Garrett Motion Inc. (Nasdaq: GTX), a leading
differentiated automotive technology provider, today announced its
financial results for the three and nine months ended September 30,
2023.
$ millions (unless otherwise noted) |
|
Q3 2023 |
|
Q3 2022 |
|
2023 YTD |
|
2022 YTD |
Net sales |
|
960 |
|
|
945 |
|
|
2,941 |
|
|
2,705 |
|
Cost of goods sold |
|
784 |
|
|
767 |
|
|
2,374 |
|
|
2,183 |
|
Gross profit |
|
176 |
|
|
178 |
|
|
567 |
|
|
522 |
|
Gross profit % |
|
18.3 |
% |
|
18.8 |
% |
|
19.3 |
% |
|
19.3 |
% |
Selling, general and administrative expenses |
|
59 |
|
|
57 |
|
|
178 |
|
|
164 |
|
Income before taxes |
|
70 |
|
|
131 |
|
|
279 |
|
|
361 |
|
Net income |
|
57 |
|
|
105 |
|
|
209 |
|
|
278 |
|
Net income margin |
|
5.9 |
% |
|
11.1 |
% |
|
7.1 |
% |
|
10.3 |
% |
Adjusted EBITDA* |
|
152 |
|
|
146 |
|
|
490 |
|
|
430 |
|
Adjusted EBITDA margin* |
|
15.8 |
% |
|
15.4 |
% |
|
16.7 |
% |
|
15.9 |
% |
Net cash provided by operating activities |
|
74 |
|
|
61 |
|
|
330 |
|
|
238 |
|
Adjusted free cash flow* |
|
57 |
|
|
120 |
|
|
285 |
|
|
181 |
|
* See reconciliations to the nearest GAAP
measure in pages 5-12
“Garrett delivered solid Q3 financial results
through productivity gains and operational excellence which
successfully offset headwinds from currency and product mix. We
also introduced our largest turbo yet, the GT80, enabling us to
better serve our industrial and off-highway customers, and
reflecting our strategy of continuing investment in our industrial
turbo business. Further momentum continues to build across our
differentiated zero emission vehicle products; we received two new
pre-development awards in E-Cooling. Additionally, we repaid $200
million of debt and repurchased $161 million of our stock in line
with our capital allocation priorities," said Olivier Rabiller,
Garrett President and CEO.
Results of Operations
Net sales for the third quarter
of 2023 were $960 million, representing an increase of 2%
(including a favorable impact of $21 million or 3% due to foreign
currency translation) compared with $945 million in the third
quarter of 2022. This increase was driven by foreign currency
translational impacts and ramp up of new products in small gasoline
engines applications. These increases were partially offset by
unfavorable product mix from demand softness for diesel and
commercial vehicle applications due to global macroeconomic
conditions.
Cost of goods sold for the
third quarter of 2023 was $784 million compared with $767 million
in the third quarter of 2022, primarily driven by $12 million of
higher sales volumes, $5 million of unfavorable product mix and $2
million of Research and Development ("R&D") costs reflecting
Garrett's continued investment in new technologies and headcount
increase year-over-year. Cost of goods sold further increased by
$10 million due to foreign currency impacts from transactional,
translational and hedging effects, offset by a decrease of $12
million due to the Company's continued focus on productivity, net
of labor inflation and repositioning costs.
Gross profit totaled $176
million for the third quarter of 2023 as compared to $178 million
in the third quarter of 2022, with a gross profit percentage for
the third quarter of 2023 of 18.3% as compared to 18.8% in the
third quarter of 2022. The decrease in gross profit was primarily
driven by $23 million of unfavorable product mix, $5 million of
pricing net of inflation recoveries from customer pass-through
agreements, and $2 million R&D costs as discussed above. These
decreases were partially offset by $12 million of higher
productivity net of labor inflation and repositioning costs, and
higher sales volumes of $5 million.
Selling, general and
administrative (“SG&A”) expenses for the third quarter
of 2023 increased to $59 million from $57 million in the third
quarter of 2022. The increase compared with the prior year was
mainly due to $2 million in legal and advisory fees related to
Garrett's capital structure transformation transactions and $1
million of labor inflation.
Interest expense in the third
quarter of 2023 was $50 million as compared to $18 million in the
third quarter of 2022. The increase was primarily driven by $25
million of higher interest expense from our new $700 million term
loan B (the "2023 Dollar Term Facility") and increased market
interest rates, and $10 million of debt issuance cost amortization
primarily due to the $200 million early repayment of the 2023
Dollar Term Facility.
Non-operating income for the
third quarter of 2023 was $4 million as compared to $29 million in
the third quarter of 2022 primarily due to a decrease of interest
income recognized in the prior year for unrealized marked-to-market
gains on the Company's interest rate swaps.
Tax expense for the third
quarter of 2023 was $13 million as compared to $26 million in the
third quarter of 2022, driven by lower income before taxes and a
lower effective tax rate. The decrease in effective tax rate is
primarily related to an increase in global R&D benefits, lower
taxes on non-U.S. earnings partially offset by nondeductible
expenses and prior year non-recurring decrease in withholding taxes
on undistributed earnings.
Net income for the third
quarter of 2023 was $57 million as compared to $105 million in the
third quarter of 2022 primarily due to $32 million of higher
interest expense as discussed above and $25 million of lower
non-operating income, partially offset by $13 million of lower tax
expense.
Net cash provided by operating
activities totaled $74 million in the third quarter of
2023 as compared to $61 million in the third quarter of 2022,
primarily due to favorable changes in working capital of $17
million, and other accrued assets and liabilities of $5 million.
These increases were partially offset by a decrease of $9 million
in net income excluding non-cash charges.
Non-GAAP Financial Measures
Adjusted EBITDA increased to
$152 million in the third quarter of 2023 as compared to $146
million in the third quarter of 2022. The increase was mainly due
to higher volume, improved productivity, as well as favorable
foreign exchange impacts, partially offset by unfavorable product
mix and inflation pass-through net of pricing.
Adjusted free cash flow, which
excludes capital structure transformation expenses, cash paid for
repositioning and factoring costs, was $57 million in the third
quarter of 2023 as compared to $120 million in the third quarter of
2022. The decrease in adjusted free cash flow was primarily due to
a $69 million usage of working capital (net of factoring) and
higher cash paid on interest, driven by the 2023 Dollar Term
Facility and increased interest rates. This was partially offset by
lower payments for capital expenditures and taxes, as well as
favorable impacts from other assets and liabilities.
Liquidity and Capital
Resources
As of September 30 2023, Garrett had $732
million in available liquidity, including $162 million in cash and
cash equivalents and $570 million of undrawn commitments under its
revolving credit facility. As of June 30, 2023, Garrett had $1,048
million in available liquidity, including $478 million in cash and
cash equivalents and $570 million undrawn commitments under its
revolving credit facility.
As of September 30, 2023, total principal amount
of debt outstanding amounted to $1,677 million, down from $1,891
million as of June 30, 2023, primarily due to the $200 million
early debt repayment during the third quarter of 2023.
During the third quarter of 2023, we repurchased
$161 million of common stock under our authorized share repurchase
program and we had remaining repurchase capacity of $72 million as
of September 30, 2023. During the second quarter of 2023, our
repurchases of common stock were $17 million and we had remaining
repurchase capacity of $233 million as of June 30, 2023.
Full Year 2023 Outlook
Garrett is providing the following revised
outlook for the full year 2023 for certain GAAP and Non-GAAP
financial measures.
|
Full Year 2023 Outlook |
Prior Outlook |
Net sales (GAAP) |
$3.83 billion to $3.90 billion |
$3.84 billion to $4.03 billion |
Net sales growth at constant currency (Non-GAAP)* |
+7% to +9% |
+6% to +11% |
Net income (GAAP) |
$252 million to $272 million |
$255 million to $290 million |
Adjusted EBITDA (Non-GAAP)* |
$615 million to $645 million |
$620 million to $670 million |
Net cash provided by operating activities (GAAP) |
$413 million to $463 million |
$410 million to $510 million |
Adjusted free cash flow (Non-GAAP)* |
$350 million to $400 million |
$340 million to $440 million |
* See reconciliations to the nearest GAAP
measure in pages 5-12.
Garrett’s full year 2023 outlook, as of October
24, 2023, includes the following expectations:
- 2023 Euro/dollar assumption of 1.08
EUR to 1.00 USD, 1.05 EUR for Q4, decrease vs. prior outlook of
1.10 EUR to 1.00 USD
Conference Call
Garrett plans to issue financial results for the
third quarter 2023 on Tuesday, October 24, 2023 before the open of
market trading. Garrett will also hold a conference call the same
day at 8:00 am EDT / 2:00 pm CET. To participate on the conference
call, please dial +1-877-883-0383 (US) or +1-412-902-6506
(international) and use the passcode 1022468.
The conference call will also be broadcast over
the internet and include a slide presentation. To access the
webcast and supporting material, please visit the investor
relations section of the Garrett Motion website at
http://investors.garrettmotion.com/. A replay of the conference
call will be available by dialing +1-877-344-7529 (US) or
+1-412-317-0088 (international) using the access code 1678098. The
webcast will also be archived on Garrett’s website.
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 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,
new product development and capital deployment plans for the future
including expected R&D expenditures, anticipated impacts of
partnerships with third parties, and Garrett's outlook for 2023.
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, 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, 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 cleaner, more efficient and
connected. 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 |
Maria Santiago Echandi |
|
Eric Birge |
1.734.386.6593 |
|
1.734.228.9529 |
Maria.SantiagoEchandi@garrettmotion.com |
|
Eric.Birge@garrettmotion.com |
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS |
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
(Dollars in millions, except per share
amounts) |
Net
sales |
$ |
960 |
|
|
$ |
945 |
|
|
$ |
2,941 |
|
|
$ |
2,705 |
|
Cost of
goods sold |
|
784 |
|
|
|
767 |
|
|
|
2,374 |
|
|
|
2,183 |
|
Gross profit |
|
176 |
|
|
|
178 |
|
|
|
567 |
|
|
|
522 |
|
Selling,
general and administrative expenses |
|
59 |
|
|
|
57 |
|
|
|
178 |
|
|
|
164 |
|
Other
expense, net |
|
1 |
|
|
|
1 |
|
|
|
3 |
|
|
|
2 |
|
Interest
expense |
|
50 |
|
|
|
18 |
|
|
|
108 |
|
|
|
61 |
|
Loss on
extinguishment of debt |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
Non-operating income |
|
(4 |
) |
|
|
(29 |
) |
|
|
(1 |
) |
|
|
(73 |
) |
Reorganization items, net |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
Income before taxes |
|
70 |
|
|
|
131 |
|
|
|
279 |
|
|
|
361 |
|
Tax
expense |
|
13 |
|
|
|
26 |
|
|
|
70 |
|
|
|
83 |
|
Net
income |
|
57 |
|
|
|
105 |
|
|
|
209 |
|
|
|
278 |
|
Less:
preferred stock dividends |
|
— |
|
|
|
(40 |
) |
|
|
(80 |
) |
|
|
(117 |
) |
Less:
preferred stock deemed dividends |
|
— |
|
|
|
— |
|
|
|
(232 |
) |
|
|
— |
|
Net (loss) income available for distribution |
$ |
57 |
|
|
$ |
65 |
|
|
$ |
(103 |
) |
|
$ |
161 |
|
|
|
|
|
|
|
|
|
Earnings (loss) per common
share |
|
|
|
|
|
|
|
Basic |
$ |
0.23 |
|
|
$ |
0.21 |
|
|
$ |
(0.73 |
) |
|
$ |
0.52 |
|
Diluted |
$ |
0.23 |
|
|
$ |
0.21 |
|
|
$ |
(0.73 |
) |
|
$ |
0.52 |
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding |
|
|
|
|
|
|
|
Basic |
|
250,888,716 |
|
|
|
64,820,887 |
|
|
|
141,745,701 |
|
|
|
64,834,298 |
|
Diluted |
|
252,381,719 |
|
|
|
65,250,287 |
|
|
|
141,745,701 |
|
|
|
65,118,021 |
|
CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE
INCOME |
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
(Dollars in millions) |
Net
income |
$ |
57 |
|
|
$ |
105 |
|
|
$ |
209 |
|
|
$ |
278 |
|
Foreign
exchange translation adjustment |
|
14 |
|
|
|
10 |
|
|
|
8 |
|
|
|
13 |
|
Changes
in fair value of effective cash flow hedges, net of tax |
|
(2 |
) |
|
|
9 |
|
|
|
(3 |
) |
|
|
26 |
|
Changes
in fair value of net investment hedges, net of tax |
|
20 |
|
|
|
45 |
|
|
|
18 |
|
|
|
87 |
|
Total
other comprehensive income, net of tax |
|
32 |
|
|
|
64 |
|
|
|
23 |
|
|
|
126 |
|
Comprehensive income |
$ |
89 |
|
|
$ |
169 |
|
|
$ |
232 |
|
|
$ |
404 |
|
CONSOLIDATED INTERIM BALANCE SHEETS |
|
September 30,2023 |
|
December 31,2022 |
|
(Dollars in millions) |
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash and cash equivalents |
$ |
162 |
|
|
$ |
246 |
|
Restricted cash |
|
1 |
|
|
|
2 |
|
Accounts, notes and other receivables – net |
|
860 |
|
|
|
803 |
|
Inventories – net |
|
294 |
|
|
|
270 |
|
Other current assets |
|
73 |
|
|
|
110 |
|
Total current assets |
|
1,390 |
|
|
|
1,431 |
|
Investments and long-term receivables |
|
32 |
|
|
|
30 |
|
Property, plant and equipment – net |
|
437 |
|
|
|
470 |
|
Goodwill |
|
193 |
|
|
|
193 |
|
Deferred
income taxes |
|
225 |
|
|
|
232 |
|
Other
assets |
|
255 |
|
|
|
281 |
|
Total assets |
$ |
2,532 |
|
|
$ |
2,637 |
|
LIABILITIES |
|
|
|
Current
liabilities: |
|
|
|
Accounts payable |
$ |
1,066 |
|
|
$ |
1,048 |
|
Current maturities of long-term debt |
|
7 |
|
|
|
7 |
|
Accrued liabilities |
|
312 |
|
|
|
320 |
|
Total current liabilities |
|
1,385 |
|
|
|
1,375 |
|
Long-term debt |
|
1,622 |
|
|
|
1,148 |
|
Deferred
income taxes |
|
21 |
|
|
|
25 |
|
Other
liabilities |
|
196 |
|
|
|
205 |
|
Total liabilities |
$ |
3,224 |
|
|
$ |
2,753 |
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
EQUITY (DEFICIT) |
|
|
|
Series A
Preferred Stock, par value $0.001; zero and 245,089,671 shares
issued and outstanding as of September 30, 2023 and December
31, 2022, respectively |
$ |
— |
|
|
$ |
— |
|
Common
Stock, par value $0.001; 1,000,000,000 and 1,000,000,000 shares
authorized, 243,305,848 and 64,943,238 issued and 243,011,280 and
64,832,609 outstanding as of September 30, 2023 and
December 31, 2022, respectively |
|
— |
|
|
|
— |
|
Additional paid – in capital |
|
1,188 |
|
|
|
1,333 |
|
Retained
deficit |
|
(1,939 |
) |
|
|
(1,485 |
) |
Accumulated other comprehensive income |
|
59 |
|
|
|
36 |
|
Total
deficit |
|
(692 |
) |
|
|
(116 |
) |
Total
liabilities and deficit |
$ |
2,532 |
|
|
$ |
2,637 |
|
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS |
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
(Dollars in millions) |
Cash flows from operating activities: |
|
|
|
Net
income |
$ |
209 |
|
|
$ |
278 |
|
Adjustments to reconcile net income to net cash provided by
operating activities |
|
|
|
Deferred income taxes |
|
13 |
|
|
|
16 |
|
Depreciation |
|
66 |
|
|
|
64 |
|
Amortization of deferred issuance costs |
|
17 |
|
|
|
6 |
|
Interest payments, net of debt discount accretion |
|
— |
|
|
|
(19 |
) |
Loss on extinguishment of debt |
|
— |
|
|
|
5 |
|
Loss on remeasurement of forward purchase contract |
|
13 |
|
|
|
— |
|
Foreign exchange loss |
|
— |
|
|
|
4 |
|
Stock compensation expense |
|
12 |
|
|
|
8 |
|
Pension expense |
|
1 |
|
|
|
— |
|
Change in fair value of derivatives |
|
21 |
|
|
|
(54 |
) |
Other |
|
7 |
|
|
|
2 |
|
Changes in assets and liabilities: |
|
|
|
Accounts, notes and other receivables |
|
(76 |
) |
|
|
(166 |
) |
Inventories |
|
(30 |
) |
|
|
(80 |
) |
Other assets |
|
2 |
|
|
|
13 |
|
Accounts payable |
|
57 |
|
|
|
180 |
|
Accrued liabilities |
|
26 |
|
|
|
(2 |
) |
Other liabilities |
|
(8 |
) |
|
|
(17 |
) |
Net cash
provided by operating activities |
$ |
330 |
|
|
$ |
238 |
|
Cash flows from investing activities: |
|
|
|
Expenditures for property, plant and equipment |
|
(57 |
) |
|
|
(78 |
) |
Re-couponing of cross-currency
swap contract |
|
9 |
|
|
|
— |
|
Net cash
used for investing activities |
$ |
(48 |
) |
|
$ |
(78 |
) |
Cash flows from financing activities: |
|
|
|
Proceeds
from issuance of long-term debt, net of deferred financing
costs |
|
667 |
|
|
|
— |
|
Payments
of long-term debt |
|
(205 |
) |
|
|
(5 |
) |
Redemption of Series B Preferred Stock |
|
— |
|
|
|
(381 |
) |
Repurchases of Series A Preferred Stock |
|
(580 |
) |
|
|
(4 |
) |
Repurchases of Common Stock |
|
(178 |
) |
|
|
— |
|
Payments
of Additional Amounts for conversion of Series A Preferred
Stock |
|
(25 |
) |
|
|
— |
|
Payments
for preference dividends |
|
(42 |
) |
|
|
(42 |
) |
Payments
for debt and revolving facility financing costs |
|
(2 |
) |
|
|
(4 |
) |
Other |
|
(1 |
) |
|
|
— |
|
Net cash
used for financing activities |
$ |
(366 |
) |
|
$ |
(436 |
) |
Effect
of foreign exchange rate changes on cash, cash equivalents and
restricted cash |
|
(1 |
) |
|
|
(27 |
) |
Net
decrease in cash, cash equivalents and restricted cash |
|
(85 |
) |
|
|
(303 |
) |
Cash,
cash equivalents and restricted cash at beginning of period |
|
248 |
|
|
|
464 |
|
Cash,
cash equivalents and restricted cash at end of period |
$ |
163 |
|
|
$ |
161 |
|
Supplemental cash flow disclosure: |
|
|
|
Income taxes paid (net of refunds) |
|
38 |
|
|
|
38 |
|
Interest paid |
|
45 |
|
|
|
56 |
|
Reconciliation of Net Income to Adjusted
EBITDA(1) |
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
(Dollars in millions) |
Net income —
GAAP |
|
$ |
57 |
|
|
$ |
105 |
|
|
$ |
209 |
|
|
$ |
278 |
|
Interest expense, net of interest income |
|
|
47 |
|
|
|
(9 |
) |
|
|
98 |
|
|
|
(5 |
) |
Tax expense |
|
|
13 |
|
|
|
26 |
|
|
|
70 |
|
|
|
83 |
|
Depreciation |
|
|
23 |
|
|
|
21 |
|
|
|
66 |
|
|
|
64 |
|
EBITDA (Non-GAAP) |
|
|
140 |
|
|
|
143 |
|
|
|
443 |
|
|
|
420 |
|
Reorganization items, net (2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
Stock compensation expense (3) |
|
|
4 |
|
|
|
3 |
|
|
|
12 |
|
|
|
8 |
|
Repositioning charges (4) |
|
|
6 |
|
|
|
1 |
|
|
|
14 |
|
|
|
4 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
Discounting costs on factoring |
|
|
1 |
|
|
|
1 |
|
|
|
3 |
|
|
|
2 |
|
Other non-operating income (5) |
|
|
(1 |
) |
|
|
(2 |
) |
|
|
(4 |
) |
|
|
(11 |
) |
Capital structure transformation expenses (6) |
|
|
2 |
|
|
|
— |
|
|
|
22 |
|
|
|
— |
|
Adjusted EBITDA
(Non-GAAP) |
|
$ |
152 |
|
|
$ |
146 |
|
|
$ |
490 |
|
|
$ |
430 |
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
960 |
|
|
$ |
945 |
|
|
$ |
2,941 |
|
|
$ |
2,705 |
|
|
|
|
|
|
|
|
|
|
Net income
margin |
|
|
5.9 |
% |
|
|
11.1 |
% |
|
|
7.1 |
% |
|
|
10.3 |
% |
Adjusted EBITDA margin
(Non-GAAP) (7) |
|
|
15.8 |
% |
|
|
15.4 |
% |
|
|
16.7 |
% |
|
|
15.9 |
% |
(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, discounting costs on
factoring, other non-operating income and capital structure
transformation expenses. 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 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
related to these transactions and events were 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) Includes the loss on remeasurement of the
agreements to repurchase shares of the Company's Series A Preferred
Stock from certain of the Company's investors in connection with
the Company's capital structure transformation transactions, well
as third-party legal and advisory fees that are directly
attributable to such transactions.
(7) Adjusted EBITDA margin represents Adjusted
EBITDA as a percentage of net sales.
Reconciliation of Constant Currency Sales %
Change(1) |
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Garrett |
|
|
|
|
|
|
|
Reported sales % change |
2 |
% |
|
13 |
% |
|
9 |
% |
|
(2) |
% |
Less: Foreign currency translation |
3 |
% |
|
(12) |
% |
|
(1) |
% |
|
(7) |
% |
Constant currency sales % change |
(1) |
% |
|
25 |
% |
|
10 |
% |
|
5 |
% |
|
|
|
|
|
|
|
|
Gasoline |
|
|
|
|
|
|
|
Reported sales % change |
10 |
% |
|
21 |
% |
|
17 |
% |
|
4 |
% |
Less: Foreign currency translation |
1 |
% |
|
(13) |
% |
|
(2) |
% |
|
(8) |
% |
Constant currency sales % change |
9 |
% |
|
34 |
% |
|
19 |
% |
|
12 |
% |
|
|
|
|
|
|
|
|
Diesel |
|
|
|
|
|
|
|
Reported sales % change |
(4) |
% |
|
6 |
% |
|
3 |
% |
|
(11) |
% |
Less: Foreign currency translation |
5 |
% |
|
(15) |
% |
|
0 |
% |
|
(9) |
% |
Constant currency sales % change |
(9) |
% |
|
21 |
% |
|
3 |
% |
|
(2) |
% |
|
|
|
|
|
|
|
|
Commercial vehicles |
|
|
|
|
|
|
|
Reported sales % change |
(13) |
% |
|
10 |
% |
|
2 |
% |
|
(7) |
% |
Less: Foreign currency translation |
1 |
% |
|
(10) |
% |
|
(1) |
% |
|
(6) |
% |
Constant currency sales % change |
(14) |
% |
|
20 |
% |
|
3 |
% |
|
(1) |
% |
|
|
|
|
|
|
|
|
Aftermarket |
|
|
|
|
|
|
|
Reported sales % change |
3 |
% |
|
7 |
% |
|
4 |
% |
|
9 |
% |
Less: Foreign currency translation |
3 |
% |
|
(9) |
% |
|
0 |
% |
|
(6) |
% |
Constant currency sales % change |
0 |
% |
|
16 |
% |
|
4 |
% |
|
15 |
% |
|
|
|
|
|
|
|
|
Other Sales |
|
|
|
|
|
|
|
Reported sales % change |
23 |
% |
|
0 |
% |
|
2 |
% |
|
(9) |
% |
Less: Foreign currency translation |
4 |
% |
|
(15) |
% |
|
(1) |
% |
|
(10) |
% |
Constant currency sales % change |
19 |
% |
|
15 |
% |
|
3 |
% |
|
1 |
% |
(1) 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. 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 EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
(Dollars in millions) |
Net cash provided by operating activities
(GAAP) |
$ |
74 |
|
|
$ |
61 |
|
|
$ |
330 |
|
|
$ |
238 |
|
Expenditures for property, plant and equipment |
|
(24 |
) |
|
|
(26 |
) |
|
|
(57 |
) |
|
|
(78 |
) |
Net cash
provided by operating activities less expenditures for property,
plant and equipment |
|
50 |
|
|
|
35 |
|
|
|
273 |
|
|
|
160 |
|
Chapter
11 professional service costs |
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
4 |
|
Capital
structure transformation expenses |
|
5 |
|
|
|
— |
|
|
|
7 |
|
|
|
— |
|
Cash
payments for repositioning |
|
5 |
|
|
|
1 |
|
|
|
9 |
|
|
|
4 |
|
Factoring and P-notes |
|
(3 |
) |
|
|
83 |
|
|
|
(4 |
) |
|
|
13 |
|
Adjusted free cash flow (Non-GAAP) (1) |
$ |
57 |
|
|
$ |
120 |
|
|
$ |
285 |
|
|
$ |
181 |
|
|
|
|
|
|
|
|
|
(1) 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 cash flow impacts for capital structure
transformation expenses, factoring and guaranteed bank notes
activity.
Full Year
2023 Outlook Reconciliation of Reported Net Sales to Net Sales
Growth at Constant Currency |
|
|
2023 Full Year |
|
|
Low End |
|
High End |
Reported net sales (% change) |
|
6 |
% |
|
8 |
% |
Foreign
currency translation |
|
(1) |
% |
|
(1) |
% |
Full year 2023 Outlook Net sales growth at constant
currency (Non-GAAP) |
|
7 |
% |
|
9 |
% |
Full Year
2023 Outlook Reconciliation of Net Income to Adjusted
EBITDA |
|
|
2023 Full Year |
|
|
Low End |
|
High End |
|
|
(Dollars in millions) |
Net income - GAAP |
|
$ |
252 |
|
|
$ |
272 |
|
Net
interest expense |
|
|
137 |
|
|
|
137 |
|
Tax
expense |
|
|
82 |
|
|
|
92 |
|
Depreciation |
|
|
89 |
|
|
|
89 |
|
Full
year 2023 Outlook EBITDA (Non-GAAP) |
|
|
560 |
|
|
|
590 |
|
Non-operating income |
|
|
(1 |
) |
|
|
(1 |
) |
Discounting costs on factoring |
|
|
4 |
|
|
|
4 |
|
Stock
compensation expense |
|
|
16 |
|
|
|
16 |
|
Repositioning charges |
|
|
14 |
|
|
|
14 |
|
Capital
structure transformation expenses |
|
|
22 |
|
|
|
22 |
|
Full Year 2023 Outlook Adjusted EBITDA
(Non-GAAP) |
|
$ |
615 |
|
|
$ |
645 |
|
Full Year
2023 Outlook Reconciliation of Net Cash Provided by Operating
Activities to Adjusted Free Cash Flow |
|
|
2023 Full Year |
|
|
Low End |
|
High End |
|
|
(Dollars in millions) |
Net cash provided by operating activities
(GAAP) |
|
$ |
413 |
|
|
$ |
463 |
|
Expenditures for property, plant and equipment |
|
|
(82 |
) |
|
|
(82 |
) |
Net cash
provided by operating activities less expenditures for property,
plant and equipment (Non-GAAP) |
|
$ |
331 |
|
|
$ |
381 |
|
Cash
payments for repositioning |
|
|
14 |
|
|
|
14 |
|
Capital
structure transformation expenses |
|
|
9 |
|
|
|
9 |
|
Factoring and P-notes |
|
|
(4 |
) |
|
|
(4 |
) |
Full Year 2023 Outlook Adjusted free cash flow
(Non-GAAP) |
|
$ |
350 |
|
|
$ |
400 |
|
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