Garrett Motion Inc. (Nasdaq: GTX) (the "Company"),
a leading differentiated automotive technology provider, today
announced its financial results for the three and six months ended
June 30, 2024.
$ millions (unless otherwise noted) |
|
Q2 2024 |
|
Q2 2023 |
|
H1 2024 |
|
H1 2023 |
Net sales |
|
890 |
|
1,011 |
|
1,805 |
|
1,981 |
Cost of goods sold |
|
705 |
|
809 |
|
1,448 |
|
1,590 |
Gross profit |
|
185 |
|
202 |
|
357 |
|
391 |
Gross profit % |
|
20.8% |
|
20.0% |
|
19.8% |
|
19.7% |
Selling, general and administrative expenses |
|
61 |
|
63 |
|
125 |
|
119 |
Income before taxes |
|
87 |
|
101 |
|
168 |
|
209 |
Net income |
|
64 |
|
71 |
|
130 |
|
152 |
Net income margin |
|
7.2% |
|
7.0% |
|
7.2% |
|
7.7% |
Adjusted EBITDA* |
|
150 |
|
170 |
|
301 |
|
338 |
Adjusted EBITDA margin* |
|
16.9% |
|
16.8% |
|
16.7% |
|
17.1% |
Net cash provided by operating activities |
|
126 |
|
164 |
|
210 |
|
256 |
Adjusted free cash flow* |
|
62 |
|
140 |
|
130 |
|
228 |
* See reconciliations to the nearest GAAP
measure in pages 6-13
“Despite a volatile volume environment in the
second quarter, Garrett delivered a very solid performance. We
expanded our adjusted EBITDA margin by 40 basis points quarter over
quarter to 16.9% and delivered $62 million of adjusted free cash
flow,” said Olivier Rabiller, President and CEO of Garrett. "We
continued to deliver strong margin performance by leveraging our
variable cost structure and driving sustained operating
productivity. These results enabled us to once again make very
significant progress on our capital allocation priorities. In Q2,
we repurchased $65 million of common stock, totaling $174 million
for the first half of 2024. We also issued $800 million of senior
unsecured notes at favorable interest rates which we used to
partially repay our Term Loan B in the quarter."
“Coupled with our financial performance, we've
kept on strengthening our core turbo business and advancing our
zero-emission vehicle technologies this quarter. We secured a
number of new series production awards in our turbo business
including an additional new large industrial turbo, aimed at the
fast-growing power generation industry. We also achieved
significant progress on the zero-emission technologies, scoring new
wins for our broad and industry leading Fuel Cell Compressor
Portfolio, and winning for the first time a number of E-Powertrain
predevelopment programs with commercial vehicle players for our
high-speed proprietary E-Powertrain concept now adapted to
demanding commercial vehicle use. This once again confirms the
increasing traction we receive from customers for our
differentiated high speed electrification solutions.”
Results of Operations
Net sales for the second
quarter of 2024 were $890 million, representing a decrease of 12%
(including an unfavorable impact of $18 million or 2% due to
foreign currency translation) compared with $1,011 million in the
second quarter of 2023. This decrease was mainly driven by demand
softness in gasoline, diesel and commercial vehicles applications,
partially offset by increased demand for replacement parts on
aftermarket sales. Net sales further declined due to commodity
deflation impact on pricing net of inflation pass-through.
Cost of goods sold for the
second quarter of 2024 decreased to $705 million from $809 million
in the second quarter of 2023, primarily driven by $78 million of
lower sales volumes, $27 million of commodity, transportation and
energy deflation and $18 million of productivity net of labor
inflation. These decreases were partially offset by $26 million of
unfavorable product mix and $2 million of higher research and
development ("R&D") costs, reflecting Garrett's continued
investment in new turbo and zero emission technologies.
Gross profit totaled
$185 million for the second quarter of 2024 as compared to
$202 million in the second quarter of 2023, with a gross profit
percentage for the second quarter of 2024 of 20.8% as compared to
20.0% in the second quarter of 2023. The decrease in gross profit
was primarily driven by $34 million from lower sales, $22 million
from commodity deflation impact on pricing net of inflation
pass-through, $2 million from higher R&D costs and $9 million
due to foreign currency impact. These decreases were partially
offset by $27 million of commodity, transportation and energy
deflation, $21 million of productivity, net of labor inflation and
$2 million of favorable product mix.
Selling, general and
administrative (“SG&A”) expenses for the second
quarter of 2024 decreased to $61 million from $63 million in the
second quarter of 2023. The decrease was mainly driven by $4
million of lower professional service fees, partially offset by $2
million of higher bad debt expense. SG&A expenses also
decreased due to $1 million of favorable foreign exchange
impact.
Interest expense in the second
quarter of 2024 was $62 million as compared to $29 million in the
second quarter of 2023. The increase was primarily driven by $27
million of accelerated debt issuance cost amortization and $3
million of higher interest expense due to a different notional
amount of debt outstanding during the period and higher variable
interest rates, partially offset by the spread reduction on the
2021 Dollar Term Facility. We also recognized $25 million of
marked-to-market remeasurement losses recorded during the quarter
on our undesignated interest rate swap contracts, partially offset
by $22 million of gains, including settlements of $18 million, on
our interest derivatives.
Non-operating income (expense)
for the second quarter of 2024 was $1 million of income as compared
to $8 million of expense in the second quarter of 2023, with the
increase primarily driven by foreign exchange transactional gains
partially offset by $2 million of lower equity income due to the
sale of an equity interest in an unconsolidated joint venture.
Tax expense for the second
quarter of 2024 was $23 million as compared to $30 million in the
second quarter of 2023, mainly driven by lower U.S. taxes on
international operations and lower non-deductible transaction
costs, partially offset by tax related to the sale of an equity
interest in an unconsolidated joint venture.
Net income for the second
quarter of 2024 was $64 million as compared to $71 million in the
second quarter of 2023. The $7 million decrease was primarily due
to $17 million of lower gross profit and $33 million of higher
interest expense. These decreases were partially offset by $27
million of gain from the sale of an equity interest in an
unconsolidated joint venture, $9 million of higher non-operating
income and $7 million of lower tax expense.
Net cash provided by operating
activities totaled $126 million in the second quarter
of 2024 as compared to $164 million in the second quarter of
2023, a decrease of $38 million. This decrease was primarily due to
$30 million higher usage of working capital and $17 million from
changes in other assets and liabilities, partially offset by an
increase of $9 million in net income excluding non-cash
charges.
Non-GAAP Financial Measures
Adjusted EBITDA decreased to
$150 million in the second quarter of 2024 as compared to $170
million in the second quarter of 2023. The decrease was mainly due
to demand softness across gasoline, diesel and commercial vehicles,
commodity deflation impact on pricing net of inflation pass-through
as well as unfavorable foreign exchange impact. These decreases
were partially offset by strong operational performance through
productivity, net of labor inflation, commodity, transportation and
energy inflation and favorable product mix.
Adjusted free cash flow was $62
million in the second quarter of 2024 as compared to $140 million
in the second quarter of 2023. The decrease was primarily driven by
$84 million of higher working capital usage (net of factoring), $20
million of lower Adjusted EBITDA and $9 million of higher cash paid
for taxes. These decreases were partially offset by $28 million of
other assets and liabilities and $8 million of lower capital
expenditures.
Liquidity and Capital
Resources
As of June 30, 2024, Garrett had $698
million in available liquidity, including $98 million in cash and
cash equivalents and $600 million of undrawn commitments under its
revolving credit facility. As of March 31, 2024, Garrett had $766
million in available liquidity, including $196 million in cash and
cash equivalents and $570 million of undrawn commitments under its
revolving credit facility.
As of June 30, 2024, total principal amount
of debt outstanding amounted to $1,497 million, down from $1,683
million as of March 31, 2024, due to early debt repayments of $985
million partially offset by proceeds of $794 million from our new
Senior Unsecured Notes, net of deferred financing costs.
During the second quarter of 2024, we
repurchased $65 million of our common stock under our authorized
share repurchase program and we had remaining repurchase capacity
of $176 million as of June 30, 2024. During the first quarter of
2024, our repurchases of common stock were $109 million.
Full Year 2024 Outlook
Garrett is updating its outlook for the full
year 2024 for certain GAAP and Non-GAAP financial measures.
|
Full Year 2024 Outlook |
Prior Outlook |
Net sales (GAAP) |
$3.50 billion to $3.65 billion |
$3.80 billion to $3.95 billion |
Net sales growth at constant currency (Non-GAAP)* |
-9% to -5% |
-2% to +2% |
Net income (GAAP) |
$245 million to $285 million |
$230 million to $275 million |
Adjusted EBITDA (Non-GAAP)* |
$583 million to $633 million |
$590 million to $650 million |
Net cash provided by operating activities (GAAP) |
$355 million to $455 million |
$370 million to $470 million |
Adjusted free cash flow (Non-GAAP)* |
$300 million to $400 million |
$325 million to $425 million |
* See reconciliations to the nearest GAAP
measures on pages 6-13
Garrett’s full year 2024 outlook, as of
July 25, 2024, includes the following expectations:
- 2024 light vehicle production down
2% vs. 2023 (flat vs. 2023 in prior outlook)
- 2024 commercial vehicle production
flat to down 1% including on- and off-highway (+2% in prior
outlook)
- FX EUR/$ at 1.08, $/JPY at 154 and
$/CNY at 7.23
- RD&E of ~4.4% of sales (vs.
4.5% in prior outlook), ~60% on zero emission technology
- Capital expenditures ~2.4% of sales
(vs. 2.2% in prior outlook), with greater than 30% on zero emission
technologies
Conference Call
Garrett will hold a conference call at 8:30 am
EDT / 2:30 pm CET on Thursday, July 25, 2024, to discuss its
results. To participate on the conference call, please dial
+1-877-883-0383 (US) or +1-412-902-6506 (international) and use the
passcode 4523182.
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 4634128. The
webcast will also be archived on Garrett’s website.
Forward-Looking Statements
This communication and related comments by
management may include “forward-looking statements” within the
meaning of the U.S. federal securities laws. Forward-looking
statements are any statements other than statements of historical
fact. Forward-looking statements represent our current judgment
about possible future activities, events, or developments that we
intend, expect, project, believe, or anticipate will or may occur
in the future. In making these statement, we rely upon assumptions
and analysis based on our experience and perception of historical
trends, current conditions, and expected future developments, as
well as other factors we consider appropriate under the
circumstances. We believe these judgments are reasonable, but these
statements are not guarantees of any future performance, events, or
results, and actual performance, events, or results may differ
materially from those envisaged by our forward-looking statements
due to a variety of important factors, many of which are described
in our most recent Annual Report on Form 10-K and our other filings
with the U.S. Securities and Exchange Commission. You are cautioned
not to place undue reliance on forward-looking statements, which
speak only as of the date they are made, and we undertake no
obligation to update publicly or otherwise revise any
forward-looking statements, whether as a result of new information,
future events, or other factors that affect the subject of these
statement, except where we are expressly required to do so by
law.
Non-GAAP Financial Measures
This communication 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. We believe
these measures are useful to investors and management in
understanding our ongoing operations and analysis of ongoing
operating trends and are important indicators of operating
performance because they exclude the effects of certain
non-operating items, therefore making them more closely reflect our
operational performance. Our calculation of these non-GAAP
measures, including a reconciliation of such measures to the most
closely related GAAP measure, are set forth in the Appendix to this
presentation. These non-GAAP measures may not be comparable to
similarly titled measures of other companies due to potential
differences between companies in the method of calculation. As a
result, the use of these non-GAAP measures has limitations and
should not be considered superior to, in isolation from, or as a
substitute for, related GAAP measures. For additional information
regarding our non-GAAP financial measures, see our most recent
Annual Report on Form 10-K and our other filings with the U.S.
Securities and Exchange Commission.
About Garrett Motion Inc.
Garrett Motion is a differentiated technology
leader, serving automotive customers worldwide for close to 70
years. Known for its global leadership in turbocharging, the
company develops transformative technologies for vehicles to become
cleaner and more efficient. Its advanced technologies help reduce
emissions and reach zero emissions via passenger and commercial
vehicle applications – for on and off-highway use. Its portfolio
includes turbochargers, electric turbos (E-Turbo) and electric
compressors (E-Compressor) for both ICE and hybrid powertrains. In
the zero emissions vehicle category, it offers fuel cell
compressors for hydrogen fuel cell vehicles (FCEVs) as well as
electric propulsion and thermal management systems for battery
electric vehicles (BEVs). It boasts five R&D centers, 13
manufacturing sites and a team of 9,300 located in more than 20
countries. Its mission is to further advance motion through unique,
differentiated innovations. More information at
www.garrettmotion.com.
Contacts: |
|
|
INVESTOR RELATIONS |
|
MEDIA |
Eric Birge |
|
Amanda Jones |
+1.734.392.5504 |
|
+41.79.601.07.87 |
Eric.Birge@garrettmotion.com |
|
Amanda.Jones@garrettmotion.com |
|
|
|
CONSOLIDATED INTERIM STATEMENTS OF
OPERATIONS
|
For the Three Months EndedJune
30, |
|
For the Six Months EndedJune
30, |
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
(Dollars in millions, except per share
amounts) |
Net
sales |
$ |
890 |
|
|
$ |
1,011 |
|
|
$ |
1,805 |
|
|
$ |
1,981 |
|
Cost of
goods sold |
|
705 |
|
|
|
809 |
|
|
|
1,448 |
|
|
|
1,590 |
|
Gross
profit |
|
185 |
|
|
|
202 |
|
|
|
357 |
|
|
|
391 |
|
Selling,
general and administrative expenses |
|
61 |
|
|
|
63 |
|
|
|
125 |
|
|
|
119 |
|
Other
expense, net |
|
3 |
|
|
|
1 |
|
|
|
4 |
|
|
|
2 |
|
Interest
expense |
|
62 |
|
|
|
29 |
|
|
|
93 |
|
|
|
56 |
|
Gain on
sale of equity investment |
|
(27 |
) |
|
|
— |
|
|
|
(27 |
) |
|
|
— |
|
Non-operating (income) expense |
|
(1 |
) |
|
|
8 |
|
|
|
(6 |
) |
|
|
5 |
|
Income
before taxes |
|
87 |
|
|
|
101 |
|
|
|
168 |
|
|
|
209 |
|
Tax
expense |
|
23 |
|
|
|
30 |
|
|
|
38 |
|
|
|
57 |
|
Net
income |
|
64 |
|
|
|
71 |
|
|
|
130 |
|
|
|
152 |
|
Less:
preferred stock dividends |
|
— |
|
|
|
(40 |
) |
|
|
— |
|
|
|
(80 |
) |
Less:
preferred stock deemed dividends |
|
— |
|
|
|
(232 |
) |
|
|
— |
|
|
|
(232 |
) |
Net
income (loss) available for distribution |
$ |
64 |
|
|
$ |
(201 |
) |
|
$ |
130 |
|
|
$ |
(160 |
) |
|
|
|
|
|
|
|
|
Earnings (loss) per common
share |
|
|
|
|
|
|
|
Basic |
$ |
0.29 |
|
|
$ |
(1.88 |
) |
|
$ |
0.56 |
|
|
$ |
(1.86 |
) |
Diluted |
|
0.28 |
|
|
|
(1.88 |
) |
|
|
0.56 |
|
|
|
(1.86 |
) |
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding |
|
|
|
|
|
|
|
Basic |
|
224,321,948 |
|
|
|
107,408,432 |
|
|
|
230,493,039 |
|
|
|
86,269,694 |
|
Diluted |
|
225,898,814 |
|
|
|
107,408,432 |
|
|
|
232,455,083 |
|
|
|
86,269,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED INTERIM STATEMENTS OF
COMPREHENSIVE INCOME
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
(Dollars in millions) |
Net
income |
$ |
64 |
|
|
$ |
71 |
|
|
$ |
130 |
|
|
$ |
152 |
|
Foreign
exchange translation adjustment |
|
— |
|
|
|
(8 |
) |
|
|
18 |
|
|
|
(6 |
) |
Defined
benefit pension plan adjustment, net of tax |
|
2 |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
Changes
in fair value of effective cash flow hedges, net of tax |
|
(2 |
) |
|
|
2 |
|
|
|
1 |
|
|
|
(1 |
) |
Changes
in fair value of net investment hedges, net of tax |
|
8 |
|
|
|
3 |
|
|
|
27 |
|
|
|
(2 |
) |
Total
other comprehensive income (loss), net of tax |
|
8 |
|
|
|
(3 |
) |
|
|
49 |
|
|
|
(9 |
) |
Comprehensive income |
$ |
72 |
|
|
$ |
68 |
|
|
$ |
179 |
|
|
$ |
143 |
|
|
CONSOLIDATED INTERIM BALANCE
SHEETS
|
June 30,2024 |
|
December 31,2023 |
|
(Dollars in millions) |
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash and cash equivalents |
$ |
98 |
|
|
$ |
259 |
|
Restricted cash |
|
1 |
|
|
|
1 |
|
Accounts, notes and other receivables – net |
|
736 |
|
|
|
808 |
|
Inventories – net |
|
272 |
|
|
|
263 |
|
Other current assets |
|
85 |
|
|
|
75 |
|
Total current assets |
|
1,192 |
|
|
|
1,406 |
|
Investments and long-term receivables |
|
11 |
|
|
|
29 |
|
Property, plant and equipment – net |
|
438 |
|
|
|
477 |
|
Goodwill |
|
193 |
|
|
|
193 |
|
Deferred
income taxes |
|
199 |
|
|
|
216 |
|
Other
assets |
|
196 |
|
|
|
206 |
|
Total assets |
$ |
2,229 |
|
|
$ |
2,527 |
|
LIABILITIES |
|
|
|
Current
liabilities: |
|
|
|
Accounts payable |
$ |
984 |
|
|
$ |
1,074 |
|
Current maturities of long-term debt |
|
7 |
|
|
|
7 |
|
Accrued liabilities |
|
283 |
|
|
|
293 |
|
Total current liabilities |
|
1,274 |
|
|
|
1,374 |
|
Long-term debt |
|
1,465 |
|
|
|
1,643 |
|
Deferred
income taxes |
|
24 |
|
|
|
27 |
|
Other
liabilities |
|
191 |
|
|
|
218 |
|
Total liabilities |
$ |
2,954 |
|
|
$ |
3,262 |
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
EQUITY (DEFICIT) |
|
|
|
Common
Stock, par value $0.001; 1,000,000,000 and 1,000,000,000 shares
authorized, 240,783,003 and 238,543,624 issued and 220,720,522 and
238,249,056 outstanding as of June 30, 2024 and
December 31, 2023, respectively |
|
— |
|
|
|
— |
|
Additional paid – in capital |
|
1,203 |
|
|
|
1,190 |
|
Retained
deficit |
|
(1,792 |
) |
|
|
(1,922 |
) |
Accumulated other comprehensive income (loss) |
|
46 |
|
|
|
(3 |
) |
Treasury
Stock, at cost; 20,062,481 and 0 shares as of June 30, 2024
and December 31, 2023, respectively |
|
(182 |
) |
|
|
— |
|
Total
deficit |
|
(725 |
) |
|
|
(735 |
) |
Total
liabilities and deficit |
$ |
2,229 |
|
|
$ |
2,527 |
|
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS |
Six Months Ended June 30, |
|
|
2024 |
|
|
|
2023 |
|
|
(Dollars in millions) |
Cash flows from
operating activities: |
|
|
|
Net income |
$ |
130 |
|
|
$ |
152 |
|
Adjustments to reconcile net
income to net cash provided by operating activities |
|
|
|
Deferred income taxes |
|
14 |
|
|
|
8 |
|
Depreciation |
|
44 |
|
|
|
43 |
|
Amortization of deferred issuance costs |
|
33 |
|
|
|
5 |
|
Loss on remeasurement of forward purchase contract |
|
— |
|
|
|
13 |
|
Gain on sale of equity investment |
|
(27 |
) |
|
|
— |
|
Foreign exchange loss (gain) |
|
13 |
|
|
|
(11 |
) |
Stock compensation expense |
|
13 |
|
|
|
8 |
|
Pension expense |
|
1 |
|
|
|
1 |
|
Unrealized loss on derivatives |
|
1 |
|
|
|
19 |
|
Other |
|
3 |
|
|
|
9 |
|
Changes in assets and liabilities: |
|
|
|
Accounts, notes and other receivables |
|
50 |
|
|
|
(69 |
) |
Inventories |
|
(24 |
) |
|
|
(47 |
) |
Other assets |
|
17 |
|
|
|
(10 |
) |
Accounts payable |
|
(33 |
) |
|
|
105 |
|
Accrued liabilities |
|
(5 |
) |
|
|
32 |
|
Other liabilities |
|
(20 |
) |
|
|
(2 |
) |
Net cash provided by operating
activities |
$ |
210 |
|
|
$ |
256 |
|
Cash flows from
investing activities: |
|
|
|
Expenditures for property,
plant and equipment |
|
(49 |
) |
|
|
(33 |
) |
Proceeds from cross-currency
swap contracts |
|
21 |
|
|
|
9 |
|
Proceeds from sale of equity
investment |
|
46 |
|
|
|
— |
|
Net cash provided by (used)
for investing activities |
$ |
18 |
|
|
$ |
(24 |
) |
Cash flows from
financing activities: |
|
|
|
Proceeds from issuance of
long-term debt, net of deferred financing costs |
|
794 |
|
|
|
667 |
|
Payments of long-term
debt |
|
(989 |
) |
|
|
(4 |
) |
Repurchases of Series A
Preferred Stock |
|
— |
|
|
|
(580 |
) |
Repurchases of Common
Stock |
|
(173 |
) |
|
|
(15 |
) |
Payments of Additional Amounts
for conversion of Series A Preferred Stock |
|
— |
|
|
|
(25 |
) |
Payments for preference
dividends |
|
— |
|
|
|
(42 |
) |
Payments for debt and
revolving facility financing costs |
|
(7 |
) |
|
|
(2 |
) |
Other |
|
(9 |
) |
|
|
(1 |
) |
Net cash used for financing
activities |
$ |
(384 |
) |
|
$ |
(2 |
) |
Effect of foreign exchange
rate changes on cash, cash equivalents and restricted cash |
|
(5 |
) |
|
|
1 |
|
Net (decrease) increase in
cash, cash equivalents and restricted cash |
|
(161 |
) |
|
|
231 |
|
Cash, cash equivalents and
restricted cash at beginning of the period |
|
260 |
|
|
|
248 |
|
Cash, cash equivalents and
restricted cash at end of the period |
$ |
99 |
|
|
$ |
479 |
|
Supplemental cash flow
disclosure: |
|
|
|
Income taxes paid (net of refunds) |
|
27 |
|
|
|
27 |
|
Interest paid |
|
42 |
|
|
|
24 |
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income to Adjusted
EBITDA(1)
|
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
(Dollars in millions) |
Net income |
|
$ |
64 |
|
|
$ |
71 |
|
|
$ |
130 |
|
|
$ |
152 |
|
Interest expense, net of interest income (2) |
|
|
61 |
|
|
|
24 |
|
|
|
90 |
|
|
|
51 |
|
Tax expense |
|
|
23 |
|
|
|
30 |
|
|
|
38 |
|
|
|
57 |
|
Depreciation |
|
|
22 |
|
|
|
22 |
|
|
|
44 |
|
|
|
43 |
|
EBITDA |
|
|
170 |
|
|
|
147 |
|
|
|
302 |
|
|
|
303 |
|
Stock compensation expense (3) |
|
|
5 |
|
|
|
5 |
|
|
|
13 |
|
|
|
8 |
|
Repositioning costs |
|
|
1 |
|
|
|
1 |
|
|
|
12 |
|
|
|
8 |
|
Foreign exchange gain on debt, net of related hedging loss |
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
Discounting costs on factoring |
|
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
2 |
|
Gain on sale of equity investment |
|
|
(27 |
) |
|
|
— |
|
|
|
(27 |
) |
|
|
— |
|
Other non-operating income (4) |
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(3 |
) |
|
|
(3 |
) |
Acquisition and divestiture expenses (5) |
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
Capital structure transformation expenses (6) |
|
|
— |
|
|
|
18 |
|
|
|
— |
|
|
|
20 |
|
Debt refinancing and redemption costs (7) |
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
Adjusted EBITDA |
|
$ |
150 |
|
|
$ |
170 |
|
|
$ |
301 |
|
|
$ |
338 |
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
890 |
|
|
$ |
1,011 |
|
|
$ |
1,805 |
|
|
$ |
1,981 |
|
|
|
|
|
|
|
|
|
|
Net income margin |
|
|
7.2 |
% |
|
|
7.0 |
% |
|
|
7.2 |
% |
|
|
7.7 |
% |
Adjusted EBITDA margin
(8) |
|
|
16.9 |
% |
|
|
16.8 |
% |
|
|
16.7 |
% |
|
|
17.1 |
% |
(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 interest
expense net of interest income, tax expense and depreciation. We
define “Adjusted EBITDA” as EBITDA, plus the sum of stock
compensation expense, repositioning costs, foreign exchange (gain)
loss on debt net of related hedging gains (loss), discounting costs
on factoring, gain on sale of equity investment, acquisition and
divestiture expenses, other non-operating income, capital structure
transformation expenses, debt refinancing and redemption costs, net
reorganization items and loss on extinguishment of debt (if any).
Adjusted EBITDA now also adjusts for acquisition and divestiture
expenses, and debt refinancing and redemption costs, but no
adjustments were made to the prior period as there were no similar
adjustments in the prior period. 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-related charges 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) Reflects interest income of $1 million
and $5 million for the three months ended June 30, 2024 and
2023, respectively, and $3 million and $5 million for the
six months ended June 30, 2024 and 2023, respectively.
(3) Stock compensation expense includes only
non-cash expenses.
(4) Reflects the non-service component of net
periodic pension income.
(5) Reflects the incremental third-party costs
incurred for the sale of an equity interest in an unconsolidated
joint venture.
(6) Reflects the third-party incremental costs
that were directly attributable to the transformation of the
Company's capital structure through the partial repurchase and
subsequent conversion of the remaining outstanding Series A
Preferred Stock into a single class of common stock in June
2023.
(7) Reflects the third-party costs directly
attributable to the repricing of our 2021 Dollar Term Facility.
(8) 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, |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
Garrett |
|
|
|
|
|
|
|
Reported sales % change |
(12 |
)% |
|
18 |
% |
|
(9 |
)% |
|
13 |
% |
Less: Foreign currency translation |
(2 |
)% |
|
(1 |
)% |
|
(1 |
)% |
|
(3 |
)% |
Constant currency sales % change |
(10 |
)% |
|
19 |
% |
|
(8 |
)% |
|
16 |
% |
|
|
|
|
|
|
|
|
Gasoline |
|
|
|
|
|
|
|
Reported sales % change |
(17 |
)% |
|
32 |
% |
|
(11 |
)% |
|
21 |
% |
Less: Foreign currency translation |
(2 |
)% |
|
(2 |
)% |
|
(2 |
)% |
|
(4 |
)% |
Constant currency sales % change |
(15 |
)% |
|
34 |
% |
|
(9 |
)% |
|
25 |
% |
|
|
|
|
|
|
|
|
Diesel |
|
|
|
|
|
|
|
Reported sales % change |
(15 |
)% |
|
10 |
% |
|
(12 |
)% |
|
6 |
% |
Less: Foreign currency translation |
(1 |
)% |
|
1 |
% |
|
(1 |
)% |
|
(3 |
)% |
Constant currency sales % change |
(14 |
)% |
|
9 |
% |
|
(11 |
)% |
|
9 |
% |
|
|
|
|
|
|
|
|
Commercial
vehicles |
|
|
|
|
|
|
|
Reported sales % change |
(4 |
)% |
|
9 |
% |
|
(8 |
)% |
|
10 |
% |
Less: Foreign currency translation |
(2 |
)% |
|
(1 |
)% |
|
(2 |
)% |
|
(3 |
)% |
Constant currency sales % change |
(2 |
)% |
|
10 |
% |
|
(6 |
)% |
|
13 |
% |
|
|
|
|
|
|
|
|
Aftermarket |
|
|
|
|
|
|
|
Reported sales % change |
6 |
% |
|
6 |
% |
|
4 |
% |
|
5 |
% |
Less: Foreign currency translation |
(1 |
)% |
|
0 |
% |
|
(1 |
)% |
|
(2 |
)% |
Constant currency sales % change |
7 |
% |
|
6 |
% |
|
5 |
% |
|
7 |
% |
|
|
|
|
|
|
|
|
Other Sales |
|
|
|
|
|
|
|
Reported sales % change |
(13 |
)% |
|
0 |
% |
|
0 |
% |
|
(7 |
)% |
Less: Foreign currency translation |
(2 |
)% |
|
0 |
% |
|
(2 |
)% |
|
(2 |
)% |
Constant currency sales % change |
(11 |
)% |
|
0 |
% |
|
2 |
% |
|
(5 |
)% |
(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 EndedJune 30, |
|
Six Months EndedJune 30, |
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
(Dollars in millions) |
Net cash
provided by operating activities |
$ |
126 |
|
|
$ |
164 |
|
|
$ |
210 |
|
|
$ |
256 |
|
Expenditures for property, plant and equipment |
|
(17 |
) |
|
|
(25 |
) |
|
|
(49 |
) |
|
|
(33 |
) |
Net cash
provided by operating activities less expenditures for property,
plant and equipment |
|
109 |
|
|
|
139 |
|
|
|
161 |
|
|
|
223 |
|
Capital
structure transformation expenses |
|
— |
|
|
|
1 |
|
|
|
1 |
|
|
|
2 |
|
Acquisition and divestiture expenses |
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
Cash
payments for repositioning |
|
4 |
|
|
|
2 |
|
|
|
13 |
|
|
|
4 |
|
Proceeds
from cross currency swap contracts |
|
4 |
|
|
|
— |
|
|
|
8 |
|
|
|
— |
|
Factoring and P-notes |
|
(56 |
) |
|
|
(2 |
) |
|
|
(54 |
) |
|
|
(1 |
) |
Adjusted
free cash flow (1) |
$ |
62 |
|
|
$ |
140 |
|
|
$ |
130 |
|
|
$ |
228 |
|
(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 2024 Outlook Reconciliation of
Reported Net Sales to Net Sales Growth at Constant
Currency
|
|
2024 Full Year |
|
|
|
|
Low End |
|
|
High End |
|
Reported
net sales (% change) |
|
(10 |
)% |
|
(6 |
)% |
Foreign
currency translation |
|
(1 |
)% |
|
(1 |
)% |
Full
year 2024 Outlook Net sales growth at constant currency |
|
(9 |
)% |
|
(5 |
)% |
|
|
|
Full Year 2024 Outlook Reconciliation of
Net Income to Adjusted EBITDA
|
|
2024 Full Year |
|
|
Low End |
|
High End |
|
|
(Dollars in millions) |
Net income |
|
$ |
245 |
|
|
$ |
285 |
|
Interest
expense, net of interest income * |
|
|
148 |
|
|
|
148 |
|
Tax
expense |
|
|
82 |
|
|
|
92 |
|
Depreciation |
|
|
91 |
|
|
|
91 |
|
Full
year 2024 Outlook EBITDA |
|
|
566 |
|
|
|
616 |
|
Other
non-operating income |
|
|
(27 |
) |
|
|
(27 |
) |
Discounting costs on factoring |
|
|
2 |
|
|
|
2 |
|
Stock
compensation expense |
|
|
21 |
|
|
|
21 |
|
Acquisition and divestiture expenses |
|
|
1 |
|
|
|
1 |
|
Debt
refinancing and redemption costs |
|
|
2 |
|
|
|
2 |
|
Repositioning costs |
|
|
18 |
|
|
|
18 |
|
Full
Year 2024 Outlook Adjusted EBITDA |
|
$ |
583 |
|
|
$ |
633 |
|
* Excludes the effects of marked-to-market
fluctuations from our interest rate swap contracts
Full Year 2024 Outlook Reconciliation of
Net Cash Provided by Operating Activities to Adjusted Free Cash
Flow
|
|
2024 Full Year |
|
|
Low End |
|
High End |
|
|
(Dollars in millions) |
Net cash provided by operating activities |
|
$ |
355 |
|
|
$ |
455 |
|
Expenditures for property, plant and equipment |
|
|
(87 |
) |
|
|
(87 |
) |
Net cash
provided by operating activities less expenditures for property,
plant and equipment |
|
|
268 |
|
|
|
368 |
|
Cash
payments for repositioning |
|
|
15 |
|
|
|
15 |
|
Proceeds
from cross currency swap contracts |
|
|
15 |
|
|
|
15 |
|
Acquisition and divestiture expenses |
|
|
1 |
|
|
|
1 |
|
Capital
structure transformation costs |
|
|
1 |
|
|
|
1 |
|
Full
Year 2024 Outlook Adjusted free cash flow |
|
$ |
300 |
|
|
$ |
400 |
|
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