Garrett Motion Inc. (Nasdaq: GTX, GTXAP), a
leading differentiated technology provider for the automotive
industry, today announced its financial results for the quarter
ended June 30, 2022.
$ millions (unless otherwise noted) |
|
Q2 2022 |
|
Q2 2021 |
|
H1 2022 |
|
H1 2021 |
Net sales |
|
859 |
|
935 |
|
1,760 |
|
1,932 |
Cost of goods sold |
|
690 |
|
742 |
|
1,416 |
|
1,543 |
Gross profit |
|
169 |
|
193 |
|
344 |
|
389 |
Gross profit % |
|
19.7% |
|
20.6% |
|
19.5% |
|
20.1% |
Selling, general and administrative expenses |
|
54 |
|
51 |
|
107 |
|
106 |
Income before taxes |
|
105 |
|
439 |
|
230 |
|
358 |
Net income |
|
85 |
|
409 |
|
173 |
|
304 |
Net income margin |
|
9.9% |
|
43.7% |
|
9.8% |
|
15.7% |
Adjusted EBITDA* |
|
138 |
|
168 |
|
284 |
|
344 |
Adjusted EBITDA margin* |
|
16.1% |
|
18.0% |
|
16.1% |
|
17.8% |
Net cash provided by (used for) operating activities |
|
104 |
|
(423) |
|
177 |
|
(391) |
Adjusted free cash flow* |
|
23 |
|
139 |
|
61 |
|
279 |
* See reconciliations to the nearest GAAP
measure in pages 6-13.
“Solid first half performance coupled with
recently improving trends positions Garrett to reach the upper half
of our full year 2022 outlook if supply chain bottlenecks continue
to ease," said Olivier Rabiller, Garrett President and CEO.
"Despite a volatile production environment and an accelerated
weakening of the Euro for much of the first half, Garrett continues
to successfully implement inflation management strategies, flex its
variable cost structure, and produce solid margins. More recently
we are encouraged to see emerging trends reflecting reduced
production volatility and increased production volumes, although we
remain cautious and are closely monitoring this trend as it
materializes in the second half of 2022. As the industry outlook
begins to stabilize and improve, increased production volumes
further amplified by share of demand gains and increased
penetration of turbocharger technology as emissions standards
tighten, should drive significant revenue and income growth for
Garrett. Our ability to consistently generate cash, even in
difficult times, allowed us to significantly reduce our leverage
for the third consecutive quarter prepaying the remainder of the
Series B Preferred Stock reflecting substantial deleveraging
progress over the last year. We are excited about our improved
financial flexibility and our growth prospects as we continue to
accelerate our strategic initiatives to bring advanced
differentiated new technologies to the transformation of the
powertrain industry."
Results of Operations
Net sales for the second
quarter of 2022 were $859 million, representing a decrease of 8%
(including an unfavorable impact of $73 million or 8% due to
foreign currency translation) compared with $935 million in the
second quarter of 2021. Net sales, excluding the impacts of foreign
currency translation, outpaced global light vehicle production by
approximately 6% driven by successful recoveries on inflation pass
through. New product launches on gasoline increased our share of
demand. Overall volumes however were impacted by the ongoing global
semiconductor shortage despite strong underlying demand for light
vehicles, further accentuated by an improved second quarter of 2021
due to accumulated pent-up demand from 2020. The continued
COVID-related lockdown measures in China also impacted sales for
the quarter.
Cost of goods sold for the
second quarter of 2022 was $690 million compared with $742 million
in the second quarter of 2021 primarily due to lower volumes and
foreign currency impacts which contributed to a decrease of $94
million. Cost of goods sold further decreased by $20 million from
benefits from our continued focus on productivity, net of $2
million of higher premium freight costs driven by supply chain
disruptions, transportation constraints and volume volatility.
These decreases were also partially offset by $32 million due to
inflation on commodities and transportation costs and $25 million
due to unfavorable product mix. Research and development
("R&D") expenses increased by $5 million which reflects shift
in investment in new technologies and increases in head count.
Gross profit totaled $169
million for the second quarter of 2022 as compared to $193 million
in the second quarter of 2021, with a gross profit percentage for
the second quarter of 2022 of 19.7% as compared to 20.6% in the
second quarter of 2021. The decrease in gross profit was primarily
due to lower sales volume which impacted gross profit by $18
million, inflation related to commodities, transportation and
energy costs of $32 million, and higher premium freight costs as
discussed above. Higher R&D costs and unfavorable foreign
currency translational, transactional and hedging effects also
lowered our gross profit. This was partially offset by $24 million
in productivity and $28 million of inflation recoveries from
customer pass-through agreements net of pricing reductions.
Selling, general and
administrative (“SG&A”) expenses for the second
quarter of 2022 increased to $54 million from $51 million in the
second quarter of 2021 primarily due to higher professional service
fees on tax optimization projects and labor inflation, partially
offset by lower expected payout on 2022 employee incentives and
favorable impacts from foreign exchange rates. As a percentage of
net sales, SG&A for the second quarter of 2022 was 6.3% up from
5.5% in 2021.
Interest expense in the second
quarter of 2022 was $20 million as compared to $24 million in the
second quarter of 2021. The decrease is primarily due to $3 million
of lower accretion on our Series B Preferred Stock, which as of
June 30, 2022, has been remediated in full.
Non-operating income decreased
to $16 million in the second quarter of 2022 from $26 million in
the second quarter of 2021. The decrease in income is primarily
related to $25 million of favorable foreign exchange impacts
recognized in 2021 on foreign currency-denominated debt which were
unhedged due to the restrictions placed on the Company during its
Chapter 11 proceedings, partially offset by $12 million of interest
income recorded in 2022 from unrealized marked-to-market gains on
interest rate swaps.
Reorganization items - net was
an expense of $1 million in the second quarter of 2022 related to
professional services for the Company's Chapter 11 cases. In the
second quarter of 2021, Reorganization items - net amounted to $295
million gain, representing $502 million gain on settlement of
Honeywell claims, partially offset by $96 million professional
service fees related to the Chapter 11 cases, $39 million in
Directors' and Officers' insurance related to the Chapter 11 cases,
$25 million write off on debt issuance costs of the old term loan
debt, $13 million in employee stock awards cancellation and $34
million in other costs mainly related to unsecured notes settlement
in connection with the Company's emergence from bankruptcy.
Net Income for the second
quarter of 2022 was $85 million as compared to $409 million in the
second quarter of 2021. The decrease of $324 million is primarily
as a result of the $295 million gain recorded in prior year on
Reorganization items, net, offset by lower gross profit of $24
million. The net income margin decreased to 9.9% in the second
quarter of 2022 as compared to 43.7% in the second quarter of
2021.
Net cash provided by operating
activities totaled $104 million in the second quarter of
2022 as compared to a usage of cash of $423 million in the second
quarter of 2021, primarily due to $375 million paid in 2021 on
obligations to Honeywell and favorable impacts from working capital
of $120 million.
Non-GAAP Financial Measures
Adjusted EBITDA decreased to
$138 million in the second quarter of 2022 as compared to $168
million in the second quarter of 2021. The decrease was mainly due
to a 6% decline in volume, inflation on commodities and
transportation, as well as unfavorable foreign exchange impacts,
partially offset by increased productivity and inflation
pass-through net of pricing. The Adjusted EBITDA margin decreased
to 16.1% in the second quarter of 2022 as compared to 18.0% in the
second quarter of 2021.
Adjusted free cash flow, which
excludes reorganization items, repositioning charges (primarily
severance costs related to internal restructuring projects) and
stock compensation expense, was $23 million in the second quarter
of 2022 as compared with $139 million in the second quarter of
2021. The decrease in adjusted free cash flow was primarily due to
lower production volumes, higher working capital, and increased
cash interest expense driven by the final redemption of the Series
B Preferred Stock.
Liquidity and Capital
Resources
As of June 30, 2022, Garrett had $621 million in
available liquidity, including $146 million in cash and cash
equivalents and approximately $475 million of undrawn commitments
under its revolving credit facility. In the first quarter of 2022,
Garrett had $788 million in available liquidity, including $315
million in cash and cash equivalents and approximately $473 million
undrawn commitments under its revolving credit facility.
As of June 30, 2022, total principal amount of
debt outstanding totaled $1,180 million, down from $1,412 million
at the end of the first quarter 2022 due to the accelerated
redemption of all Series B Preferred Stock.
Emergence from Chapter 11
As previously announced, on April 30, 2021,
Garrett emerged from its pending Chapter 11 cases, successfully
completing the restructuring process and implementing the Plan of
Reorganization that was confirmed by the U.S. Bankruptcy Court for
the Southern District of New York.
Full Year 2022 Outlook
Garrett is providing the following outlook for
the full year 2022 for certain GAAP and Non-GAAP financial
measures.
|
Full Year 2022 Outlook (vs. Prior Outlook) |
Net sales (GAAP) |
$3.5 billion to $3.7 billion (unchanged) |
Net sales growth at constant currency (Non-GAAP)* |
5% to 10% (vs. 1% to 6%) |
Net income (GAAP) |
$290 million to $335 million (vs. $250 to $295 million) |
Adjusted EBITDA (Non-GAAP)* |
$530 million to $590 million (unchanged) |
Net cash provided by operating activities (GAAP) |
$405 million to $505 million (unchanged) |
Adjusted free cash flow (Non-GAAP)* |
$330 million to $430 million (unchanged) |
* See reconciliations to the nearest GAAP
measure in pages 6-15.
Garrett’s full year 2022 outlook, as of July 28,
2022, includes the following expectations compared to previous
outlook:
- Global light
vehicle auto production growth of 1% versus 2021 (versus flat in
the prior outlook);
- An exchange rate of 1.04 EUR to
1.00 USD, as compared with the prior outlook exchange rate
assumption of 1.08 EUR to 1.00 USD;
- Maintaining previous commitment of
increased R&D investment in new technologies of approximately
$18 million for the full year 2022.
Conference Call
Garrett will host a conference call on Thursday,
July 28, 2022 at 8:30 am Eastern Time / 2:30 pm Central European
Time. The conference call will be broadcast over the Internet and
include a slide presentation. To access the webcast and supporting
materials, please visit the investor relations section of Garrett’s
website at http://investors.garrettmotion.com/. The webcast will be
archived on Garrett’s website for replay.
Forward-Looking Statements
This release contains “forward-looking
statements” within the Private Securities Reform Act of 1995. All
statements, other than statements of fact, that address activities,
events or developments that we or our management intend, expect,
project, believe or anticipate will or may occur in the future are
forward-looking statements including without limitation our
statements regarding the impact of the COVID-19 pandemic, the
conflict between Russia and Ukraine, inflationary pressure on
Garrett's business and management's inflation mitigation
strategies, financial results and financial conditions, industry
trends and anticipated demand for our products, Garrett’s strategy,
anticipated supply constraints, including with respect to
semiconductor, anticipated developments in emissions standards,
trends including with respect to production volatility and volume,
Garrett's capital structure, anticipated new product development
plans for the future including expected R&D expenditures,
anticipated impacts of partnerships with third parties, and
Garrett's outlook for 2022. Although we believe forward-looking
statements are based upon reasonable assumptions, such statements
involve known and unknown risks, uncertainties, and other factors,
which may cause the actual results or performance of Garrett to be
materially different from any future results or performance
expressed or implied by such forward-looking statements. Such risks
and uncertainties include but are not limited to those described in
our annual report on Form 10-K for the year ended December 31,
2021, and our quarterly report on Form 10-Q for the quarter ended
June 30, 2022, as well as our other filings with the Securities and
Exchange Commission, under the headings “Risk Factors” and
“Cautionary Note Regarding Forward-Looking Statements.” You are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this document.
Forward-looking statements are not guarantees of future
performance, and actual results, developments and business
decisions may differ from those envisaged by our forward-looking
statements.
Non-GAAP Financial Measures
This release includes the following Non-GAAP
financial measures which are not calculated in accordance with
generally accepted accounting principles in the United States
(“GAAP”): constant currency sales growth, EBITDA, Adjusted EBITDA,
Adjusted EBITDA Margin, and Adjusted Free Cash Flow. The Non-GAAP
financial measures provided herein are adjusted for certain items
as presented in the Appendix containing Non-GAAP Reconciliations
and may not be directly comparable to similar measures used by
other companies in our industry, as other companies may define such
measures differently. Management believes that, when considered
together with reported amounts, these measures are useful to
investors and management in understanding our ongoing operations
and analysis of ongoing operating trends. Garrett believes that the
Non-GAAP measures presented herein are important indicators of
operating performance because they exclude the effects of certain
items, therefore making them more closely reflect our operational
performance. These metrics should be considered in addition to, and
not as replacements for, the most comparable GAAP measure. For
additional information with respect to our Non-GAAP financial
measures, see the Appendix to this presentation and our annual
report on Form 10-K for the year ended December 31, 2021, and our
quarterly report on Form 10-Q for the quarter ended June 30,
2022.
About Garrett Motion Inc.
Garrett Motion is a differentiated technology
leader, serving customers worldwide for more than 65 years with
passenger vehicle, commercial vehicle, aftermarket replacement and
performance enhancement solutions. Garrett’s cutting-edge
technology enables vehicles to become safer, more connected,
efficient and environmentally friendly. Our portfolio of
turbocharging, electric boosting and automotive software solutions
empowers the transportation industry to redefine and further
advance motion. For more information, please
visit www.garrettmotion.com.
Contacts: |
|
|
MEDIA |
|
INVESTOR RELATIONS |
Christophe Mathy |
|
Paul Blalock |
+41 786 43 71 94 |
|
+1 862 812-5013 |
christophe.mathy@garrettmotion.com |
|
paul.blalock@garrettmotion.com |
GARRETT MOTION INC.
CONSOLIDATED INTERIM STATEMENTS OF
OPERATIONS
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
(Dollars in millions, except per share
amounts) |
Net sales |
$ |
859 |
|
|
$ |
935 |
|
|
$ |
1,760 |
|
|
$ |
1,932 |
|
Cost of goods sold |
|
690 |
|
|
|
742 |
|
|
|
1,416 |
|
|
|
1,543 |
|
Gross profit |
|
169 |
|
|
|
193 |
|
|
|
344 |
|
|
|
389 |
|
Selling, general and administrative expenses |
|
54 |
|
|
|
51 |
|
|
|
107 |
|
|
|
106 |
|
Other expense, net |
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
1 |
|
Interest expense |
|
20 |
|
|
|
24 |
|
|
|
43 |
|
|
|
45 |
|
Loss on extinguishment of debt |
|
5 |
|
|
|
— |
|
|
|
5 |
|
|
|
— |
|
Non-operating income |
|
(16 |
) |
|
|
(26 |
) |
|
|
(44 |
) |
|
|
— |
|
Reorganization items, net |
|
1 |
|
|
|
(295 |
) |
|
|
2 |
|
|
|
(121 |
) |
Income before taxes |
|
105 |
|
|
|
439 |
|
|
|
230 |
|
|
|
358 |
|
Tax expense |
|
20 |
|
|
|
30 |
|
|
|
57 |
|
|
|
54 |
|
Net income |
|
85 |
|
|
|
409 |
|
|
|
173 |
|
|
|
304 |
|
Less: preferred stock dividend |
|
(39 |
) |
|
|
(24 |
) |
|
|
(77 |
) |
|
|
(24 |
) |
Net income available for distribution |
$ |
46 |
|
|
$ |
385 |
|
|
$ |
96 |
|
|
$ |
280 |
|
|
|
|
|
|
|
|
|
Earnings per common share |
|
|
|
|
|
|
|
Basic |
$ |
0.15 |
|
|
$ |
1.63 |
|
|
$ |
0.31 |
|
|
$ |
1.79 |
|
Diluted |
$ |
0.15 |
|
|
$ |
1.29 |
|
|
$ |
0.31 |
|
|
$ |
0.95 |
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
Basic |
|
64,839,157 |
|
|
|
69,667,651 |
|
|
|
64,689,673 |
|
|
|
72,862,102 |
|
Diluted |
|
65,102,162 |
|
|
|
317,436,613 |
|
|
|
64,907,289 |
|
|
|
320,631,084 |
|
GARRETT MOTION INC.
CONSOLIDATED INTERIM STATEMENTS OF
COMPREHENSIVE INCOME
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
|
|
2022 |
|
|
2021 |
|
|
|
2022 |
|
|
2021 |
|
(Dollars in millions) |
Net income |
$ |
85 |
|
$ |
409 |
|
|
$ |
173 |
|
$ |
304 |
Foreign exchange translation adjustment |
|
1 |
|
|
(67 |
) |
|
|
3 |
|
|
43 |
Changes in fair value of effective cash flow hedges, net of
tax |
|
9 |
|
|
4 |
|
|
|
17 |
|
|
5 |
Changes in fair value of net investment hedges, net of tax |
|
29 |
|
|
15 |
|
|
|
42 |
|
|
15 |
Total other comprehensive income (loss), net of tax |
|
39 |
|
|
(48 |
) |
|
|
62 |
|
|
63 |
Comprehensive income |
$ |
124 |
|
$ |
361 |
|
|
$ |
235 |
|
$ |
367 |
GARRETT MOTION INC.
CONSOLIDATED INTERIM BALANCE
SHEETS
|
June 30,2022 |
|
December 31,2021 |
|
(Dollars in millions) |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
146 |
|
|
$ |
423 |
|
Restricted cash |
|
33 |
|
|
|
41 |
|
Accounts, notes and other receivables – net |
|
713 |
|
|
|
747 |
|
Inventories – net |
|
284 |
|
|
|
244 |
|
Other current assets |
|
81 |
|
|
|
56 |
|
Total current assets |
|
1,257 |
|
|
|
1,511 |
|
Investments and long-term receivables |
|
31 |
|
|
|
28 |
|
Property, plant and equipment – net |
|
443 |
|
|
|
485 |
|
Goodwill |
|
193 |
|
|
|
193 |
|
Deferred income taxes |
|
266 |
|
|
|
289 |
|
Other assets |
|
272 |
|
|
|
200 |
|
Total assets |
$ |
2,462 |
|
|
$ |
2,706 |
|
LIABILITIES |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
979 |
|
|
$ |
1,006 |
|
Current maturities of long-term debt |
|
7 |
|
|
|
7 |
|
Mandatorily redeemable Series B Preferred Stock |
|
— |
|
|
|
200 |
|
Accrued liabilities |
|
287 |
|
|
|
295 |
|
Total current liabilities |
|
1,273 |
|
|
|
1,508 |
|
Long-term debt |
|
1,139 |
|
|
|
1,181 |
|
Mandatorily redeemable Series B Preferred Stock – long-term |
|
— |
|
|
|
195 |
|
Deferred income taxes |
|
21 |
|
|
|
21 |
|
Other liabilities |
|
260 |
|
|
|
269 |
|
Total liabilities |
$ |
2,693 |
|
|
$ |
3,174 |
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
EQUITY (DEFICIT) |
|
|
|
Series A Preferred Stock, par value $0.001; 245,594,670 and
245,921,617 shares issued and outstanding as of June 30, 2022
and December 31, 2021, respectively |
$ |
— |
|
|
$ |
— |
|
Common Stock, par value $0.001; 1,000,000,000 and 1,000,000,000
shares authorized, 64,906,270 and 64,570,950 issued and 64,804,051
and 64,570,950 outstanding as of June 30, 2022 and
December 31, 2021, respectively |
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
1,329 |
|
|
|
1,326 |
|
Retained deficit |
|
(1,618 |
) |
|
|
(1,790 |
) |
Accumulated other comprehensive income (loss) |
|
58 |
|
|
|
(4 |
) |
Total deficit |
|
(231 |
) |
|
|
(468 |
) |
Total liabilities and deficit |
$ |
2,462 |
|
|
$ |
2,706 |
|
GARRETT MOTION INC.
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS |
Six Months Ended June 30, |
|
|
2022 |
|
|
|
2021 |
|
|
(Dollars in millions) |
Cash flows from operating activities: |
|
|
|
Net income |
$ |
173 |
|
|
$ |
304 |
|
Adjustments to reconcile net income to net cash provided by (used
for) operating activities |
|
|
|
Reorganization items, net |
|
— |
|
|
|
(373 |
) |
Deferred income taxes |
|
15 |
|
|
|
3 |
|
Depreciation |
|
43 |
|
|
|
47 |
|
Amortization of deferred issuance costs |
|
4 |
|
|
|
4 |
|
Interest payments, net of debt discount accretion |
|
(19 |
) |
|
|
7 |
|
Loss on extinguishment of debt |
|
5 |
|
|
|
— |
|
Foreign exchange gain |
|
2 |
|
|
|
9 |
|
Stock compensation expense |
|
5 |
|
|
|
3 |
|
Pension expense |
|
— |
|
|
|
(1 |
) |
Change in fair value of derivatives |
|
(35 |
) |
|
|
— |
|
Other |
|
(4 |
) |
|
|
(6 |
) |
Changes in assets and liabilities: |
|
|
|
Accounts, notes and other receivables |
|
(33 |
) |
|
|
17 |
|
Inventories |
|
(64 |
) |
|
|
(51 |
) |
Other assets |
|
1 |
|
|
|
58 |
|
Accounts payable |
|
86 |
|
|
|
(52 |
) |
Accrued liabilities |
|
2 |
|
|
|
(2 |
) |
Obligations payable to Honeywell |
|
— |
|
|
|
(375 |
) |
Other liabilities |
|
(4 |
) |
|
|
17 |
|
Net cash provided by (used for) operating activities |
$ |
177 |
|
|
$ |
(391 |
) |
Cash flows from investing activities: |
|
|
|
Expenditures for property, plant and equipment |
|
(52 |
) |
|
|
(40 |
) |
Other |
|
— |
|
|
|
1 |
|
Net cash used for investing activities |
$ |
(52 |
) |
|
$ |
(39 |
) |
Cash flows from financing activities: |
|
|
|
Proceeds from issuance of Series A Preferred Stock |
|
— |
|
|
|
1,301 |
|
Proceeds from issuance of long-term debt, net of deferred financing
costs |
|
— |
|
|
|
1,221 |
|
Payments of long-term debt |
|
(4 |
) |
|
|
(1,515 |
) |
Payments of revolving credit facilities |
|
— |
|
|
|
(370 |
) |
Payments of debtor-in-possession financing |
|
— |
|
|
|
(200 |
) |
Redemption of Series B Preferred Stock |
|
(381 |
) |
|
|
— |
|
Payments for Cash-Out election |
|
— |
|
|
|
(69 |
) |
Payments for share repurchases |
|
(3 |
) |
|
|
— |
|
Debt financing costs |
|
(5 |
) |
|
|
(9 |
) |
Net cash (used for) provided by financing activities |
$ |
(393 |
) |
|
$ |
359 |
|
Effect of foreign exchange rate changes on cash, cash equivalents
and restricted cash |
|
(17 |
) |
|
|
(6 |
) |
Net decrease in cash, cash equivalents and restricted cash |
|
(285 |
) |
|
|
(77 |
) |
Cash, cash equivalents and restricted cash at beginning of
period |
|
464 |
|
|
|
693 |
|
Cash, cash equivalents and restricted cash at end of period |
$ |
179 |
|
|
$ |
616 |
|
Supplemental cash flow disclosure: |
|
|
|
Income taxes paid (net of refunds) |
|
24 |
|
|
|
32 |
|
Interest paid |
|
47 |
|
|
|
57 |
|
Reorganization items paid |
|
3 |
|
|
|
342 |
|
Supplemental disclosure of non-cash investing and financing
activities: |
|
|
|
Issuance of Series B Preferred Stock |
|
— |
|
|
|
577 |
|
Reconciliation of Net Income (Loss) to
Adjusted EBITDA(1)
|
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
(Dollars in millions) |
Net income — GAAP |
|
$ |
85 |
|
|
$ |
409 |
|
|
$ |
173 |
|
|
$ |
304 |
|
Net interest expense |
|
|
8 |
|
|
|
23 |
|
|
|
4 |
|
|
|
43 |
|
Tax expense |
|
|
20 |
|
|
|
30 |
|
|
|
57 |
|
|
|
54 |
|
Depreciation |
|
|
21 |
|
|
|
24 |
|
|
|
43 |
|
|
|
47 |
|
EBITDA (Non-GAAP) |
|
|
134 |
|
|
|
486 |
|
|
|
277 |
|
|
|
448 |
|
Reorganization items, net (2) |
|
|
1 |
|
|
|
(295 |
) |
|
|
2 |
|
|
|
(121 |
) |
Stock compensation expense (3) |
|
|
3 |
|
|
|
1 |
|
|
|
5 |
|
|
|
3 |
|
Repositioning charges (4) |
|
|
2 |
|
|
|
3 |
|
|
|
3 |
|
|
|
11 |
|
Foreign exchange (gain)/loss on debt, net |
|
|
— |
|
|
|
(24 |
) |
|
|
— |
|
|
|
9 |
|
Loss on extinguishment of debt |
|
|
5 |
|
|
|
— |
|
|
|
5 |
|
|
|
— |
|
Discounting costs on factoring |
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
Other non-operating income (5) |
|
|
(7 |
) |
|
|
(3 |
) |
|
|
(9 |
) |
|
|
(6 |
) |
Adjusted EBITDA (Non-GAAP) |
|
$ |
138 |
|
|
$ |
168 |
|
|
$ |
284 |
|
|
$ |
344 |
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
859 |
|
|
$ |
935 |
|
|
$ |
1,760 |
|
|
$ |
1,932 |
|
|
|
|
|
|
|
|
|
|
Net income (loss) margin |
|
|
9.9 |
% |
|
|
43.7 |
% |
|
|
9.8 |
% |
|
|
15.7 |
% |
Adjusted EBITDA margin (Non-GAAP)
(6) |
|
|
16.1 |
% |
|
|
18.0 |
% |
|
|
16.1 |
% |
|
|
17.8 |
% |
(1) We evaluate performance on the basis
of EBITDA and Adjusted EBITDA. We define “EBITDA” as our net income
calculated in accordance with U.S. GAAP, plus the sum of net
interest expense, tax expense and depreciation. We define “Adjusted
EBITDA” as EBITDA, plus the sum of net reorganization items, stock
compensation expense, repositioning costs, net foreign exchange
(gain)/loss on debt, loss on extinguishment on debt, discounting
costs on factoring and other non-operating income. We believe that
EBITDA and Adjusted EBITDA are important indicators of operating
performance and provide useful information for investors
because:
- EBITDA and
Adjusted EBITDA exclude the effects of income taxes, as well as the
effects of financing and investing activities by eliminating the
effects of interest and depreciation expenses and therefore more
closely measure our operational performance; and
- certain adjustment
items, while periodically affecting our results, may vary
significantly from period to period and have disproportionate
effect in a given period, which affects the comparability of our
results.
In addition, our management may use Adjusted
EBITDA in setting performance incentive targets to align
performance measurement with operational performance.
(2) The Company applied ASC 852 for
periods subsequent to the September 20, 2020, the date the Company
and certain of its subsidiaries each filed a voluntary petition for
relief under Chapter 11 of title 11 of the United States Code, to
distinguish transactions and events that were directly associated
with the Company’s reorganization from the ongoing operations of
the business. Accordingly, certain expenses and gains incurred
during the Chapter 11 cases are recorded within Reorganization
items, net in the Consolidated Interim Statements of
Operations.
(3) Stock compensation expense includes
only non-cash expenses.
(4) Repositioning costs includes severance
costs related to restructuring projects to improve future
productivity.
(5) Reflects the non-service component of
net periodic pension costs and other income that are non-recurring
or not considered directly related to the Company's operations.
(6) Adjusted EBITDA margin represents
Adjusted EBITDA as a percentage of net sales.
Reconciliation of Constant Currency
Sales % Change(1)
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Garrett |
|
|
|
|
|
|
|
|
|
|
|
Reported sales % change |
(8) |
% |
|
96 |
% |
|
(9) |
% |
|
58 |
% |
Less: Foreign currency translation |
(8) |
% |
|
13 |
% |
|
(6) |
% |
|
10 |
% |
Constant currency sales % change |
— |
% |
|
83 |
% |
|
(3) |
% |
|
48 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Gasoline |
|
|
|
|
|
|
|
|
|
|
|
Reported sales % change |
1 |
% |
|
101 |
% |
|
(4) |
% |
|
67 |
% |
Less: Foreign currency translation |
(8) |
% |
|
16 |
% |
|
(6) |
% |
|
12 |
% |
Constant currency sales % change |
9 |
% |
|
85 |
% |
|
2 |
% |
|
55 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Diesel |
|
|
|
|
|
|
|
|
|
|
|
Reported sales % change |
(17) |
% |
|
129 |
% |
|
(18) |
% |
|
64 |
% |
Less: Foreign currency translation |
(10) |
% |
|
18 |
% |
|
(7) |
% |
|
12 |
% |
Constant currency sales % change |
(7) |
% |
|
111 |
% |
|
(11) |
% |
|
52 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial vehicles |
|
|
|
|
|
|
|
|
|
|
|
Reported sales % change |
(19) |
% |
|
90 |
% |
|
(15) |
% |
|
56 |
% |
Less: Foreign currency translation |
(6) |
% |
|
9 |
% |
|
(5) |
% |
|
7 |
% |
Constant currency sales % change |
(13) |
% |
|
81 |
% |
|
(10) |
% |
|
49 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Aftermarket |
|
|
|
|
|
|
|
|
|
|
|
Reported sales % change |
6 |
% |
|
46 |
% |
|
10 |
% |
|
27 |
% |
Less: Foreign currency translation |
(5) |
% |
|
6 |
% |
|
(5) |
% |
|
5 |
% |
Constant currency sales % change |
11 |
% |
|
40 |
% |
|
15 |
% |
|
22 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Other Sales |
|
|
|
|
|
|
|
|
|
|
|
Reported sales % change |
— |
% |
|
25 |
% |
|
(13) |
% |
|
19 |
% |
Less: Foreign currency translation |
(11) |
% |
|
7 |
% |
|
(8) |
% |
|
7 |
% |
Constant currency sales % change |
11 |
% |
|
18 |
% |
|
(5) |
% |
|
12 |
% |
(1) We previously referred to “constant
currency sales growth” as “organic sales growth.” We define
constant currency sales growth as the year-over-year change in
reported sales relative to the comparable period, excluding the
impact on sales from foreign currency translation. This is the same
definition we previously used for “organic sales growth”. We
believe this measure is useful to investors and management in
understanding our ongoing operations and in analysis of ongoing
operating trends.
Reconciliation of Cash Flow from
Operations to Adjusted Free Cash
Flow(1)
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
(Dollars in millions) |
Net cash provided by (used for) operating
activities |
$ |
104 |
|
|
$ |
(423 |
) |
|
$ |
177 |
|
|
$ |
(391 |
) |
Expenditures for property, plant and equipment |
|
(23 |
) |
|
|
(22 |
) |
|
|
(52 |
) |
|
|
(40 |
) |
Net cash provided by (used for) operating activities less
expenditures for property, plant and equipment |
|
81 |
|
|
|
(445 |
) |
|
|
125 |
|
|
|
(431 |
) |
Stalking horse termination reimbursement |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
79 |
|
Chapter 11 professional service costs |
|
1 |
|
|
|
146 |
|
|
|
3 |
|
|
|
212 |
|
Honeywell Settlement as per Emergence Agreement |
|
— |
|
|
|
375 |
|
|
|
— |
|
|
|
375 |
|
Chapter 11 related cash interests (1) |
|
— |
|
|
|
38 |
|
|
|
— |
|
|
|
41 |
|
Stock compensation cash |
|
— |
|
|
|
9 |
|
|
|
— |
|
|
|
10 |
|
Repositioning cash |
|
1 |
|
|
|
2 |
|
|
|
3 |
|
|
|
4 |
|
Factoring and P-notes (2) |
|
(60 |
) |
|
|
14 |
|
|
|
(70 |
) |
|
|
(11 |
) |
Adjusted free cash flow (Non-GAAP) (2, 3) |
$ |
23 |
|
|
$ |
139 |
|
|
$ |
61 |
|
|
$ |
279 |
|
(1) Chapter 11 related cash interests
increased by $18 million and $21 million for the three and six
months ended June 30, 2021, respectively, after full reconciliation
of all reorganization items done in 2021.
(2) Q1 2021 Adjusted free cash flow was
restated to reflect updated definition which excludes liquidity
actions such as sales of receivables.
(3) Adjusted free cash flow reflects an
additional way of viewing liquidity that management believes is
useful to investors in analyzing the Company’s ability to service
and repay its debt. The Company defines adjusted free cash flow as
cash flow provided from operating activities less capital
expenditures and additionally adjusted for other discretionary
items including Chapter 11 related items and cash flow impacts for
factoring and guaranteed bank notes activity.
Full Year 2022 Outlook Reconciliation of
Reported Net Sales to Net Sales Growth at Constant
Currency
|
2022 Full Year |
|
Low End |
|
High End |
Reported net sales (% change) |
(2 |
%) |
|
3 |
% |
Foreign currency translation |
(7 |
%) |
|
(7 |
%) |
Full year 2022 Targeted Net Sales Growth at Constant Currency
(Non-GAAP) |
5 |
% |
|
10 |
% |
Full Year 2022 Outlook Reconciliation of
Net Income to Adjusted EBITDA
|
2022 Full Year |
|
Low End |
|
High End |
|
(Dollars in millions) |
Net income - GAAP |
$ |
290 |
|
|
$ |
335 |
|
Net interest expense |
|
41 |
|
|
|
41 |
|
Tax expense |
|
98 |
|
|
|
113 |
|
Depreciation |
|
88 |
|
|
|
88 |
|
Full year 2022 outlook EBITDA (Non-GAAP) |
|
517 |
|
|
|
577 |
|
Non-operating income |
|
(9 |
) |
|
|
(9 |
) |
Reorganization items, net |
|
2 |
|
|
|
2 |
|
Stock compensation expense |
|
10 |
|
|
|
10 |
|
Repositioning charges |
|
5 |
|
|
|
5 |
|
Loss on extinguishment of debt |
|
5 |
|
|
|
5 |
|
Full Year 2022 Outlook Adjusted EBITDA
(Non-GAAP) |
$ |
530 |
|
|
$ |
590 |
|
Full Year 2022 Outlook Reconciliation of
Net Cash Provided by Operating Activities to Adjusted Free Cash
Flow
|
2022 Full Year |
|
Low End |
|
High End |
|
(Dollars in millions) |
Net cash provided by operating activities
(GAAP) |
$ |
405 |
|
|
$ |
505 |
|
Expenditures for property, plant and equipment |
|
(91 |
) |
|
|
(91 |
) |
Cash payments for restructuring |
|
13 |
|
|
|
13 |
|
Non-recurring cash items |
|
3 |
|
|
|
3 |
|
Full year 2022 Outlook Adjusted Free Cash Flow
(Non-GAAP) |
$ |
330 |
|
|
$ |
430 |
|
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