( 7 ) ( 9 ) Amortization of prior service (credit) cost — — — ( 1 ) ( 1 ) ( 1 ) Recognition of actuarial (gains) losses — — — ( 9 ) ( 8 ) ( 1 ) Settlements and curtailments — — — ( 1 ) ( 1 ) ( 1 ) Net periodic benefit (income) cost $ ( 1 ) $ — $ — $ ( 6 ) $ ( 6 ) $ ( 1 ) The components of net periodic benefit (income) cost and other amounts recognized in Other comprehensive (income) loss for our pension and other post-employment benefit plans include the following components: Other Changes in Plan Assets and Benefits Obligations Recognized in Other Comprehensive (Income) Loss U.S. Plans Non-U.S. Plans 2025 2024 2023 2025 2024 2023 (Dollars in millions) Actuarial (gains) losses $ 2 $ ( 3 ) $ ( 1 ) $ ( 9 ) $ ( 11 ) $ — Prior service (credit) cost — — — — ( 1 ) — Recognition of prior service credit (cost) — — — 1 1 1 Recognition of actuarial gains (losses) — — — 9 9 2 Foreign currency translation — — — ( 3 ) 1 ( 2 ) Total recognized in other comprehensive (income) loss $ 2 $ ( 3 ) $ ( 1 ) $ ( 2 ) $ ( 1 ) $ 1 Total recognized in net periodic benefit (income) cost and other comprehensive (income) loss $ 1 $ ( 3 ) $ ( 1 ) $ ( 8 ) $ ( 7 ) $ — The main actuarial assumptions used in determining the benefit obligations and net periodic benefit (income) cost for the benefit plans are presented in the following table as weighted averages. Pension and Post-Employment Benefits U.S. Plans Non-U.S. Plans 2025 2024 2023 2025 2024 2023 Actuarial assumptions used to determine benefit obligations as of December 31: Discount rate 5.49 % 5.68 % 5.02 % 2.68 % 2.21 % 2.36 % Expected annual rate of compensation increase 3.00 % 3.00 % 3.00 % 1.92 % 2.11 % 2.38 % Interest credited to accounts (1) — % — % — % 2.50 % 2.65 % 2.65 % Actuarial assumptions used to determine net periodic benefit (income) cost for years ended December 31: Discount rate—benefit obligation 5.68 % 5.02 % 5.21 % 2.21 % 2.36 % 2.91 % Discount rate—service cost 5.67 % 5.05 % 5.23 % 2.21 % 2.36 % 2.91 % Discount rate—interest cost 5.38 % 4.91 % 5.09 % 2.17 % 2.35 % 2.94 % Expected rate of return on plan assets 5.65 % 4.86 % 4.98 % 4.00 % 4.42 % 4.94 % Expected annual rate of compensation increase 3.00 % 3.00 % 3.00 % 2.11 % 2.38 % 2.43 % (1) Only applicable to the defined benefit pension plan in Switzerland. 87 The discount rates for the pension and post-employment plans reflect the current rates at which the associated liabilities could be settled at the measurement date of December 31, 2025 . To determine the discount rates, we use a modeling process that involves matching the expected cash outflows of our benefit plans to a yield curve constructed from a portfolio of high quality, fixed-income debt instruments. We use the single weighted-average yield of this hypothetical portfolio as a discount rate benchmark. For both our U.S. and non-U.S. defined benefit pension and post-employment plans, we estimate the service and interest cost components of net period benefit (income) cost by utilizing a full yield curve approach in the estimation of these cost components by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to their underlying projected cash flows. 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. For non-U.S. benefit plans, actuarial assumptions reflect economic and market factors relevant to each country. The following amounts relate to our pension plans with accumulated benefit obligations exceeding the fair value of plan assets. December 31, U.S. Plans Non-U.S. Plans 2025 2024 2025 2024 (Dollars in millions) Projected benefit obligation $ — $ — $ 17 $ 85 Accumulated benefit obligation — — 14 84 Fair value of plan assets — — 8 78 Our U.S. pension asset investment strategy focuses on maintaining a diversified portfolio using various asset classes in order to achieve market exposure and diversification on a risk adjusted basis. Our target allocations are as follows: 91 % liability-hedging fixed income investments, 8 % global equity securities, and 1 % real estate investments. Fixed income investments include corporate and government issues with a target duration close to that of the plan liability. Global equity securities include mutual funds that invest in companies located both inside and outside the United States. The real estate fund invests in real estate investment trusts – companies that purchase office buildings, hotels and other real estate property. Our assets are reviewed on a daily basis to ensure that we are within the targeted asset allocation ranges and, if necessary, asset balances are adjusted back within target allocations. Our non-U.S. pension and post-employment assets are typically managed by decentralized fiduciary committees. Our non-U.S. investment policies are different for each country as local regulations, funding requirements, and financial and tax considerations are part of the funding and investment allocation process in each country. 88 The fair values of both our U.S. and non-U.S. pension and post-employment plans assets by asset category are as follows: U.S. Plans December 31, 2025 Total Level 1 Level 2 Level 3 (Dollars in millions) Cash and cash equivalents $ 3 $ 3 $ — $ — Equity funds 12 — 12 — Government bond funds 34 — 34 — Corporate bond funds 99 — 99 — Liability driven investment fund 13 — 13 — Real estate funds 2 — 2 — Other 2 — 2 — Total assets at fair value $ 165 $ 3 $ 162 $ — U.S. Plans December 31, 2024 Total Level 1 Level 2 Level 3 (Dollars in millions) Cash and cash equivalents $ 3 $ 3 $ — $ — Equity funds 12 — 12 — Government bond funds 39 — 39 — Corporate bond funds 93 — 93 — Liability driven investment fund 13 — 13 — Real estate funds 2 — 2 — Other 2 — 2 — Total assets at fair value $ 164 $ 3 $ 161 $ — Non-U.S. Plans December 31, 2025 Total Level 1 Level 2 Level 3 (Dollars in millions) Cash and cash equivalents $ 4 $ 4 $ — $ — Money market funds 21 21 — — Equity funds 55 — 55 — Government bond funds 9 — 9 — Corporate bond funds 18 — 18 — Real estate funds 25 — 25 — Diversified mutual funds 65 — 65 — Other 10 — 10 — Total assets at fair value $ 207 $ 25 $ 182 $ — 89 Non-U.S. Plans December 31, 2024 Total Level 1 Level 2 Level 3 (Dollars in millions) Cash and cash equivalents $ 6 $ 6 $ — $ — Money market funds 29 29 — — Equity funds 49 — 49 — Government bond funds 6 — 6 — Corporate bond funds 13 — 13 — Real estate funds 19 — 19 — Diversified mutual funds 49 — 49 — Other 12 — 12 — Total assets at fair value $ 183 $ 35 $ 148 $ — Equity funds, corporate bond funds, government bond funds, real estate funds, swap funds and short-term investments are valued either by bids provided by brokers or dealers or quoted prices of securities with similar characteristics. Other includes private equity and hedge funds. These investments are valued at estimated fair value based on quarterly financial information received from the investment advisor and/or general partner. Our general funding policy for qualified defined benefit pension plans is to contribute amounts at least sufficient to satisfy regulatory funding standards. We were not required to make any contributions to our U.S. pension plan in 2025. In 2025, contributions of $ 6 million were made to our non-U.S. pension plans to satisfy regulatory funding requirements. In 2026, we expect to make contributions of cash and/or marketable securities of approximately $ 5 million to our non-U.S. pension plans to satisfy regulatory funding standards. Contributions for both our U.S. and non-U.S. pension and post-employment plans do not reflect benefits paid directly from Company assets. Benefit payments, including amounts to be paid from Company assets, and reflecting expected future service, as appropriate, are expected to be paid as follows: U.S. Plans Non-U.S. Plans (Dollars in millions) 2026 $ 12 $ 6 2027 12 6 2028 12 7 2029 12 8 2030 12 9 2031-2035 61 54 Note 25. Segments and Concentrations The Company has identified our CODM as the Chief Executive Officer. The CODM reviews consolidated net income when assessing the Company's performance, allocating resources and establishing management's compensation. In addition to consolidated net income, the CODM receives discrete information for net sales by product and by geographical location. Consolidated net income is used to monitor budget versus actual results. The accounting policies of our operating segment are the same as those described in the Company's summary of significant accounting policies. The Company derives revenues from customers through sales of air and fluid compression and high-speed electric motor technologies for OEMs and distributors within the mobility and industrial space. In addition to consolidated net income, the CODM regularly reviews sales by region and product line. 90 Sales concentration — Net sales by region (determined based on country of shipment) and product line are as follows: Year Ended December 31, 2025 2024 2023 (Dollars in millions) United States $ 694 $ 700 $ 744 Europe 1,745 1,642 1,874 Asia China 638 643 768 Rest of Asia 406 413 433 Other International 101 77 67 $ 3,584 $ 3,475 $ 3,886 Year Ended December 31, 2025 2024 2023 (Dollars in millions) Diesel $ 837 $ 827 $ 992 Gas 1,592 1,505 1,720 Commercial Vehicle 654 629 656 Aftermarket 438 459 456 Other 63 55 62 $ 3,584 $ 3,475 $ 3,886 Customer concentration — Net sales to Garrett’s largest customers and the corresponding percentage of total net sales are as follows: Net sales Year Ended December 31, 2025 % 2024 % 2023 % (Dollars in millions) Customer A $ 424 12 $ 330 9 $ 347 9 Customer B 385 11 401 12 474 12 Customer C 377 11 354 10 364 9 Others (1) 2,398 66 2,390 69 2,701 70 $ 3,584 100 $ 3,475 100 $ 3,886 100 (1) No other customer had sales individually exceeding 10%. 91 The table below provides segment information about the Company: Year Ended December 31, 2025 2024 2023 (Dollars in millions) Net sales $ 3,584 $ 3,475 $ 3,886 Less: Material costs 2,009 2,022 2,323 Variable manufacturing costs (1) 456 386 417 Fixed manufacturing costs (2) 237 201 228 Research, development and engineering costs 151 161 163 Selling, general and administrative costs 240 240 247 Interest expense 108 156 159 Income tax expense 82 61 86 Other segment items (3) ( 9 ) ( 34 ) 2 Consolidated net income $ 310 $ 282 $ 261 (1) Variable manufacturing costs include freight, duties and tariffs, direct and indirect labor costs, repairs and maintenance, and variable overhead costs. (2) Fixed manufacturing costs include depreciation and amortization, rent, overhead labor costs, repositioning costs, utilities and other fixed costs. (3) Other segment items consist of gain on sale of equity interest in unconsolidated joint venture, non-service components of net periodic expense, interest income, equity income, loss on extinguishment of debt and other non-operating income items (if any). Long-lived assets concentration — Long-lived assets (1) by region are as follows: December 31 2025 2024 (Dollars in millions) United States $ 19 $ 18 Europe Slovakia 99 83 Rest of Europe 145 139 Asia China 107 110 Rest of Asia 48 50 Other International 44 49 $ 462 $ 449 (1) Long-lived assets are comprised of property, plant and equipment–net. The measure of segment assets is reported on the balance sheet as total consolidated assets. The Company had capital expenditure purchases of $ 72 million, $ 91 million and $ 83 million for the years ended December 31, 2025, 2024 and 2023, respectively. The Company had depreciation and amortization expense in the amount of $ 99 million, $ 90 million and $ 90 million for the years ended December 31, 2025, 2024 and 2023, respectively. The Company reports significant non-cash adjustments in its Consolidated Statement of Cash Flows. Note 26. Acquisitions and Divestitures On April 3, 2024, the Company divested its equity interest in an unconsolidated joint venture for approximately $ 58 million, subject to customary debt and working capital adjustments. We received cash consideration on the divestiture date of $ 46 million. An additional $ 7 million of deferred payments is to be received in equal installments due twelve 92 months and thirty-six months from the divestiture date, with the first deferred payment received in 2025. A pre-tax gain of $ 27 million was recognized related to this divestiture, including $ 5 million of cumulative translation losses reclassified from AOCI to Net income. Transaction fees of $ 1 million were incurred in connection with the divestiture and are included in Selling, general, and administrative expenses in our Consolidated Statement of Operations. Note 27. Subsequent Events On February 19, 2026, the Board of Directors declared a cash dividend of $ 0.08 per share of Common Stock, payable on March 16, 2026, to shareholders of record as of March 2, 2026. Note 28. Unaudited Quarterly Financial Information The following tables show selected unaudited quarterly results of operations for the years ended December 31, 2025 and 2024. The quarterly data have been prepared on the same basis as the audited annual financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair statement of our results of operations for these periods. 2025 March 31 June 30 September 30 December 31 Year Ended December 31 (Dollars in millions) Net sales $ 878 $ 913 $ 902 $ 891 $ 3,584 Gross profit 179 181 186 185 731 Net income 62 87 77 84 310 Earnings per share - basic 0.30 0.43 0.39 0.43 1.55 Earnings per share - diluted 0.30 0.42 0.38 0.42 1.52 2024 March 31 June 30 September 30 December 31 Year Ended December 31 (Dollars in millions) Net sales $ 915 $ 890 $ 826 $ 844 $ 3,475 Gross profit 172 185 166 182 705 Net income 66 64 52 100 282 Earnings (loss) per share - basic 0.28 0.29 0.24 0.47 1.27 Earnings (loss) per share - diluted 0.28 0.28 0.24 0.47 1.26 93 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.