Document And Entity Information
Document And Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | May 07, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | GTX | |
Entity Registrant Name | Garrett Motion Inc. | |
Entity Central Index Key | 0001735707 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 75,587,498 | |
Entity Current Reporting Status | Yes | |
Entity Shell Company | false | |
Entity File Number | 001-38636 | |
Entity Tax Identification Number | 82-4873189 | |
Entity Address, Address Line One | La Pièce 16 | |
Entity Address, City or Town | Rolle | |
Entity Incorporation, State or Country Code | DE | |
Entity Address, Country | CH | |
Entity Address, Postal Zip Code | 1180 | |
City Area Code | 41 21 | |
Local Phone Number | 695 30 00 | |
Entity Interactive Data Current | Yes | |
Title of 12(b) Security | Common Stock,$0.001 par value per share | |
Security Exchange Name | NYSE | |
Document Quarterly Report | true | |
Document Transition Report | false |
CONSOLIDATED INTERIM STATEMENTS
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Statement [Abstract] | ||
Net sales (Note 3) | $ 745 | $ 835 |
Cost of goods sold | 603 | 639 |
Gross profit | 142 | 196 |
Selling, general and administrative expenses | 61 | 60 |
Other expense, net (Note 5) | 16 | 19 |
Interest expense | 16 | 16 |
Non-operating (income) expense | (4) | 4 |
Income before taxes | 53 | 97 |
Tax expense (Note 6) | 1 | 24 |
Net income | $ 52 | $ 73 |
Earnings per common share | ||
Basic | $ 0.69 | $ 0.98 |
Diluted | $ 0.68 | $ 0.97 |
Weighted average common shares outstanding | ||
Basic | 75,040,932 | 74,229,627 |
Diluted | 76,261,545 | 75,379,228 |
CONSOLIDATED INTERIM STATEMEN_2
CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Statement Of Income And Comprehensive Income [Abstract] | ||
Net income | $ 52 | $ 73 |
Foreign exchange translation adjustment | 39 | 59 |
Defined benefit pension plan adjustment, net of tax (Note 18) | 1 | |
Changes in fair value of effective cash flow hedges, net of tax (Note 14) | 3 | |
Total other comprehensive income, net of tax | 39 | 63 |
Comprehensive income | $ 91 | $ 136 |
CONSOLIDATED INTERIM BALANCE SH
CONSOLIDATED INTERIM BALANCE SHEETS (Unaudited) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 254 | $ 187 |
Accounts, notes and other receivables – net (Note 7) | 629 | 707 |
Inventories – net (Note 9) | 225 | 220 |
Other current assets | 80 | 85 |
Total current assets | 1,188 | 1,199 |
Investments and long-term receivables | 34 | 36 |
Property, plant and equipment – net | 457 | 471 |
Goodwill | 193 | 193 |
Deferred income taxes | 277 | 268 |
Other assets (Note 10) | 105 | 108 |
Total assets | 2,254 | 2,275 |
Current liabilities: | ||
Accounts payable | 935 | 1,009 |
Borrowings under revolving credit facility | 66 | |
Current maturities of long-term debt | 4 | 4 |
Obligations payable to Honeywell, current (Note 17) | 68 | 69 |
Accrued liabilities (Note 11) | 303 | 310 |
Total current liabilities | 1,376 | 1,392 |
Long-term debt | 1,389 | 1,409 |
Deferred income taxes | 37 | 51 |
Obligations payable to Honeywell (Note 17) | 1,236 | 1,282 |
Other liabilities (Note 12) | 262 | 274 |
Total liabilities | 4,300 | 4,408 |
COMMITMENTS AND CONTINGENCIES (Note 17) | ||
EQUITY (DEFICIT) | ||
Additional paid-in capital | 20 | 19 |
Retained earnings | (2,235) | (2,282) |
Accumulated other comprehensive income (Note 15) | 169 | 130 |
Total stockholders' deficit | (2,046) | (2,133) |
Total liabilities and stockholders' deficit | $ 2,254 | $ 2,275 |
CONSOLIDATED INTERIM BALANCE _2
CONSOLIDATED INTERIM BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2020 | Dec. 31, 2019 |
Statement Of Financial Position [Abstract] | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 400,000,000 | 400,000,000 |
Common stock, shares, issued | 75,939,795 | 74,911,139 |
Common stock, shares, outstanding | 75,571,651 | 74,826,329 |
CONSOLIDATED INTERIM STATEMEN_3
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash flows from operating activities: | ||
Net income | $ 52 | $ 73 |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||
Deferred income taxes | (15) | 3 |
Depreciation | 19 | 19 |
Amortization of deferred issuance costs | 2 | 2 |
Foreign exchange (gain) loss | 12 | 7 |
Stock compensation expense | 2 | 5 |
Pension expense | 1 | |
Other | 8 | 4 |
Changes in assets and liabilities: | ||
Accounts, notes and other receivables | 58 | (43) |
Inventories | (14) | (14) |
Other assets | (10) | 13 |
Accounts payable | (29) | (24) |
Accrued liabilities | 1 | 12 |
Obligations payable to Honeywell | (21) | (21) |
Other liabilities | (8) | (1) |
Net cash provided by operating activities | 57 | 36 |
Cash flows from investing activities: | ||
Expenditures for property, plant and equipment | (39) | (21) |
Other | 1 | |
Net cash used for investing activities | (39) | (20) |
Cash flows from financing activities: | ||
Proceeds from revolving credit facility | 621 | 140 |
Payments of revolving credit facility | (555) | (140) |
Payments of long-term debt | (1) | (6) |
Other | (3) | 1 |
Net cash provided by (used for) financing activities | 62 | (5) |
Effect of foreign exchange rate changes on cash and cash equivalents | (13) | |
Net increase in cash and cash equivalents | 67 | 11 |
Cash and cash equivalents at beginning of period | 187 | 196 |
Cash and cash equivalents at end of period | $ 254 | $ 207 |
CONSOLIDATED INTERIM STATEMEN_4
CONSOLIDATED INTERIM STATEMENTS OF EQUITY (DEFICIT) (Unaudited) - USD ($) shares in Millions, $ in Millions | Total | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income/(loss) |
Beginning balance at Dec. 31, 2018 | $ (2,517) | $ 5 | $ (2,595) | $ 73 | |
Beginning balance, Shares at Dec. 31, 2018 | 74 | ||||
Net income | 73 | 73 | |||
Other comprehensive income, net of tax | 63 | 63 | |||
Stock-based compensation | 5 | 5 | |||
Stock based compensation, Shares | 1 | ||||
Ending balance at Mar. 31, 2019 | (2,376) | 10 | (2,522) | 136 | |
Ending balance, Shares at Mar. 31, 2019 | 75 | ||||
Beginning balance at Dec. 31, 2019 | (2,133) | 19 | (2,282) | 130 | |
Beginning balance, Shares at Dec. 31, 2019 | 75 | ||||
Net income | 52 | 52 | |||
Other comprehensive income, net of tax | 39 | 39 | |||
Stock-based compensation | 2 | 2 | |||
Tax withholding related to vesting of restricted stock units and other | (1) | (1) | |||
Adoption impact of ASU 2016-13, Financial Instruments—Credit Losses | ASU 2016-13 | (5) | (5) | |||
Ending balance at Mar. 31, 2020 | $ (2,046) | $ 20 | $ (2,235) | $ 169 | |
Ending balance, Shares at Mar. 31, 2020 | 75 |
Background and Basis of Present
Background and Basis of Presentation | 3 Months Ended |
Mar. 31, 2020 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Background and Basis of Presentation | Note 1. Background and Basis of Presentation Background Garrett Motion Inc. (the “Company” or “Garrett”) designs, manufactures and sells highly engineered turbocharger and electric-boosting technologies for light and commercial vehicle original equipment manufacturers (“OEMs”) and the global vehicle independent aftermarket, as well as automotive software solutions. These OEMs in turn ship to consumers globally. We are a global technology leader with significant expertise in delivering products across gasoline, diesel, natural gas and electric (hybrid and fuel cell) powertrains. These products are key enablers for fuel economy and emission standards compliance. On October 1, 2018, the Company became an independent publicly-traded company through a pro rata distribution by Honeywell International Inc. (“Former Parent” or “Honeywell”) of 100% of the then-outstanding shares of Garrett to Honeywell’s stockholders (the “Spin-Off”). 10 The Spin-Off was completed pursuant to a Separation and Distribution Agreement and other agreements with Honeywell related to the Spin-Off, including but not limited to an indemnification and reimbursement agreement (the “Indemnification and Reimbursement Agreement”) and a tax matters agreement (the “Tax Matters Agreement”). Refer to Note 17, Commitments and Contingencies for additional details related to the Indemnification and Reimbursement Agreement and Tax Matters Agreement. Unless the context otherwise requires, references to “Garrett,” “we,” “us,” “our,” and “the Company” refer to (i) Honeywell’s Transportation Systems Business (the “Transportation Systems Business” or the “Business”) prior to the Spin-Off and (ii) Garrett Motion Inc. and its subsidiaries following the Spin-Off, as applicable. COVID-19 In December 2019, a strain of novel coronavirus disease, COVID-19, was identified in Wuhan, China. This virus has been declared a pandemic and has spread across the world, including throughout Asia, the United States and Europe. Our business operations have been materially disrupted and our revenues have decreased significantly as a result of the COVID-19 pandemic and related response measures, and we expect our financial performance in the quarter ending June 30, 2020, and in future fiscal quarters, to be materially negatively affected by the pandemic and its impact on the global automotive industry. Our Credit Agreement by and among us, certain of our subsidiaries, the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Agreement”), contains financial covenants, including a consolidated total leverage ratio covenant and a consolidated interest coverage ratio covenant. We were in compliance with our financial covenants as of March 31, 2020. However, as a result of the impacts of the COVID-19 pandemic, we expect to be unable to continue to comply with the consolidated total leverage ratio covenant as early as June 30, 2020. If we fail to comply with our consolidated total leverage ratio covenant, an event of default under the Credit Agreement would be triggered and our obligations under the Credit Agreement or other agreements (including as a result of cross-default provisions) may be accelerated. Our management has concluded that the foregoing conditions and events raise substantial doubt as to our ability to continue as a going concern. The accompanying financial statements do not include any adjustments or classifications that may result from the possible inability of the Company to continue as a going concern within one year after the issuance of the financial statements. Our management is in the process of negotiating with our lenders to obtain an amendment to or a waiver from the consolidated total leverage ratio covenant in our Credit Agreement. However, there can be no assurance that we will be successful in obtaining an amendment or waiver. Basis of Presentation The Consolidated Interim Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All amounts presented are in millions, except per share amounts. Asbestos-related expenses, net of probable insurance recoveries, are presented within Other expense, net in the Consolidated Interim Statement of Operations. Honeywell is subject to certain asbestos-related and environmental-related liabilities, primarily related to its legacy Bendix business. In conjunction with the Spin-Off, certain operations that were part of the Bendix business, along with the ownership of the Bendix trademark, as well as certain operations that were part of other legacy elements of the Business, were transferred to us. The accounting for the majority of our asbestos-related liability payments and accounts payable reflect the terms of the Indemnification and Reimbursement Agreement with Honeywell entered into on September 12, 2018, under which we are required to make payments to Honeywell in amounts equal to 90% of Honeywell’s asbestos-related liability payments and accounts payable, primarily related to the Bendix business in the United States, as well as certain environmental-related liability payments and accounts payable and non-United States asbestos-related liability payments and accounts payable, in each case related to legacy elements of the Business, including the legal costs of defending and resolving such liabilities, less 90% of Honeywell’s net insurance receipts and, as may be applicable, certain other recoveries associated with such liabilities. The Indemnification and Reimbursement Agreement provides that the agreement will terminate upon the earlier of (x) December 31, 2048 or (y) December 31st of the third consecutive year during which certain amounts owed to Honeywell during each such year were less than $25 million as converted into Euros in accordance with the terms of the agreement. The Consolidated Interim Financial Statements are unaudited; however, in the opinion of management, they contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to state fairly the financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP applicable to interim periods. The Consolidated Interim Financial Statements should be read in conjunction with the audited annual Consolidated and Combined Financial Statements for the year ended December 31, 2019 included in our Annual Report on Form 10-K, as filed with the SEC on February 27, 2020 (our “2018 Form 10-K”). The results of operations We report our quarterly financial information using a calendar convention: the first, second and third quarters are consistently reported as ending on March 31, June 30 and September 30. It has been our practice to establish actual quarterly closing dates using a predetermined fiscal calendar, which requires our businesses to close their books on a Saturday in order to minimize the potentially disruptive effects of quarterly closing on our business processes. The effects of this practice are generally not significant to reported results for any quarter and only exist within a reporting year. For differences in actual closing dates that are material to year-over-year comparisons of quarterly or year-to-date results, such differences have been adjusted for the three months ended March 31, 2020. Our actual closing dates for the three months ended March 31, 2020 and 2019 were March 28, 2020 and March 30, 2019, respectively. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2. Summary of Significant Accounting Policies The accounting policies of the Company are set forth in Note 2 to the audited annual Consolidated and Combined Financial Statements for the year ended December 31, 2019 included in our Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”). We include herein certain updates to those policies. Trade Receivables and Allowance for Doubtful Accounts —Trade accounts receivable are recorded at the invoiced amount as a result of transactions with customers. Garrett maintains allowances for doubtful accounts for estimated losses as a result of a customer’s inability to make required payments. As of January 1, 2020, Garrett adopted ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new guidance requires an entity to recognize as an allowance its estimate of lifetime expected credit losses rather than incurred losses. The guidance is also applicable to contract assets such as unbilled receivables. Consistent with the new guidance, Garrett estimates losses from doubtful accounts expected over the contractual life of the receivables based on days past due as measured from the contractual due date and collection history. Garrett also takes into consideration changes in economic conditions that may not be reflected in historical trends (for example, customers in bankruptcy, liquidation or reorganization). Receivables are written-off against the allowance for doubtful accounts when they are determined uncollectible. Such determination includes analysis and consideration of the particular conditions of the account, including time intervals since last collection, customer performance against agreed upon payment plans, solvency of customer and any bankruptcy proceedings. Recently Adopted Accounting Pronouncements In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which amends certain disclosure requirements related to fair value measures. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Effective January 1, 2020, the Company adopted the new guidance. The adoption did not have an impact on our Consolidated Interim Balance Sheets, Consolidated Interim Statements of Operations and related Notes to the Consolidated Interim Financial Statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Early adoption is permitted. Adoption of the new standard resulted in an increase in the allowance for doubtful accounts of $5 million which was recognized as a cumulative-effect adjustment to opening retained earnings as of January 1, 2020. Recently Issued Accounting Pronouncements In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits Defined Benefit Plans – General (Subtopic 715-20), which amends certain disclosure requirements related to the defined benefit pension and other postretirement plans. The guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year. Early adoption is permitted. The Company is currently evaluating the impact on its disclosures. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform. The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company is currently evaluating the impact on our hedging relationships, other transactions, and disclosures. |
Revenue Recognition and Contrac
Revenue Recognition and Contracts with Customers | 3 Months Ended |
Mar. 31, 2020 | |
Revenue From Contract With Customer [Abstract] | |
Revenue Recognition and Contracts with Customers | Note 3. Revenue Recognition and Contracts with Customers Disaggregated Revenue Net sales by region (determined based on country of shipment) and channel are as follows: Three months ended March 31, 2020 OEM Aftermarket Other Total United States $ 92 $ 40 $ — $ 132 Europe 394 30 9 433 Asia 159 8 6 173 Other International 3 4 — 7 $ 648 $ 82 $ 15 $ 745 Three months ended March 31, 2019 OEM Aftermarket Other Total United States $ 83 $ 45 $ 1 $ 129 Europe 429 37 12 478 Asia 199 13 7 219 Other International 4 5 — 9 $ 715 $ 100 $ 20 $ 835 Contract Balances The following table summarizes our contract assets and liabilities balances: 2020 Contract assets—January 1 $ 6 Contract assets—March 31 33 Change in contract assets—Increase/(Decrease) $ 27 Contract liabilities—January 1 $ (3 ) Contract liabilities—March 31 (4 ) Change in contract liabilities—(Increase)/Decrease $ (1 ) |
Research, Development & Enginee
Research, Development & Engineering | 3 Months Ended |
Mar. 31, 2020 | |
Research And Development [Abstract] | |
Research, Development & Engineering | Note 4. Research, Development & Engineering Garrett conducts research, development and engineering (“RD&E”) activities, which consist primarily of the development of new products and product applications. RD&E costs are charged to expense as incurred unless the Company has a contractual guarantee for reimbursement from the customer. Customer reimbursements are netted against gross RD&E expenditures as they are considered a recovery of cost. Such costs are included in Cost of goods sold as follows: Three Months Ended March 31, 2020 2019 Research and development costs $ 28 $ 32 Engineering-related expenses 4 3 $ 32 $ 35 |
Other Expense, Net
Other Expense, Net | 3 Months Ended |
Mar. 31, 2020 | |
Other Income And Expenses [Abstract] | |
Other Expense, Net | Note 5. Other Expense, Net Three Months Ended March 31, 2020 2019 Indemnification related — post Spin-Off $ 15 $ 19 Indemnification related — litigation 1 — $ 16 $ 19 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 6. Income Taxes For the Three Months Ended March 31, 2020 2019 (Dollars in millions) Tax expense $ 1 $ 24 Effective tax rate 1.9 % 25.0 % For the period ended March 31, 2020 the Company computed its effective tax rate using actual year to date information rather than a full year forecast to compute an annual effective tax rate. Based on current forecasts which take into account a range of potential impacts from COVID-19, the Company’s effective tax rate is expected to be highly sensitive to changes in pre-tax book income because of non-deductible asbestos related expenses which have no correlation to earnings. Accordingly, the Company concluded that computing its effective tax rate using year to date actual results is its best estimate of tax expense for the period ended March 31, 2020 . The effective tax rate decreased for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, primarily due to a reduction in withholding taxes and true ups from local statutory filings, partially offset by permanent tax differences that are not impacted proportionately with lower pre-tax book income as compared to the three months ended March 31, 2019. The effective tax rate for the three months ended March 31, 2020 was lower than the U.S. federal statutory rate of 21% primarily due to a reduction in withholding taxes, true ups from local statutory filings and lower pre-tax book income. The effective tax rate for the three months ended March 31, 2019 was higher than the U.S. federal statutory rate of 21% primarily due to non-deductible asbestos related expenses, withholding taxes on current year earnings and tax reserves, partially offset by non-U.S. earnings taxed at lower rates. The effective tax rate can vary from quarter to quarter due to changes in the Company’s global mix of earnings, impacts of Covid -19 In connection with the global outbreak of COVID-19, many countries have enacted legislation to provide various forms of emergency economic relief, including the CARES Act in the United States, that may provide financial benefits to the Company. At this time, we do not expect such benefits to have a material impact to the Company. |
Accounts, Notes and Other Recei
Accounts, Notes and Other Receivables—Net | 3 Months Ended |
Mar. 31, 2020 | |
Receivables [Abstract] | |
Accounts, Notes and Other Receivables—Net | Note 7. Accounts, Notes and Other Receivables—Net March 31, 2020 December 31, 2019 Trade receivables $ 489 $ 574 Notes receivables 77 68 Other receivables 72 69 $ 638 $ 711 Less—Allowance for doubtful accounts (9 ) (4 ) $ 629 $ 707 Trade Receivables include $33 million and $4 million of unbilled balances as of March 31, 2020 and December 31, 2019, respectively. These amounts are billed in accordance with the terms of customer contracts to which they relate. Unbilled receivables include $33 million and $6 million of contract assets as of March 31, 2020 and December 31, 2019, respectively. See Note 3, Revenue Recognition and Contracts with Customers. |
Factoring and Notes Receivable
Factoring and Notes Receivable | 3 Months Ended |
Mar. 31, 2020 | |
Receivables [Abstract] | |
Factoring and Notes Receivable | Note 8. Factoring and Notes Receivable The Company entered into arrangements with financial institutions to sell eligible trade receivables. During the periods ended March 31, 2020 and December 31, 2019, the Company sold $102 and $27 million of eligible receivables, respectively, without recourse, and accounted for these arrangements as true sales. The Company also received guaranteed bank notes without recourse, in settlement of accounts receivables, primarily in the Asia Pacific region. The Company can hold the bank notes until maturity, exchange them with suppliers to settle liabilities, or sell them to third party financial institutions in exchange for cash. During the periods ended March 31, 2020 and December 31, 2019, the Company sold $26 and $105 million of bank notes, respectively, without recourse, and accounted for these as true sales. |
Inventories-Net
Inventories-Net | 3 Months Ended |
Mar. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Inventories-Net | Note 9. Inventories—Net March 31, 2020 December 31, 2019 Raw materials $ 145 $ 142 Work in process 19 18 Finished products 85 85 $ 249 $ 245 Less—Reserves (24 ) (25 ) $ 225 $ 220 |
Other Assets
Other Assets | 3 Months Ended |
Mar. 31, 2020 | |
Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract] | |
Other Assets | Note 10. Other Assets March 31, December 31, 2020 2019 Advanced discounts to customers, non-current $ 61 $ 62 Operating right-of-use assets (Note 13) 32 35 Undesignated cross-currency swap at fair value 6 — Other 6 11 $ 105 $ 108 |
Accrued Liabilities
Accrued Liabilities | 3 Months Ended |
Mar. 31, 2020 | |
Accrued Liabilities Current [Abstract] | |
Accrued Liabilities | Note 11 . Accrued Liabilities March 31, 2020 December 31, 2019 Customer pricing reserve $ 90 $ 90 Compensation, benefit and other employee related 56 64 Repositioning 7 4 Product warranties and performance guarantees 27 29 Taxes 25 33 Advanced discounts from suppliers, current 19 19 Customer advances and deferred income (a) 13 12 Accrued interest 11 5 Short-term lease liability (Note 13) 7 8 Other (primarily operating expenses) 48 46 $ 303 $ 310 (a) Customer advances and deferred income include $4 million and $3 million of contract liabilities as of March 31, 2020 and December 31, 2019, respectively. See Note 3 Revenue Recognition and Contracts with Customers. The Company accrued repositioning costs related to right-sizing its organizational structure. Expenses related to the repositioning accruals are included in Cost of goods sold in our Consolidated Interim Statements of Operations. Severance Costs Exit Costs Total Balance at December 31, 2018 $ 13 $ 2 $ 15 Charges 1 — 1 Usage—cash (2 ) (2 ) (4 ) Adjustments and reclassifications (6 ) 1 (5 ) Foreign currency translation — — — Balance at March 31, 2019 $ 6 $ 1 $ 7 Severance Costs Exit Costs Total Balance at December 31, 2019 $ 3 $ 1 $ 4 Charges 5 — 5 Usage—cash (2 ) — (2 ) Adjustments and reclassifications — — — Foreign currency translation — — — Balance at March 31, 2020 $ 6 $ 1 $ 7 |
Other Liabilities
Other Liabilities | 3 Months Ended |
Mar. 31, 2020 | |
Other Liabilities Disclosure [Abstract] | |
Other Liabilities | Note 12. Other Liabilities March 31, 2020 December 31, 2019 Pension and other employee related $ 91 $ 94 Advanced discounts from suppliers 40 46 Uncertain tax positions 80 79 Long-term lease liability (Note 13) 25 28 Other 26 27 $ 262 $ 274 |
Leases
Leases | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Leases | Note 13. Leases We have operating leases for real estate and machinery and equipment. Our leases have remaining lease terms of up to 11 years, some of which include options to extend the leases for up to two years, and some of which include options to terminate the leases within the year. The components of lease expense are as follows: Three Months Ended March 31, 2020 Three Months Ended March 31, 2019 Operating lease cost $ 3 $ 3 Supplemental cash flow information related to operating leases is as follows: Three Months Ended March 31, 2020 Three Months Ended March 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 2 $ 3 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ — $ 5 Supplemental balance sheet information related to operating leases is as follows: March 31, 2020 December 31, 2019 Other assets $ 32 $ 35 Accrued liabilities 7 8 Other liabilities 25 28 March 31, 2020 December 31, 2019 Weighted-average lease term 6.26 6.30 Weighted-average discount rate 6.33 6.36 Maturities of operating lease liabilities were as follows: March 31, 2020 2020 $ 7 2021 7 2022 6 2023 5 2024 4 Thereafter 11 Total lease payments 40 Less imputed interest (7 ) $ 33 |
Financial Instruments and Fair
Financial Instruments and Fair Value Measures | 3 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
Financial Instruments and Fair Value Measures | Note 14. Financial Instruments and Fair Value Measures Our credit, market and foreign currency risk management policies are described in Note 18, Financial Instruments and Fair Value Measures, of the notes to the audited annual Consolidated Financial Statements for the year ended December 31, 2019 included in our 2019 Form 10-K. At March 31, 2020 and December 31, 2019, we had contracts with aggregate gross notional amounts of $ 2,212 million and $ 1,820 million, respectively, to limit interest rate risk and to exchange foreign currencies, principally the U.S. Dollar, Swiss Franc, British Pound, Euro, Chinese Yuan, Japanese Yen, Mexican Peso, New Romanian Leu, Czech Koruna, Australian Dollar and Korean Won . Financial and nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2020 and December 31, 2019: Fair Value Notional Amounts Assets Liabilities March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019 Designated forward currency exchange contracts $ 329 $ 392 $ 7 $ 5 (a) $ 2 $ 1 (b) Undesignated instruments: Undesignated cross-currency swap 419 420 7 — (c) — 1 (d) Undesignated interest rate swap 550 561 — — 1 1 (d) Undesignated forward currency exchange contracts 914 447 8 2 (a) 14 3 (b) $ 2,212 $ 1,820 $ 22 $ 7 $ 17 $ 6 ( a ) Recorded within Other current assets in the Company’s Consolidated Interim Balance Sheets ( b ) Recorded within Accrued liabilities in the Company’s Consolidated Interim Balance Sheets (c) Recorded within Other assets in the Company’s Consolidated Interim Balance Sheets (d) Recorded within Other liabilities in the Company´s Consolidated Interim Balance Sheets The foreign currency exchange, interest rate swap and cross-currency swap contracts are valued using market observable inputs. As such, these derivative instruments are classified within Level 2. The assumptions used in measuring fair value of the cross-currency swap are considered Level 2 inputs, which are based upon market observable interest rate curves, cross currency basis curves, credit default swap curves, and foreign exchange rates. The carrying value of Cash and cash equivalents, Account receivables, Notes and Other receivables, and Account payables contained in the Consolidated Balance Sheets approximates fair value. The following table sets forth the Company’s financial assets and liabilities that were not carried at fair value: March 31, 2020 Carrying Value Fair Value Long-term debt and related current maturities $ 1,393 $ 1,162 The Company determined the fair value of certain of its long-term debt and related current maturities utilizing transactions in the listed markets for similar liabilities. As such, the fair value of the long-term debt and related current maturities is considered Level 2. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) | 3 Months Ended |
Mar. 31, 2020 | |
Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract] | |
Accumulated Other Comprehensive Income (Loss) | Note 15. Accumulated Other Comprehensive Income (Loss) Changes in Accumulated Other Comprehensive Income (Loss) by Component Foreign Exchange Translation Adjustment Changes in Fair Value of Effective Cash Flow Hedges Pension Adjustments Total Accumulated Other Comprehensive Income (Loss) Balance at December 31, 2018 $ 86 $ — $ (13 ) $ 73 Other comprehensive income (loss) before reclassifications 59 3 — 62 Amounts reclassified from accumulated other comprehensive income (loss) — — 1 1 Net current period other comprehensive income (loss) 59 3 1 63 Balance at March 31, 2019 $ 145 $ 3 $ (12 ) $ 136 Foreign Exchange Translation Adjustment Changes in Fair Value of Effective Cash Flow Hedges Pension Adjustments Total Accumulated Other Comprehensive Income (Loss) Balance at December 31, 2019 $ 153 $ 4 $ (27 ) $ 130 Other comprehensive income (loss) before reclassifications 39 — — 39 Amounts reclassified from accumulated other comprehensive income (loss) — — — Net current period other comprehensive income (loss) 39 39 Balance at March 31, 2020 $ 192 $ 4 $ (27 ) $ 169 |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Note 16. Earnings Per Share The details of the earnings per share calculations for the three months ended March 31, 2020 and 2019 are as follows: Three Months Ended March 31, 2020 2019 Basic Net Income $ 52 $ 73 Weighted average common shares outstanding 75,040,932 74,229,627 EPS – Basic $ 0.69 $ 0.98 Three Months Ended March 31, 2020 2019 Diluted Net Income $ 52 $ 73 Weighted average common shares outstanding – Basic 75,040,932 74,229,627 Dilutive effect of unvested RSUs and other contingently issuable shares 1,220,613 1,149,601 Weighted average common shares outstanding – Diluted 76,261,545 75,379,228 EPS – Diluted $ 0.68 $ 0.97 Diluted EPS is computed based upon the weighted average number of common shares outstanding for the period plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the period. The diluted earnings per share calculations exclude the effect of stock options when the options’ assumed proceeds exceed the average market price of the common shares during the period. For the three months ended March 31, 2020, the weighted number of stock options excluded from the computations was 441,966. These stock options were outstanding at March 31, 2020. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2020 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 17. Commitments and Contingencies Obligations payable to Honeywell Honeywell is a defendant in asbestos-related personal injury actions mainly related to its legacy Bendix friction materials (“Bendix”) business. The Bendix business manufactured automotive brake linings that contained chrysotile asbestos in an encapsulated form. Claimants consist largely of individuals who allege exposure to asbestos from brakes from either performing or being in the vicinity of individuals who performed brake replacements. Certain operations that were part of the Bendix business were transferred to Garrett. In connection with the Spin-Off, we entered into an Indemnification and Reimbursement Agreement with Honeywell on September 12, 2018. As of the Spin-Off date of October 1, 2018, we are obligated to make payments to Honeywell in amounts equal to 90% of Honeywell’s asbestos-related liability payments and accounts payable, primarily related to the Bendix business in the United States, as well as certain environmental-related liability payments and accounts payable and non-United States asbestos-related liability payments and accounts payable, in each case related to legacy elements of the Business, including the legal costs of defending and resolving such liabilities, less 90% of Honeywell’s net insurance receipts and, as may be applicable, certain other recoveries associated with such liabilities. Pursuant to the terms of this Indemnification and Reimbursement Agreement, we are responsible for paying to Honeywell such amounts, up to a cap of an amount equal to the Euro-to-U.S. dollar exchange rate determined by Honeywell as of a date within two business days prior to the date of the Distribution (1.16977 USD = 1 EUR) equivalent of $175 million in respect of such liabilities arising in any given calendar year. The payments that we are required to make to Honeywell pursuant to the terms of this agreement will not be deductible for U.S. federal income tax purposes. The Indemnification and Reimbursement Agreement provides that the agreement will terminate upon the earlier of (x) December 31, 2048 or (y) December 31st of the third consecutive year during which certain amounts owed to Honeywell during each such year were less than $25 million as converted into Euros in accordance with the terms of the agreement. During the first quarter of 2020, we paid Honeywell the Euro-equivalent of $35 million in connection with the Indemnification and Reimbursement Agreement. Garrett has made all payments under the Indemnification and Reimbursement Agreement under protest, as described below. On December 2, 2019, the Company and its subsidiary, Garrett ASASCO Inc., filed a Summons with Notice in the Commercial Division of the Supreme Court of the State of New York, County of New York (the “NY Supreme Court”) commencing an action (the “Action”) against Honeywell, certain of Honeywell’s subsidiaries and certain of Honeywell’s employees for declaratory judgment, breach of contract, breach of fiduciary duties, aiding and abetting breach of fiduciary duties, corporate waste, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. On January 15, 2020, the Company and Garrett ASASCO Inc., filed a Complaint in the NY Supreme Court in connection with the Action. The lawsuit arises from the Indemnification and Reimbursement Agreement. The Company is seeking declaratory relief; compensatory damages in an amount to be determined at trial; rescission of the Indemnification and Reimbursement Agreement; attorneys’ fees and costs and such other and further relief as the Court may deem just and proper. There can be no assurance as to the time and resources that will be required to pursue these claims or the ultimate outcome of the lawsuit. Among other claims, Garrett asserts that Honeywell is not entitled to indemnification because it improperly seeks indemnification for amounts attributable to punitive damages and intentional misconduct, and because it has failed to establish other prerequisites for indemnification under New York law. Specifically, the claim asserts that Honeywell has failed to establish its right to indemnity for each and every asbestos settlement of the thousands for which it seeks indemnification. The Action seeks to establish that the Indemnification and Reimbursement Agreement is not enforceable, in whole or in part. On March 5, 2020, Honeywell filed a “Notice of Motion to Dismiss Garrett’s Complaint.” Garrett does not believe Honeywell’s motion has merit, and Garrett plans to respond. Given the New York Supreme Court’s limited operations during the Covid On September 12, 2018, we also entered into a Tax Matters Agreement with Honeywell (the “Tax Matters Agreement”), which governs the respective rights, responsibilities and obligations of Honeywell and us after the Spin-Off with respect to all tax matters (including tax liabilities, tax attributes, tax returns and tax contests). The Tax Matters Agreement generally provides that, following the Spin-Off date of October 1, 2018, we are responsible and will indemnify Honeywell for all taxes, including income taxes, sales taxes, value-added and payroll taxes, relating to Garrett for all periods, including periods prior to the completion date of the Spin-Off. Among other items, as a result of the mandatory transition tax imposed by the Tax Cuts and Jobs Act, one of our subsidiaries is required to make payments to a subsidiary of Honeywell in the amount representing the net tax liability of Honeywell under the mandatory transition tax attributable to us, as determined by Honeywell. We estimate that our total aggregate payments to Honeywell with respect to the mandatory transition tax will be $240 million with $190 million in payments remaining as of March 31, 2020. Under the terms of the Tax Matters Agreement, we are required to pay this amount in Euros, without interest, in five annual installments, each equal to 8% of the aggregate amount, followed by three additional annual installments equal to 15%, 20% and 25% of the aggregate amount, respectively. Following the Spin-Off in October 2018, we paid our first annual installment in that month. Subsequently, our annual installments are paid in April of each year. The annual installment due on April 1, 2020 has been deferred to May 31, 2020 in agreement with Honeywell. In addition, the Tax Matters Agreement addresses the allocation of liability for taxes incurred as a result of restructuring activities undertaken to effectuate the Spin-Off. The Tax Matters Agreement also provides that we are required to indemnify Honeywell for certain taxes (and reasonable expenses) resulting from the failure of the Spin-Off and related internal transactions to qualify for their intended tax treatment under U.S. federal, state and local income tax law, as well as foreign tax law. Further, the Tax Matters Agreement also imposes certain restrictions on us and our subsidiaries (including restrictions on share issuances, redemptions or repurchases, business combinations, sales of assets and similar transactions) that are designed to address compliance with Section 355 of the Internal Revenue Code of 1986, as amended, and are intended to preserve the tax-free nature of the Spin-Off. The following table summarizes our Obligation payable to Honeywell related to these agreements: Three Months Ended March 31, 2020 Asbestos and environmental Tax Matters Total Beginning of year $ 1,090 $ 261 $ 1,351 Accrual for update to estimated liability — — — Legal fees expensed 15 — 15 Payments to Honeywell (35 ) — (35 ) Currency translation adjustment (23 ) (4 ) (27 ) End of period $ 1,047 $ 257 $ 1,304 Current 50 18 68 Non-current 997 239 1,236 Total $ 1,047 $ 257 $ 1,304 Asbestos Matters The accounting for the majority of our asbestos-related liability payments and accounts payable reflect the terms of the Indemnification and Reimbursement Agreement with Honeywell entered into on September 12, 2018, under which we are required to make payments to Honeywell in amounts equal to 90% of Honeywell’s asbestos-related liability payments and accounts payable, primarily related to the Bendix business in the United States, as well as certain environmental-related liability payments and accounts payable and non-United States asbestos-related liability payments and accounts payable, in each case related to legacy elements of the Business, including the legal costs of defending and resolving such liabilities, less 90% of Honeywell’s net insurance receipts and, as may be applicable, certain other recoveries associated with such liabilities. The Indemnification and Reimbursement Agreement provides that the agreement will terminate upon the earlier of (x) December 31, 2048 or (y) December 31st of the third consecutive year during which certain amounts owed to Honeywell during each such year were less than $25 million as converted into Euros in accordance with the terms of the agreement. The following tables present information regarding Bendix related asbestos claims activity: Three Months Ended March 31, Year Ended December 31, Claims Activity 2020 2019 Claims Unresolved at the beginning of the year 6,480 6,209 Claims Filed 509 2,659 Claims Resolved (708 ) (2,388 ) Claims Unresolved at the end of the period 6,281 6,480 Three Months Ended March 31, Years Ended December 31, Disease Distribution of Unresolved Claims 2020 2019 Mesothelioma and Other Cancer Claims 3,221 3,399 Nonmalignant Claims 3,060 3,081 Total Claims 6,281 6,480 Honeywell has experienced average resolutions per claim excluding legal costs as follows: Years Ended December 31, 2019 2018 2017 2016 (in whole dollars) Malignant claims $ 50,200 $ 55,300 $ 56,000 $ 44,000 Nonmalignant claims $ 3,900 $ 4,700 $ 2,800 $ 4,485 It is not possible to predict whether resolution values for Bendix-related asbestos claims will increase, decrease or stabilize in the future. Other Matters We are subject to other lawsuits, investigations and disputes arising out of the conduct of our business, including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employee benefit plans, intellectual property, and environmental, health and safety matters. We recognize a liability for any contingency that is probable of occurrence and reasonably estimable. We continually assess the likelihood of adverse judgments of outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. To date, no such matters are material to the Consolidated Interim Statements of Operations. |
Pension Benefits
Pension Benefits | 3 Months Ended |
Mar. 31, 2020 | |
Compensation And Retirement Disclosure [Abstract] | |
Pension Benefits | Note 18. Pension Benefits We sponsor several funded U.S. and non-U.S. defined benefit pension plans. Significant plans outside of the U.S. are in Switzerland and Ireland. Other pension plans outside of the U.S. are not material to the Company either individually or in the aggregate. Our general funding policy for qualified defined benefit pension plans is to contribute amounts at least sufficient to satisfy regulatory funding standards. We are not required to make any contributions to our U.S. pension plan in 2020. We expect to make contributions of cash and/or marketable securities of approximately $7 million to our non-U.S. pension plans to satisfy regulatory funding standards in 2020. No contributions have been made through the first three months of the year. Net periodic benefit costs for our significant defined benefit plans include the following components: Three Months Ended U.S. Plans March 31, Non-U.S. Plans March 31, 2020 2019 2020 2019 Service cost — — 2 $ 1 Interest cost 1 1 0 1 Expected return on plan assets (3 ) (1 ) (1 ) (1 ) Amortization of prior service (credit) — — — — (2 ) — 1 $ 1 For both our U.S. and non-U.S. defined benefit pension plans, we estimate the service and interest cost components of net period benefit (income) cost by utilizing a full yield curve approach in the estimation of these cost components by applying the specific spot rates along the yield curve used in the determination of the pension benefit obligation to their underlying projected cash flows. This approach provides a more precise measurement of service and interest costs by improving the correlation between projected cash flows and their corresponding spot rates. |
China Variable Interest Entity
China Variable Interest Entity | 3 Months Ended |
Mar. 31, 2020 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
China Variable Interest Entity | Note 19. China Variable Interest Entity On September 20, 2018 in preparation of the Spin-Off, we entered into an agreement by and between Honeywell International Inc. and Garrett Motion Inc. (the “China Purchase Agreement”) in which Honeywell agreed to sell to Garrett 100% of the equity interests of Honeywell Transportation Investment (China) Co., Ltd. (“Garrett China”) consisting of our primary operations in China, in exchange for upfront consideration of 8,444,077 shares of our common stock. No further consideration from Garrett is due. The China Purchase Agreement has been amended to extend the date of the transfer of the equity interests in Garrett China from September 20, 2019 to June 30, 2020. Garrett China is considered a variable interest entity for which Garrett is the primary beneficiary because the China Purchase Agreement provides Garrett, prior to the transfer of the equity interests, control to direct the management and operation of Garrett China as well as all economic benefits and losses. The intent of the agreement is to place Garrett in the same position as if it already owned 100% of the equity interests of Garrett China. As the agreement was effective prior to the Spin-Off date while the Company and Garrett China were under common control of Honeywell, the assets and liabilities of Garrett China are recognized at their carrying amounts. The following table summarizes the consolidated assets and liabilities of Garrett China: March 31, December 31, 2020 2019 (Dollars in millions) ASSETS Current assets: Cash and cash equivalents $ 46 $ 141 Accounts, notes and other receivables—net 215 254 Inventories—net 28 27 Other current assets 1 1 Total current assets 290 423 Property, plant and equipment—net 81 82 Deferred income taxes 26 26 Other assets 1 1 Total assets $ 398 $ 532 LIABILITIES Current liabilities: Accounts payable $ 298 $ 326 Accrued liabilities 73 80 Total current liabilities 371 406 Other liabilities 9 10 Total liabilities $ 380 $ 416 Net sales from Garrett China were $95 million and $116 million for the three months ended March 31, 2020 and 2019, respectively. Related expenses primarily consisted of Costs of Goods Sold of $68 million million 4 million 4 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Trade Receivables and Allowance for Doubtful Accounts | Trade Receivables and Allowance for Doubtful Accounts —Trade accounts receivable are recorded at the invoiced amount as a result of transactions with customers. Garrett maintains allowances for doubtful accounts for estimated losses as a result of a customer’s inability to make required payments. As of January 1, 2020, Garrett adopted ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new guidance requires an entity to recognize as an allowance its estimate of lifetime expected credit losses rather than incurred losses. The guidance is also applicable to contract assets such as unbilled receivables. Consistent with the new guidance, Garrett estimates losses from doubtful accounts expected over the contractual life of the receivables based on days past due as measured from the contractual due date and collection history. Garrett also takes into consideration changes in economic conditions that may not be reflected in historical trends (for example, customers in bankruptcy, liquidation or reorganization). Receivables are written-off against the allowance for doubtful accounts when they are determined uncollectible. Such determination includes analysis and consideration of the particular conditions of the account, including time intervals since last collection, customer performance against agreed upon payment plans, solvency of customer and any bankruptcy proceedings. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which amends certain disclosure requirements related to fair value measures. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Effective January 1, 2020, the Company adopted the new guidance. The adoption did not have an impact on our Consolidated Interim Balance Sheets, Consolidated Interim Statements of Operations and related Notes to the Consolidated Interim Financial Statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Early adoption is permitted. Adoption of the new standard resulted in an increase in the allowance for doubtful accounts of $5 million which was recognized as a cumulative-effect adjustment to opening retained earnings as of January 1, 2020. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits Defined Benefit Plans – General (Subtopic 715-20), which amends certain disclosure requirements related to the defined benefit pension and other postretirement plans. The guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year. Early adoption is permitted. The Company is currently evaluating the impact on its disclosures. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform. The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company is currently evaluating the impact on our hedging relationships, other transactions, and disclosures. |
Revenue Recognition and Contr_2
Revenue Recognition and Contracts with Customers (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Revenue From Contract With Customer [Abstract] | |
Disaggregation of Revenue | Net sales by region (determined based on country of shipment) and channel are as follows: Three months ended March 31, 2020 OEM Aftermarket Other Total United States $ 92 $ 40 $ — $ 132 Europe 394 30 9 433 Asia 159 8 6 173 Other International 3 4 — 7 $ 648 $ 82 $ 15 $ 745 Three months ended March 31, 2019 OEM Aftermarket Other Total United States $ 83 $ 45 $ 1 $ 129 Europe 429 37 12 478 Asia 199 13 7 219 Other International 4 5 — 9 $ 715 $ 100 $ 20 $ 835 |
Summary of Contract Assets and Liabilities | The following table summarizes our contract assets and liabilities balances: 2020 Contract assets—January 1 $ 6 Contract assets—March 31 33 Change in contract assets—Increase/(Decrease) $ 27 Contract liabilities—January 1 $ (3 ) Contract liabilities—March 31 (4 ) Change in contract liabilities—(Increase)/Decrease $ (1 ) |
Research, Development & Engin_2
Research, Development & Engineering (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Research And Development [Abstract] | |
Summary of Research, Development & Engineering Activities | Garrett conducts research, development and engineering (“RD&E”) activities, which consist primarily of the development of new products and product applications. RD&E costs are charged to expense as incurred unless the Company has a contractual guarantee for reimbursement from the customer. Customer reimbursements are netted against gross RD&E expenditures as they are considered a recovery of cost. Such costs are included in Cost of goods sold as follows: Three Months Ended March 31, 2020 2019 Research and development costs $ 28 $ 32 Engineering-related expenses 4 3 $ 32 $ 35 |
Other Expenses, Net (Tables)
Other Expenses, Net (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Other Income And Expenses [Abstract] | |
Schedule of Other Operating Cost and Expense | Three Months Ended March 31, 2020 2019 Indemnification related — post Spin-Off $ 15 $ 19 Indemnification related — litigation 1 — $ 16 $ 19 |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Tax Expense (Benefit) and Effective Tax Rate | For the Three Months Ended March 31, 2020 2019 (Dollars in millions) Tax expense $ 1 $ 24 Effective tax rate 1.9 % 25.0 % |
Accounts, Notes and Other Rec_2
Accounts, Notes and Other Receivables—Net (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Receivables [Abstract] | |
Schedule of Accounts, Notes and Other Receivables Net | March 31, 2020 December 31, 2019 Trade receivables $ 489 $ 574 Notes receivables 77 68 Other receivables 72 69 $ 638 $ 711 Less—Allowance for doubtful accounts (9 ) (4 ) $ 629 $ 707 |
Inventories-Net (Tables)
Inventories-Net (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Summary of Inventories | March 31, 2020 December 31, 2019 Raw materials $ 145 $ 142 Work in process 19 18 Finished products 85 85 $ 249 $ 245 Less—Reserves (24 ) (25 ) $ 225 $ 220 |
Other Assets (Tables)
Other Assets (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract] | |
Schedule of Other Assets | March 31, December 31, 2020 2019 Advanced discounts to customers, non-current $ 61 $ 62 Operating right-of-use assets (Note 13) 32 35 Undesignated cross-currency swap at fair value 6 — Other 6 11 $ 105 $ 108 |
Accrued Liabilities (Tables)
Accrued Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accrued Liabilities Current [Abstract] | |
Summary of Accrued Liabilities | March 31, 2020 December 31, 2019 Customer pricing reserve $ 90 $ 90 Compensation, benefit and other employee related 56 64 Repositioning 7 4 Product warranties and performance guarantees 27 29 Taxes 25 33 Advanced discounts from suppliers, current 19 19 Customer advances and deferred income (a) 13 12 Accrued interest 11 5 Short-term lease liability (Note 13) 7 8 Other (primarily operating expenses) 48 46 $ 303 $ 310 (a) Customer advances and deferred income include $4 million and $3 million of contract liabilities as of March 31, 2020 and December 31, 2019, respectively. See Note 3 Revenue Recognition and Contracts with Customers. |
Summary of Expenses Related to the Repositioning Accruals | The Company accrued repositioning costs related to right-sizing its organizational structure. Expenses related to the repositioning accruals are included in Cost of goods sold in our Consolidated Interim Statements of Operations. Severance Costs Exit Costs Total Balance at December 31, 2018 $ 13 $ 2 $ 15 Charges 1 — 1 Usage—cash (2 ) (2 ) (4 ) Adjustments and reclassifications (6 ) 1 (5 ) Foreign currency translation — — — Balance at March 31, 2019 $ 6 $ 1 $ 7 Severance Costs Exit Costs Total Balance at December 31, 2019 $ 3 $ 1 $ 4 Charges 5 — 5 Usage—cash (2 ) — (2 ) Adjustments and reclassifications — — — Foreign currency translation — — — Balance at March 31, 2020 $ 6 $ 1 $ 7 |
Other Liabilities (Tables)
Other Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of Other Liabilities | March 31, 2020 December 31, 2019 Pension and other employee related $ 91 $ 94 Advanced discounts from suppliers 40 46 Uncertain tax positions 80 79 Long-term lease liability (Note 13) 25 28 Other 26 27 $ 262 $ 274 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Summary of Components of Lease Expense | The components of lease expense are as follows: Three Months Ended March 31, 2020 Three Months Ended March 31, 2019 Operating lease cost $ 3 $ 3 |
Summary of Supplemental Cash Flow Information Related to Operating Leases | Supplemental cash flow information related to operating leases is as follows: Three Months Ended March 31, 2020 Three Months Ended March 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 2 $ 3 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ — $ 5 |
Summary of Supplemental Balance Sheet Information Related to Operating Leases | Supplemental balance sheet information related to operating leases is as follows: March 31, 2020 December 31, 2019 Other assets $ 32 $ 35 Accrued liabilities 7 8 Other liabilities 25 28 March 31, 2020 December 31, 2019 Weighted-average lease term 6.26 6.30 Weighted-average discount rate 6.33 6.36 |
Schedule of Maturities of Operating Lease Liabilities | Maturities of operating lease liabilities were as follows: March 31, 2020 2020 $ 7 2021 7 2022 6 2023 5 2024 4 Thereafter 11 Total lease payments 40 Less imputed interest (7 ) $ 33 |
Financial Instruments and Fai_2
Financial Instruments and Fair Value Measures (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
Summary of Financial Assets and Liabilities Accounted for at Fair Value on Recurring Basis | The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2020 and December 31, 2019: Fair Value Notional Amounts Assets Liabilities March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019 Designated forward currency exchange contracts $ 329 $ 392 $ 7 $ 5 (a) $ 2 $ 1 (b) Undesignated instruments: Undesignated cross-currency swap 419 420 7 — (c) — 1 (d) Undesignated interest rate swap 550 561 — — 1 1 (d) Undesignated forward currency exchange contracts 914 447 8 2 (a) 14 3 (b) $ 2,212 $ 1,820 $ 22 $ 7 $ 17 $ 6 ( a ) Recorded within Other current assets in the Company’s Consolidated Interim Balance Sheets ( b ) Recorded within Accrued liabilities in the Company’s Consolidated Interim Balance Sheets (c) Recorded within Other assets in the Company’s Consolidated Interim Balance Sheets (d) Recorded within Other liabilities in the Company´s Consolidated Interim Balance Sheets |
Summary of Financial Assets and Liabilities Not Carried at Fair Value | The following table sets forth the Company’s financial assets and liabilities that were not carried at fair value: March 31, 2020 Carrying Value Fair Value Long-term debt and related current maturities $ 1,393 $ 1,162 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income (Loss) (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract] | |
Summary of Changes in Accumulated Other Comprehensive Income (Loss) by Component | Changes in Accumulated Other Comprehensive Income (Loss) by Component Foreign Exchange Translation Adjustment Changes in Fair Value of Effective Cash Flow Hedges Pension Adjustments Total Accumulated Other Comprehensive Income (Loss) Balance at December 31, 2018 $ 86 $ — $ (13 ) $ 73 Other comprehensive income (loss) before reclassifications 59 3 — 62 Amounts reclassified from accumulated other comprehensive income (loss) — — 1 1 Net current period other comprehensive income (loss) 59 3 1 63 Balance at March 31, 2019 $ 145 $ 3 $ (12 ) $ 136 Foreign Exchange Translation Adjustment Changes in Fair Value of Effective Cash Flow Hedges Pension Adjustments Total Accumulated Other Comprehensive Income (Loss) Balance at December 31, 2019 $ 153 $ 4 $ (27 ) $ 130 Other comprehensive income (loss) before reclassifications 39 — — 39 Amounts reclassified from accumulated other comprehensive income (loss) — — — Net current period other comprehensive income (loss) 39 39 Balance at March 31, 2020 $ 192 $ 4 $ (27 ) $ 169 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of Basic and Diluted Earnings Per Share | The details of the earnings per share calculations for the three months ended March 31, 2020 and 2019 are as follows: Three Months Ended March 31, 2020 2019 Basic Net Income $ 52 $ 73 Weighted average common shares outstanding 75,040,932 74,229,627 EPS – Basic $ 0.69 $ 0.98 Three Months Ended March 31, 2020 2019 Diluted Net Income $ 52 $ 73 Weighted average common shares outstanding – Basic 75,040,932 74,229,627 Dilutive effect of unvested RSUs and other contingently issuable shares 1,220,613 1,149,601 Weighted average common shares outstanding – Diluted 76,261,545 75,379,228 EPS – Diluted $ 0.68 $ 0.97 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Commitments And Contingencies Disclosure [Abstract] | |
Summary of Obligation Payable to Honeywell | The following table summarizes our Obligation payable to Honeywell related to these agreements: Three Months Ended March 31, 2020 Asbestos and environmental Tax Matters Total Beginning of year $ 1,090 $ 261 $ 1,351 Accrual for update to estimated liability — — — Legal fees expensed 15 — 15 Payments to Honeywell (35 ) — (35 ) Currency translation adjustment (23 ) (4 ) (27 ) End of period $ 1,047 $ 257 $ 1,304 Current 50 18 68 Non-current 997 239 1,236 Total $ 1,047 $ 257 $ 1,304 |
Summary of Asbestos Claim Activity | The following tables present information regarding Bendix related asbestos claims activity: Three Months Ended March 31, Year Ended December 31, Claims Activity 2020 2019 Claims Unresolved at the beginning of the year 6,480 6,209 Claims Filed 509 2,659 Claims Resolved (708 ) (2,388 ) Claims Unresolved at the end of the period 6,281 6,480 Three Months Ended March 31, Years Ended December 31, Disease Distribution of Unresolved Claims 2020 2019 Mesothelioma and Other Cancer Claims 3,221 3,399 Nonmalignant Claims 3,060 3,081 Total Claims 6,281 6,480 |
Summary of Average Resolutions Per Claim Excluding Legal Costs | Honeywell has experienced average resolutions per claim excluding legal costs as follows: Years Ended December 31, 2019 2018 2017 2016 (in whole dollars) Malignant claims $ 50,200 $ 55,300 $ 56,000 $ 44,000 Nonmalignant claims $ 3,900 $ 4,700 $ 2,800 $ 4,485 |
Pension Benefits (Tables)
Pension Benefits (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Compensation And Retirement Disclosure [Abstract] | |
Summary of Net Periodic Benefit Cost | Net periodic benefit costs for our significant defined benefit plans include the following components: Three Months Ended U.S. Plans March 31, Non-U.S. Plans March 31, 2020 2019 2020 2019 Service cost — — 2 $ 1 Interest cost 1 1 0 1 Expected return on plan assets (3 ) (1 ) (1 ) (1 ) Amortization of prior service (credit) — — — — (2 ) — 1 $ 1 |
China Variable Interest Entity
China Variable Interest Entity (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Schedule of Consolidated Assets and Liabilities | The following table summarizes the consolidated assets and liabilities of Garrett China: March 31, December 31, 2020 2019 (Dollars in millions) ASSETS Current assets: Cash and cash equivalents $ 46 $ 141 Accounts, notes and other receivables—net 215 254 Inventories—net 28 27 Other current assets 1 1 Total current assets 290 423 Property, plant and equipment—net 81 82 Deferred income taxes 26 26 Other assets 1 1 Total assets $ 398 $ 532 LIABILITIES Current liabilities: Accounts payable $ 298 $ 326 Accrued liabilities 73 80 Total current liabilities 371 406 Other liabilities 9 10 Total liabilities $ 380 $ 416 |
Background and Basis of Prese_2
Background and Basis of Presentation - Additional Information (Details) shares in Millions | Oct. 01, 2018shares | Sep. 12, 2018USD ($) | Mar. 31, 2020 |
Indemnification and Reimbursement Agreement | |||
Background And Basis Of Presentation [Line Items] | |||
Percentage of net insurance receipts | 90.00% | ||
Agreement termination date | Dec. 31, 2048 | ||
Agreement termination description | The Indemnification and Reimbursement Agreement provides that the agreement will terminate upon the earlier of (x) December 31, 2048 or (y) December 31st of the third consecutive year during which certain amounts owed to Honeywell during each such year were less than $25 million as converted into Euros in accordance with the terms of the agreement. | The Indemnification and Reimbursement Agreement provides that the agreement will terminate upon the earlier of (x) December 31, 2048 or (y) December 31st of the third consecutive year during which certain amounts owed to Honeywell during each such year were less than $25 million as converted into Euros in accordance with the terms of the agreement. | |
Honeywell International Inc | |||
Background And Basis Of Presentation [Line Items] | |||
Conversion common stock shareowner received ratio | 0.1 | ||
Description of conversion common stock shareowner received ratio | Each Honeywell stockholder of record received one share of Garrett common stock for every 10 shares of Honeywell common stock held on the record date. | ||
Shares of Garrett common stock distributed | shares | 74 | ||
Honeywell International Inc | Indemnification and Reimbursement Agreement | |||
Background And Basis Of Presentation [Line Items] | |||
Percentage of net insurance receipts | 90.00% | ||
Honeywell International Inc | Indemnification and Reimbursement Agreement | Maximum | |||
Background And Basis Of Presentation [Line Items] | |||
Liability for asbestos and environmental claims maximum amount converted into euros | $ | $ 25,000,000 | ||
Honeywell International Inc | Bendix | Indemnification and Reimbursement Agreement | |||
Background And Basis Of Presentation [Line Items] | |||
Percentage of asbestos and environmental liabilities liable to pay | 90.00% | ||
Garrett Motion Inc. | Honeywell International Inc | |||
Background And Basis Of Presentation [Line Items] | |||
Pro rata distribution of outstanding shares, percentage | 100.00% |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Millions | Jan. 01, 2020 | Mar. 31, 2020 |
ASU 2016-13 | ||
Significant Accounting Policies [Line Items] | ||
Cumulative-effect adjustment to opening retained earnings | $ 5 | $ (5) |
Revenue Recognition and Contr_3
Revenue Recognition and Contracts with Customers - Summary of Net Sales by Region and Channel (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Disaggregation Of Revenue [Line Items] | ||
Net sales | $ 745 | $ 835 |
OEM | ||
Disaggregation Of Revenue [Line Items] | ||
Net sales | 648 | 715 |
Aftermarket | ||
Disaggregation Of Revenue [Line Items] | ||
Net sales | 82 | 100 |
Other | ||
Disaggregation Of Revenue [Line Items] | ||
Net sales | 15 | 20 |
United States | ||
Disaggregation Of Revenue [Line Items] | ||
Net sales | 132 | 129 |
United States | OEM | ||
Disaggregation Of Revenue [Line Items] | ||
Net sales | 92 | 83 |
United States | Aftermarket | ||
Disaggregation Of Revenue [Line Items] | ||
Net sales | 40 | 45 |
United States | Other | ||
Disaggregation Of Revenue [Line Items] | ||
Net sales | 1 | |
Europe | ||
Disaggregation Of Revenue [Line Items] | ||
Net sales | 433 | 478 |
Europe | OEM | ||
Disaggregation Of Revenue [Line Items] | ||
Net sales | 394 | 429 |
Europe | Aftermarket | ||
Disaggregation Of Revenue [Line Items] | ||
Net sales | 30 | 37 |
Europe | Other | ||
Disaggregation Of Revenue [Line Items] | ||
Net sales | 9 | 12 |
Asia | ||
Disaggregation Of Revenue [Line Items] | ||
Net sales | 173 | 219 |
Asia | OEM | ||
Disaggregation Of Revenue [Line Items] | ||
Net sales | 159 | 199 |
Asia | Aftermarket | ||
Disaggregation Of Revenue [Line Items] | ||
Net sales | 8 | 13 |
Asia | Other | ||
Disaggregation Of Revenue [Line Items] | ||
Net sales | 6 | 7 |
Other International | ||
Disaggregation Of Revenue [Line Items] | ||
Net sales | 7 | 9 |
Other International | OEM | ||
Disaggregation Of Revenue [Line Items] | ||
Net sales | 3 | 4 |
Other International | Aftermarket | ||
Disaggregation Of Revenue [Line Items] | ||
Net sales | $ 4 | $ 5 |
Revenue Recognition and Contr_4
Revenue Recognition and Contracts with Customers - Summary of Contract Assets and Liabilities (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Contract With Customer Asset And Liability [Abstract] | |
Contract assets—January 1 | $ 6 |
Contract assets—March 31 | 33 |
Change in contract assets—Increase/(Decrease) | 27 |
Contract liabilities—January 1 | (3) |
Contract liabilities—March 31 | (4) |
Change in contract liabilities—(Increase)/Decrease | $ (1) |
Research, Development & Engin_3
Research, Development & Engineering - Summary of Research, Development & Engineering Activities (Details) - Cost of Goods Sold - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Research And Development Arrangement Contract To Perform For Others [Line Items] | ||
Research, development & engineering expense, total | $ 32 | $ 35 |
Research and Development Costs | ||
Research And Development Arrangement Contract To Perform For Others [Line Items] | ||
Research, development & engineering expense, total | 28 | 32 |
Engineering-Related Expenses | ||
Research And Development Arrangement Contract To Perform For Others [Line Items] | ||
Research, development & engineering expense, total | $ 4 | $ 3 |
Other Expense, Net - Schedule o
Other Expense, Net - Schedule of Other Operating Cost and Expense (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Other Income And Expenses [Abstract] | ||
Indemnification related — post Spin-Off | $ 15 | $ 19 |
Indemnification related — litigation | 1 | |
Other Expense, Net | $ 16 | $ 19 |
Income Taxes - Tax Expense (Ben
Income Taxes - Tax Expense (Benefit) and Effective Tax Rate (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Tax expense | $ 1 | $ 24 |
Effective tax rate | 1.90% | 25.00% |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
U.S. federal statutory income tax rate | 21.00% | 21.00% |
Accounts, Notes and Other Rec_3
Accounts, Notes and Other Receivables Net - Schedule of Accounts, Notes and Other Receivables Net (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | ||
Trade receivables | $ 489 | $ 574 |
Notes receivables | 77 | 68 |
Other receivables | 72 | 69 |
Accounts, notes and other receivables, gross | 638 | 711 |
Less—Allowance for doubtful accounts | (9) | (4) |
Accounts, notes and other receivables, net | $ 629 | $ 707 |
Accounts, Notes and Other Rec_4
Accounts, Notes and Other Receivables Net - Additional Information (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | ||
Unbilled balances | $ 33 | $ 4 |
Unbilled contracts assets | $ 33 | $ 6 |
Factoring and Notes Receivable
Factoring and Notes Receivable - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Receivables [Abstract] | ||
Sale of trade receivables | $ 102 | $ 27 |
Proceeds from sale of bank notes | $ 26 | $ 105 |
Inventories-Net - Summary of In
Inventories-Net - Summary of Inventories (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Inventory Combining Work In Process And Raw Materials Alternative Gross [Abstract] | ||
Raw materials | $ 145 | $ 142 |
Work in process | 19 | 18 |
Finished products | 85 | 85 |
Inventory, gross | 249 | 245 |
Less—Reserves | (24) | (25) |
Inventories | $ 225 | $ 220 |
Other Assets - Schedule of Othe
Other Assets - Schedule of Other Assets (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Other Assets [Line Items] | ||
Advanced discounts to customers, non-current | $ 61 | $ 62 |
Operating right-of-use assets (Note 13) | $ 32 | $ 35 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | us-gaap:OtherAssetsNoncurrent | us-gaap:OtherAssetsNoncurrent |
Other | $ 6 | $ 11 |
Total | 105 | $ 108 |
Undesignated as Hedging | Cross-currency Swap | ||
Other Assets [Line Items] | ||
Undesignated cross-currency swap at fair value | $ 6 |
Accrued Liabilities - Summary o
Accrued Liabilities - Summary of Accrued Liabilities (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Accrued Liabilities Current [Abstract] | ||
Customer pricing reserve | $ 90 | $ 90 |
Compensation, benefit and other employee related | 56 | 64 |
Repositioning | 7 | 4 |
Product warranties and performance guarantees | 27 | 29 |
Taxes | 25 | 33 |
Advanced discounts from suppliers, current | 19 | 19 |
Customer advances and deferred income | 13 | 12 |
Accrued interest | 11 | 5 |
Short-term lease liability (Note 13) | 7 | 8 |
Other (primarily operating expenses) | 48 | 46 |
Accrued Liabilities | $ 303 | $ 310 |
Accrued Liabilities - Summary_2
Accrued Liabilities - Summary of Accrued Liabilities (Parenthetical) (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Accrued Liabilities Current [Abstract] | ||
Contract liabilities | $ 4 | $ 3 |
Accrued Liabilities - Summary_3
Accrued Liabilities - Summary of Expenses Related to the Repositioning Accruals (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Restructuring Cost And Reserve [Line Items] | ||
Balance at beginning of period | $ 4 | $ 15 |
Charges | 5 | 1 |
Usage—cash | (2) | (4) |
Adjustments and reclassifications | (5) | |
Balance at end of period | 7 | 7 |
Severance Costs | ||
Restructuring Cost And Reserve [Line Items] | ||
Balance at beginning of period | 3 | 13 |
Charges | 5 | 1 |
Usage—cash | (2) | (2) |
Adjustments and reclassifications | (6) | |
Balance at end of period | 6 | 6 |
Exit Costs | ||
Restructuring Cost And Reserve [Line Items] | ||
Balance at beginning of period | 1 | 2 |
Usage—cash | 0 | (2) |
Adjustments and reclassifications | 1 | |
Balance at end of period | $ 1 | $ 1 |
Other Liabilities - Schedule of
Other Liabilities - Schedule of Other Liabilities (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Other Liabilities Disclosure [Abstract] | ||
Pension and other employee related | $ 91 | $ 94 |
Advanced discounts from suppliers | 40 | 46 |
Uncertain tax positions | 80 | 79 |
Long-term lease liability (Note 13) | 25 | 28 |
Other | 26 | 27 |
Other Liabilities | $ 262 | $ 274 |
Leases - Additional Information
Leases - Additional Information (Details) | 3 Months Ended |
Mar. 31, 2020 | |
Lessee Lease Description [Line Items] | |
Operating lease, option to extend | true |
Operating lease, option to extend, description | some of which include options to extend the leases for up to two years |
Operating lease, option to terminate | true |
Operating lease, option to terminate, description | some of which include options to terminate the leases within the year |
Maximum | |
Lessee Lease Description [Line Items] | |
Operating lease, remaining lease terms | 11 years |
Operating lease, options to extend, years | 2 years |
Leases - Summary of Components
Leases - Summary of Components of Lease Expense (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Leases [Abstract] | ||
Operating lease cost | $ 3 | $ 3 |
Leases - Summary of Supplementa
Leases - Summary of Supplemental Cash Flow Information Related to Operating Leases (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Leases [Abstract] | ||
Operating cash outflows from operating leases | $ 2 | $ 3 |
Right-of-use assets obtained in exchange for lease obligations, operating leases | $ 5 |
Leases - Summary of Supplemen_2
Leases - Summary of Supplemental Balance Sheet Information Related to Operating Leases (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Leases [Abstract] | ||
Other assets | $ 32 | $ 35 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | us-gaap:OtherAssetsNoncurrent | us-gaap:OtherAssetsNoncurrent |
Accrued liabilities | $ 7 | $ 8 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | us-gaap:AccruedLiabilitiesCurrent | us-gaap:AccruedLiabilitiesCurrent |
Other liabilities | $ 25 | $ 28 |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | us-gaap:OtherLiabilitiesNoncurrent | us-gaap:OtherLiabilitiesNoncurrent |
Weighted-average lease term | 6 years 3 months 3 days | 6 years 3 months 18 days |
Weighted-average discount rate | 6.33% | 6.36% |
Leases - Schedule of Maturities
Leases - Schedule of Maturities of Operating Lease Liabilities (Details) $ in Millions | Mar. 31, 2020USD ($) |
Leases [Abstract] | |
2020 | $ 7 |
2021 | 7 |
2022 | 6 |
2023 | 5 |
2024 | 4 |
Thereafter | 11 |
Total lease payments | 40 |
Less imputed interest | (7) |
Operating lease, liabilities | $ 33 |
Financial Instruments and Fai_3
Financial Instruments and Fair Value Measures - Additional Information (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | ||
Derivative, aggregate gross notional amount | $ 2,212,000,000 | $ 1,820,000,000 |
Financial Instruments and Fai_4
Financial Instruments and Fair Value Measures - Summary of Financial Assets and Liabilities Accounted for at Fair Value on Recurring Basis (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Notional Amounts | $ 2,212,000,000 | $ 1,820,000,000 |
Undesignated as Hedging | Cross-currency Swap | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Fair Value, Assets | 6,000,000 | |
Fair Value Measurements Recurring | Level 2 | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Notional Amounts | 2,212,000,000 | 1,820,000,000 |
Fair Value, Assets | 22,000,000 | 7,000,000 |
Fair Value, Liabilities | 17,000,000 | 6,000,000 |
Fair Value Measurements Recurring | Level 2 | Designated as Hedging | Forward Currency Exchange Contracts | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Notional Amounts | 329,000,000 | 392,000,000 |
Fair Value, Assets | 7,000,000 | 5,000,000 |
Fair Value, Liabilities | 2,000,000 | 1,000,000 |
Fair Value Measurements Recurring | Level 2 | Undesignated as Hedging | Forward Currency Exchange Contracts | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Notional Amounts | 914,000,000 | 447,000,000 |
Fair Value, Assets | 8,000,000 | 2,000,000 |
Fair Value, Liabilities | 14,000,000 | 3,000,000 |
Fair Value Measurements Recurring | Level 2 | Undesignated as Hedging | Cross-currency Swap | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Notional Amounts | 419,000,000 | 420,000,000 |
Fair Value, Assets | 7,000,000 | |
Fair Value, Liabilities | 1,000,000 | |
Fair Value Measurements Recurring | Level 2 | Undesignated as Hedging | Interest Rate Swap | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Notional Amounts | 550,000,000 | 561,000,000 |
Fair Value, Liabilities | $ 1,000,000 | $ 1,000,000 |
Financial Instruments and Fai_5
Financial Instruments and Fair Value Measures - Summary of Financial Assets and Liabilities Not Carried at Fair Value (Details) $ in Millions | Mar. 31, 2020USD ($) |
Carrying Value | |
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | |
Long-term debt and related current maturities | $ 1,393 |
Fair Value | Level 2 | |
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | |
Long-term debt and related current maturities | $ 1,162 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (Loss) - Summary of Changes in Accumulated Other Comprehensive Income (Loss) by Component (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning balance | $ (2,133) | $ (2,517) |
Total other comprehensive income, net of tax | 39 | 63 |
Ending balance | (2,046) | (2,376) |
Foreign Exchange Translation Adjustment | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning balance | 153 | 86 |
Other comprehensive income (loss) before reclassifications | 39 | 59 |
Total other comprehensive income, net of tax | 39 | 59 |
Ending balance | 192 | 145 |
Changes in Fair Value of Effective Cash Flow Hedges | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning balance | 4 | |
Other comprehensive income (loss) before reclassifications | 3 | |
Total other comprehensive income, net of tax | 3 | |
Ending balance | 4 | 3 |
Pension Adjustments | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning balance | (27) | (13) |
Amounts reclassified from accumulated other comprehensive income (loss) | 1 | |
Total other comprehensive income, net of tax | 1 | |
Ending balance | (27) | (12) |
Total Accumulated Other Comprehensive Income (Loss) | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning balance | 130 | 73 |
Other comprehensive income (loss) before reclassifications | 39 | 62 |
Amounts reclassified from accumulated other comprehensive income (loss) | 1 | |
Total other comprehensive income, net of tax | 39 | 63 |
Ending balance | $ 169 | $ 136 |
Earnings Per Share - Schedule o
Earnings Per Share - Schedule of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Basic | ||
Net income | $ 52 | $ 73 |
Weighted average common shares outstanding – Basic | 75,040,932 | 74,229,627 |
EPS – Basic | $ 0.69 | $ 0.98 |
Diluted | ||
Net income | $ 52 | $ 73 |
Weighted average common shares outstanding – Basic | 75,040,932 | 74,229,627 |
Dilutive effect of unvested RSUs and other contingently issuable shares | 1,220,613 | 1,149,601 |
Weighted average common shares outstanding – Diluted | 76,261,545 | 75,379,228 |
EPS – Diluted | $ 0.68 | $ 0.97 |
Earnings Per Share - Additional
Earnings Per Share - Additional Information (Details) | 3 Months Ended |
Mar. 31, 2020shares | |
Earnings Per Share [Abstract] | |
Antidilutive shares excluded from computation of diluted EPS | 441,966 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) $ in Millions | Oct. 01, 2018USD ($)Installment | Sep. 12, 2018USD ($) | Mar. 31, 2020USD ($) |
Indemnification and Reimbursement Agreement | |||
Loss Contingencies [Line Items] | |||
Percentage of net insurance receipts | 90.00% | ||
Loss contingency payable | $ 175 | ||
Minimum amount agreed to maintain for termination | $ 25 | ||
Agreement termination description | The Indemnification and Reimbursement Agreement provides that the agreement will terminate upon the earlier of (x) December 31, 2048 or (y) December 31st of the third consecutive year during which certain amounts owed to Honeywell during each such year were less than $25 million as converted into Euros in accordance with the terms of the agreement. | The Indemnification and Reimbursement Agreement provides that the agreement will terminate upon the earlier of (x) December 31, 2048 or (y) December 31st of the third consecutive year during which certain amounts owed to Honeywell during each such year were less than $25 million as converted into Euros in accordance with the terms of the agreement. | |
Honeywell International Inc | Tax Matters Agreement | |||
Loss Contingencies [Line Items] | |||
Aggregate payments connection with mandatory transition tax | $ 240 | ||
Remaining payments connection with mandatory transition tax | $ 190 | ||
Number of annual installments | Installment | 5 | ||
Mandatory transition tax rate first installment | 8.00% | ||
Mandatory transition tax rate second installment | 8.00% | ||
Mandatory transition tax rate third installment | 15.00% | ||
Mandatory transition tax rate fourth installment | 20.00% | ||
Mandatory transition tax rate fifth installment | 25.00% | ||
Honeywell International Inc | Indemnification and Reimbursement Agreement | |||
Loss Contingencies [Line Items] | |||
Percentage of net insurance receipts | 90.00% | ||
Payment made in connection with the Indemnification and Reimbursement Agreement | $ 35 | ||
Description of indemnification agreement | As of the Spin-Off date of October 1, 2018, we are obligated to make payments to Honeywell in amounts equal to 90% of Honeywell’s asbestos-related liability payments and accounts payable, primarily related to the Bendix business in the United States, as well as certain environmental-related liability payments and accounts payable and non-United States asbestos-related liability payments and accounts payable, in each case related to legacy elements of the Business, including the legal costs of defending and resolving such liabilities, less 90% of Honeywell’s net insurance receipts and, as may be applicable, certain other recoveries associated with such liabilities. Pursuant to the terms of this Indemnification and Reimbursement Agreement, we are responsible for paying to Honeywell such amounts, up to a cap of an amount equal to the Euro-to-U.S. dollar exchange rate determined by Honeywell as of a date within two business days prior to the date of the Distribution (1.16977 USD = 1 EUR) equivalent of $175 million in respect of such liabilities arising in any given calendar year. | ||
Bendix | Honeywell International Inc | Indemnification and Reimbursement Agreement | |||
Loss Contingencies [Line Items] | |||
Percentage of asbestos and environmental liabilities liable to pay | 90.00% |
Commitments and Contingencies_2
Commitments and Contingencies - Summary of Obligation Payable to Honeywell (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
Loss Contingencies [Line Items] | ||
Current | $ 68 | $ 69 |
Non-current | 1,236 | $ 1,282 |
Exit Costs | Honeywell International Inc | ||
Loss Contingencies [Line Items] | ||
Beginning of year | 1,351 | |
Legal fees expensed | 15 | |
Payments to Honeywell | (35) | |
Currency translation adjustment | (27) | |
End of period | 1,304 | |
Current | 68 | |
Non-current | 1,236 | |
Total | 1,304 | |
Exit Costs | Honeywell International Inc | Asbestos and Environmental | ||
Loss Contingencies [Line Items] | ||
Beginning of year | 1,090 | |
Legal fees expensed | 15 | |
Payments to Honeywell | (35) | |
Currency translation adjustment | (23) | |
End of period | 1,047 | |
Current | 50 | |
Non-current | 997 | |
Total | 1,047 | |
Exit Costs | Honeywell International Inc | Tax Matters Agreement | ||
Loss Contingencies [Line Items] | ||
Beginning of year | 261 | |
Currency translation adjustment | (4) | |
End of period | 257 | |
Current | 18 | |
Non-current | 239 | |
Total | $ 257 |
Commitments and Contingencies_3
Commitments and Contingencies - Summary of Asbestos Claims Activity (Details) - Bendix - Claim | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Claims Activity | ||
Claims Unresolved at the beginning of the year | 6,480 | 6,209 |
Claims Filed | 509 | 2,659 |
Claims Resolved | (708) | (2,388) |
Claims Unresolved at the end of the period | 6,281 | 6,480 |
Commitments and Contingencies_4
Commitments and Contingencies - Summary of Asbestos Disease Distribution of Unresolved Claims (Details) - Bendix - Claim | Mar. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Disease Distribution of Unresolved Claims | |||
Mesothelioma and Other Cancer Claims | 3,221 | 3,399 | |
Nonmalignant Claims | 3,060 | 3,081 | |
Total Claims | 6,281 | 6,480 | 6,209 |
Commitments and Contingencies_5
Commitments and Contingencies - Summary of Average Resolutions Per Claim Excluding Legal Costs (Details) - $ / Claim | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Commitments And Contingencies Disclosure [Abstract] | ||||
Malignant claims | 50,200 | 55,300 | 56,000 | 44,000 |
Nonmalignant claims | 3,900 | 4,700 | 2,800 | 4,485 |
Pension Benefits - Additional I
Pension Benefits - Additional Information (Details) - Pension Benefits - Non-U.S. Plans | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Defined Benefit Plan Disclosure [Line Items] | |
Expected pension contribution in the next fiscal year | $ 7,000,000 |
Pension contribution | $ 0 |
Pension Benefits - Summary of N
Pension Benefits - Summary of Net Periodic Benefit Cost (Details) - Pension Benefits - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
U.S. Plans | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Interest cost | $ 1 | $ 1 |
Expected return on plan assets | (3) | (1) |
Net periodic benefit costs | (2) | |
Non-U.S. Plans | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Service cost | 2 | 1 |
Interest cost | 0 | 1 |
Expected return on plan assets | (1) | (1) |
Net periodic benefit costs | $ 1 | $ 1 |
China Variable Interest Entit_2
China Variable Interest Entity - Additional Information (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | |
Sep. 30, 2018 | Mar. 31, 2020 | Mar. 31, 2019 | |
Variable Interest Entity [Line Items] | |||
Net sales | $ 745 | $ 835 | |
Cost of goods sold | 603 | 639 | |
Selling, general and administrative expenses | 61 | 60 | |
Tax expense (Note 6) | 1 | 24 | |
Garrett China | Variable Interest Entity, Primary Beneficiary | |||
Variable Interest Entity [Line Items] | |||
Variable interest ownership percentage | 100.00% | ||
Equity interests in exchange for shares of common stock issued | 8,444,077 | ||
Net sales | 95 | 116 | |
Cost of goods sold | 68 | 79 | |
Selling, general and administrative expenses | 4 | 3 | |
Tax expense (Note 6) | $ 4 | $ 7 |
China Variable Interest Entit_3
China Variable Interest Entity - Schedule of Consolidated Assets and Liabilities (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 254 | $ 187 |
Accounts, notes and other receivables—net | 629 | 707 |
Inventories—net | 225 | 220 |
Other current assets | 80 | 85 |
Total current assets | 1,188 | 1,199 |
Property, plant and equipment—net | 457 | 471 |
Deferred income taxes | 277 | 268 |
Other assets | 105 | 108 |
Total assets | 2,254 | 2,275 |
Current liabilities: | ||
Accounts payable | 935 | 1,009 |
Accrued liabilities | 303 | 310 |
Total current liabilities | 1,376 | 1,392 |
Other liabilities | 262 | 274 |
Total liabilities | 4,300 | 4,408 |
Variable Interest Entity, Primary Beneficiary | Garrett China | ||
Current assets: | ||
Cash and cash equivalents | 46 | 141 |
Accounts, notes and other receivables—net | 215 | 254 |
Inventories—net | 28 | 27 |
Other current assets | 1 | 1 |
Total current assets | 290 | 423 |
Property, plant and equipment—net | 81 | 82 |
Deferred income taxes | 26 | 26 |
Other assets | 1 | 1 |
Total assets | 398 | 532 |
Current liabilities: | ||
Accounts payable | 298 | 326 |
Accrued liabilities | 73 | 80 |
Total current liabilities | 371 | 406 |
Other liabilities | 9 | 10 |
Total liabilities | $ 380 | $ 416 |