Fourth Quarter 2021 Highlights

• Reported net sales totaled $862 million, down 14% on a GAAP basis and 13% at constant currency*
• Net income totaled $128 million; Adjusted net income* was $78 million
• Adjusted EBITDA* totaled $129 million; Adjusted EBITDA margin* improved to 15.0%
• Net cash provided by operating activities totaled $136 million
• Adjusted free cash flow* totaled $151 million; Adjusted free cash flow conversion rate* was 194%
  

Full Year 2021 Highlights

• Net sales totaled $3,633 million, up 20% on a GAAP basis and 15% at constant currency*
• Net income totaled $495 million; Adjusted net income* was $331 million
• Adjusted EBITDA* increased 38% to $607 million; Adjusted EBITDA margin* improved to 16.7%
• Net cash used for operating activities totaled ($310) million
• Adjusted free cash flow* totaled $367 million; Adjusted free cash flow conversion rate* was 111%
  

ROLLE, Switzerland, Feb. 14, 2022 (GLOBE NEWSWIRE) -- Garrett Motion Inc. (Nasdaq: GTX), a leading differentiated technology provider for the automotive industry, today announced its financial results for the quarter and year ended December 31, 2021.

"In 2021, Garrett achieved strong growth across all key metrics," said Olivier Rabiller, Garrett President and CEO. "Net sales of $3.6 billion grew 20% on a GAAP basis and 15% at constant currency outpacing global auto production by approximately 12.5 percentage points**, as solid demand across our product portfolio was led by 25% growth in our commercial vehicle business and 21% growth in our aftermarket business, also at constant currency. Taken together, these two businesses add significant diversification to our portfolio as they comprise 30% of our 2021 net sales and an even greater proportion of our cash flow. This resilient demand coupled with our highly flexible cost structure and supply chain agility, helped Garrett meet our revised 2021 financial targets, deliver solid cash flow and accelerate our deleveraging activities."

"Our outlook for 2022 is for focused execution in a gradually improving macro environment as we pursue our strategic growth initiatives, positioning the company for continued success for the long term benefit of shareholders in the evolving powertrain industry."

Results of Operations
Net sales for the fourth quarter 2021 were $862 million down 14% compared with $1,008 million in the fourth quarter of 2020. Net sales at constant currency decreased 13% and exclude the negative impact of $12 million from foreign currency translation. The year-over-year decrease in net sales was driven by global semiconductor shortage sales across all product lines mainly in passenger vehicles. Net Sales of 2021 were $3,633 million up 20% compared with $3,034 million in 2020. Net sales at constant currency increased 15% and include a positive impact of $132 million or 5% due to foreign currency translation driven by higher Euro-to-dollar exchange rates.

Cost of goods sold for the fourth quarter of 2021 was $707 million compared with $834 million in 2020 primarily due to lower volumes which contributed to a decrease of $125 million. Cost of goods sold further decreased by $8 million due to foreign exchange impacts. This was partially offset by $3 million by an unfavorable product mix and inflation on commodities, transport costs and labor, partially offset by benefits from our continued focus on productivity. R&D expenses increased by $2 million which reflects our continued investment in new technologies and the temporary cost control actions taken in 2020 to mitigate the COVID-19 impact. Cost of goods sold in 2021 was $2,926 million compared to $2,495 million in 2020.

Gross profit totaled $155 million for the fourth quarter of 2021 as compared to $174 million in the fourth quarter of 2020 and the gross profit percentage for 2021 increased to 18.0% from 17.3% in 2020 primarily due to lower sales volume as well as higher R&D costs and foreign exchange impacts. This was partially offset by $33 million productivity and product mix net of headwinds from inflation. Gross profit in 2021totaled $707 million as compared to $539 million in 2020 and the gross profit percentage was 19.5% as compared with 17.8% in 2020.

Selling, general and administrative ("SG&A") expenses for the fourth quarter of 2021 decreased to $50 million from $58 million in the fourth quarter of 2020 primarily due to bad debt recovery booked in the fourth quarter of 2020. As a percentage of net sales, SG&A for the fourth quarter of 2021 was 5.8% flat with 2020. For 2021 SG&A was $216 million as compared with $260 million in 2020 primarily due to higher strategic planning and other costs incurred in 2020 partially offset by labor, incentive accruals and foreign exchange impacts.

Interest expense in the fourth quarter of 2021 and for 2020 was $23 million in both periods. Interest expense for 2021 was $93 million as compared with $79 million in 2020, mainly due to $29 million accrued on the Series B Preferred Stock, partially offset by $16 million lower interest expense on our current credit facilities compared to our credit facility in 2020 before emergence from Chapter 11 and prior year fees related to amendments to our previous credit facilities.

Non-operating (income) expense decreased by $19 million in the fourth quarter of 2021 from $31 million in 2020 to $12 million in the fourth quarter of 2021. Non-operating (income) expense decreased by $22 million in 2021 from $38 million to $16 million in 2021, primarily due to $47 million in foreign exchange impact on debt, which was unhedged as a consequence of restrictions placed on the Company during Chapter 11 proceedings, partially offset by $18 million higher non-service pension benefit in 2021 and $8 million driven by interest associated with unrealized marked-to-market gains on interest rate swaps.

Income before taxes in the fourth quarter 2021 was $89 million as compared with $54 million in the fourth quarter of 2020. Income before taxes was $538 million for 2021 as compared with $119 million in 2020.

Reorganization items - net was a expense of $5 million in the fourth quarter of 2021 as compared with $69 million in the fourth quarter of 2020 mainly related to professional services related to Chapter 11. Reorganization items - net was a gain of $125 million in 2021 as compared with an expense of $73 million in 2020, and includes a $502 million gain on the settlement of Honeywell claims, partially offset by $119 million in professional service fees related to the Chapter 11 cases compared to 2020, $79 million related to the termination of and expense reimbursement under the Stalking Horse Purchase Agreement, $39 million in Directors and Officers insurance related to Chapter 11 cases, a $19 million write off on debt issuance costs of the Pre-petition Credit Agreement debt, $13 million in employee stock awards cancellation and $35 million in other costs mainly related to unsecured notes settlement.

Net Income for the fourth quarter of 2021 was $128 million as compared to $26 million in the fourth quarter of 2020. Net Income was $495 million in 2021 as compared to $80 million in 2020 primarily as a result of higher gross profit of $168 million, lower SG&A expenses of $44 million, lower Other expenses of $45 million, and favorable Reorganization items, net of $198 million.

Net income available to common shareholders for 2021 was $398 million up from $80 million in 2020.

Net cash used for operating activities totaled $310 million in 2021 as compared to $25 million in cash provided from operating activities in 2020, reflecting the impact of a gain in Reorganization items, net in 2021 of $125 million.

Expenditures for property plant and equipment totaled $72 million in 2021 as compared with $80 million in 2020.

Non-GAAP Financial Measures

Adjusted net income, which excludes Reorganization items - net, unhedged debt exposure, restructuring costs and stock-based compensation, increased 54% to $331 million in 2021 as compared to $215 million in 2020. In the fourth quarter Adjusted net income was $78 million as compared to $77 million in the fourth quarter of 2020.

Adjusted EBITDA increased 38% to $607 million in 2021 as compared to $440 million in 2020. In the fourth quarter of 2021 Adjusted EBITDA decreased 13% to $129 million as compared to $149 million in the fourth quarter of 2020. The Adjusted EBITDA margin increased to 16.7% in 2021 as compared to 14.5% in 2020. In the fourth quarter of 2021 the Adjusted EBITDA margin increased to 15.0% from 14.8% in the fourth quarter of 2020.

Adjusted free cash flow, which excludes reorganization items, repositioning charges (primarily severance costs related to internal restructuring projects) and stock compensation expense, was $367 million in 2021 as compared with $128 million in 2020. In the fourth quarter of 2021 it was $151 million as compared with $236 million in the fourth quarter of 2020.

Liquidity and Capital Resources

As of December 31, 2021, Garrett had $720 million in available liquidity, including $423 million in cash and cash equivalents and approximately $297 million undrawn commitments under its revolving credit facility. In the third quarter of 2021, Garrett had $752 million in available liquidity, including $456 million in cash and cash equivalents and approximately $296 million undrawn commitments under its revolving credit facility.

As of December 31, 2021, total debt including the Series B Preferred Stock, totaled $1,618 million down from $1,832 million at the end of the third quarter 2021.

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 ("Plan") 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.

Garrett's full year 2022 outlook, as of February 14, 2022, reflects the company's expectation that global light vehicle auto production will grow 7% global commercial vehicle production will grow 2%. Garrett's capital expenditures and R&D expenses for the full year 2022 are expected to total approximately 2.4% and 4.6%, respectively, using the midpoint of the 2022 range for net sales. The full year 2022 outlook also assumes an exchange rate of 1.13 EUR to 1.00 USD.

Conference Call

Garrett will host a conference call on Monday, February 14, 2022 at 8:30 am Eastern Time / 2:30 pm Central European Time. The dial-in number for callers in the U.S. is +1-833-797-0899 and the dial-in number for international callers is +1-409-937-8894. The access code for all callers is 9557707. 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  

A replay of the conference call can be accessed through March 1, 2021 by dialing +1-855-859-2056 in the U.S. and +1-404-537-3406 outside the U.S., and then entering the access code 9557707. The webcast will also be archived on Garrett's IR website.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. 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 on Garrett's business, financial results and financial conditions, industry trends, Garrett's strategy. 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, 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, Adjusted Net Income, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Free Cash Flow, Adjusted Free Cash Flow Conversion Rate and Net cash provided by operating activities less Expenditures for property, plant and equipment. 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 Adjusted EBITDA and Adjusted EBITDA Margin are important indicators of operating performance because they exclude the effects of income taxes and certain other items, as well as the effects of financing and investing activities by eliminating the effects of interest and depreciation expenses and therefore more closely measures 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 our annual report on Form 10-K for the year ended December 31, 2021.

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 . 

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.

¹ Full Year Chapter 11 related cash interests increased by $15M incurred in the second quarter 2021, after full reconciliation of all reorganizational items done in Q4 2021 .

² 2020 and Q1 2021 Adjusted FCF reported number was restated to reflect updated definition which excludes liquidity actions such as sales of receivables.

¹ Adjusting items are tax effected at the same annual effective tax rate that was used at the time the adjusting item was originally recorded. If the adjusting item was not originally taxed at the annual effective tax rate, then the amount of the tax originally recorded is used.

² 2020 and Q1 2021 Adjusted Tax Expense (and consequently, Adjusted Net Income) reported numbers were restated to reflect an updated adjusted tax rate.

³ For Adjusted Free Cash Flow Reconciliation, please refer to page 14 for Reconciliation of Cash Flow from Operations less Expenditures for PP&E to Adjusted Free Cash Flow.