Document And Entity Information
Document And Entity Information - shares | 6 Months Ended | |
Jun. 30, 2020 | Jul. 27, 2020 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q2 | |
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 | 75,635,938 | |
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 | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Income Statement [Abstract] | ||||
Net sales (Note 3) | $ 477 | $ 802 | $ 1,222 | $ 1,637 |
Cost of goods sold | 393 | 620 | 996 | 1,259 |
Gross profit | 84 | 182 | 226 | 378 |
Selling, general and administrative expenses | 51 | 58 | 112 | 118 |
Other expense, net (Note 5) | 15 | 17 | 31 | 36 |
Interest expense | 20 | 18 | 36 | 34 |
Non-operating (income) expense | (4) | 2 | (8) | 6 |
Income before taxes | 2 | 87 | 55 | 184 |
Tax expense (Note 6) | 11 | 21 | 12 | 45 |
Net (loss) income | $ (9) | $ 66 | $ 43 | $ 139 |
Earnings (loss) per common share | ||||
Basic | $ (0.12) | $ 0.88 | $ 0.57 | $ 1.87 |
Diluted | $ (0.12) | $ 0.86 | $ 0.57 | $ 1.83 |
Weighted average common shares outstanding | ||||
Basic | 75,595,991 | 74,591,478 | 75,316,827 | 74,414,450 |
Diluted | 75,845,511 | 76,900,544 | 75,837,459 | 76,129,821 |
CONSOLIDATED INTERIM STATEMEN_2
CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Statement Of Income And Comprehensive Income [Abstract] | ||||
Net (loss) income | $ (9) | $ 66 | $ 43 | $ 139 |
Foreign exchange translation adjustment | (50) | (34) | (11) | 25 |
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) | (2) | (1) | (2) | 2 |
Total other comprehensive (loss) income, net of tax | (52) | (35) | (13) | 28 |
Comprehensive (loss) income | $ (61) | $ 31 | $ 30 | $ 167 |
CONSOLIDATED INTERIM BALANCE SH
CONSOLIDATED INTERIM BALANCE SHEETS (Unaudited) - USD ($) $ in Millions | Jun. 30, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 139 | $ 187 |
Accounts, notes and other receivables – net (Note 7) | 554 | 707 |
Inventories – net (Note 9) | 234 | 220 |
Other current assets | 77 | 85 |
Total current assets | 1,004 | 1,199 |
Investments and long-term receivables | 34 | 36 |
Property, plant and equipment – net | 457 | 471 |
Goodwill | 193 | 193 |
Deferred income taxes | 272 | 268 |
Other assets (Note 10) | 106 | 108 |
Total assets | 2,066 | 2,275 |
Current liabilities: | ||
Accounts payable | 705 | 1,009 |
Borrowings under revolving credit facility | 135 | |
Current maturities of long-term debt | 4 | 4 |
Obligations payable to Honeywell, current (Note 17) | 37 | 69 |
Accrued liabilities (Note 11) | 284 | 310 |
Total current liabilities | 1,165 | 1,392 |
Long-term debt | 1,403 | 1,409 |
Deferred income taxes | 35 | 51 |
Obligations payable to Honeywell (Note 17) | 1,304 | 1,282 |
Other liabilities (Note 12) | 262 | 274 |
Total liabilities | 4,169 | 4,408 |
COMMITMENTS AND CONTINGENCIES (Note 17) | ||
EQUITY (DEFICIT) | ||
Additional paid-in capital | 24 | 19 |
Retained earnings | (2,244) | (2,282) |
Accumulated other comprehensive income (Note 15) | 117 | 130 |
Total stockholders' deficit | (2,103) | (2,133) |
Total liabilities and stockholders' deficit | $ 2,066 | $ 2,275 |
CONSOLIDATED INTERIM BALANCE _2
CONSOLIDATED INTERIM BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Jun. 30, 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 | 76,008,388 | 74,911,139 |
Common stock, shares, outstanding | 75,630,561 | 74,826,329 |
CONSOLIDATED INTERIM STATEMEN_3
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Cash flows from operating activities: | ||
Net income | $ 43 | $ 139 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Deferred income taxes | (5) | |
Depreciation | 37 | 35 |
Amortization of deferred issuance costs | 3 | 3 |
Foreign exchange loss | 3 | 11 |
Stock compensation expense | 6 | 9 |
Pension expense | 3 | |
Other | 4 | 6 |
Changes in assets and liabilities: | ||
Accounts, notes and other receivables | 114 | (42) |
Inventories | (23) | (26) |
Other assets | (11) | 14 |
Accounts payable | (231) | (14) |
Accrued liabilities | (16) | (48) |
Obligations payable to Honeywell | (8) | (61) |
Other liabilities | (11) | 8 |
Net cash (used for) provided by operating activities | (95) | 37 |
Cash flows from investing activities: | ||
Expenditures for property, plant and equipment | (63) | (51) |
Other | (1) | 18 |
Net cash used for investing activities | (64) | (33) |
Cash flows from financing activities: | ||
Proceeds from revolving credit facility | 1,023 | 300 |
Payments of revolving credit facility | (904) | (300) |
Payments of long-term debt | (2) | (21) |
Other | (3) | 4 |
Net cash provided by (used for) financing activities | 114 | (17) |
Effect of foreign exchange rate changes on cash and cash equivalents | (3) | (1) |
Net decrease in cash and cash equivalents | (48) | (14) |
Cash and cash equivalents at beginning of period | 187 | 196 |
Cash and cash equivalents at end of period | $ 139 | $ 182 |
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 | Invested Deficit | 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 (loss) | 73 | 73 | $ 0 | |||
Other comprehensive income (loss), 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, 2018 | (2,517) | 5 | (2,595) | 73 | ||
Beginning balance, Shares at Dec. 31, 2018 | 74 | |||||
Net income (loss) | 139 | |||||
Other comprehensive income (loss), net of tax | 28 | 28 | ||||
Ending balance at Jun. 30, 2019 | (2,341) | 14 | (2,456) | 101 | ||
Ending balance, Shares at Jun. 30, 2019 | 75 | |||||
Beginning balance at Mar. 31, 2019 | (2,376) | 10 | (2,522) | 136 | ||
Beginning balance, Shares at Mar. 31, 2019 | 75 | |||||
Net income (loss) | 66 | 66 | ||||
Other comprehensive income (loss), net of tax | (35) | (35) | ||||
Stock-based compensation | 4 | 4 | ||||
Ending balance at Jun. 30, 2019 | (2,341) | 14 | (2,456) | 101 | ||
Ending balance, Shares at Jun. 30, 2019 | 75 | |||||
Beginning balance at Dec. 31, 2019 | (2,133) | 19 | (2,282) | 130 | ||
Beginning balance, Shares at Dec. 31, 2019 | 75 | |||||
Net income (loss) | 52 | 52 | ||||
Other comprehensive income (loss), 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 | (5) | (5) | ||||
Ending balance at Mar. 31, 2020 | (2,046) | 20 | (2,235) | 169 | ||
Ending balance, Shares at Mar. 31, 2020 | 75 | |||||
Beginning balance at Dec. 31, 2019 | (2,133) | 19 | (2,282) | 130 | ||
Beginning balance, Shares at Dec. 31, 2019 | 75 | |||||
Net income (loss) | 43 | |||||
Other comprehensive income (loss), net of tax | (13) | (13) | ||||
Ending balance at Jun. 30, 2020 | (2,103) | 24 | (2,244) | 117 | ||
Ending balance, Shares at Jun. 30, 2020 | 75 | |||||
Beginning balance at Mar. 31, 2020 | (2,046) | 20 | (2,235) | 169 | ||
Beginning balance, Shares at Mar. 31, 2020 | 75 | |||||
Net income (loss) | (9) | (9) | ||||
Other comprehensive income (loss), net of tax | (52) | (52) | ||||
Stock-based compensation | 4 | 4 | ||||
Ending balance at Jun. 30, 2020 | $ (2,103) | $ 24 | $ (2,244) | $ 117 | ||
Ending balance, Shares at Jun. 30, 2020 | 75 |
Background and Basis of Present
Background and Basis of Presentation | 6 Months Ended |
Jun. 30, 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. 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 September 30, 2020, and in future fiscal quarters, to be materially negatively affected by the pandemic and its impact on the global automotive industry. O n June 12, 2020, the Company entered into an amendment (the “2020 Amendment”) to its Credit Agreement, dated as of September 27, 2018 (as amended, the “Credit Agreement”) by and among the Company, Garrett LX I S.à r.l., Garrett LX II S.à r.l., Garrett LX III S.à r.l., Garrett Borrowing LLC, and Garrett Motion Sàrl (f/k/a Honeywell Technologies Sàrl), the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent, consisting of: • a seven-year • a five-year • a five-year The primary purpose for entering into the 2020 Amendment was to obtain covenant relief with respect to the total leverage ratio and interest coverage ratios under the Credit Agreement as a result of the impact of the COVID-19 pandemic and the Company’s leveraged capital structure. The 2020 Amendment provides that the financial maintenance covenants set forth in the Credit Agreement will not apply until the earlier of the occurrence of a Covenant Relief Termination Event (as defined below) and the conclusion of the Relief Period (as defined below) and puts the following financial ratios and tests in place during the Relief Period: • Minimum Liquidity: As of the end of each fiscal month, commencing with the fiscal month ending June 30, 2020, the restricted group under the Credit Agreement must have minimum liquidity of not less than: (a) $125 million through, and including, the fiscal month ending March 31, 2021 and (b) $200 million, as of the end of each fiscal month ending thereafter for the remainder of the Relief Period. Liquidity includes available unrestricted cash and amounts available to be drawn under the Revolving Facility. • Net Secured Leverage Ratio: As of the end of each fiscal quarter, commencing with fiscal quarter ending June 30, 2020, the ratio of (a)(i) consolidated secured debt minus (ii) the lesser of available unrestricted cash on such day and $100 million to (b) consolidated EBITDA (as defined in the Credit Agreement) over the last twelve months, must not exceed the ratio set out in the table below: Fiscal Quarter Ending Consolidated Net Secured June 30, 2020 5.75 to 1.00 September 30, 2020 9.25 to 1.00 December 31, 2020 10.75 to 1.00 March 31, 2021 11.75 to 1.00 June 30, 2021 6.50 to 1.00 September 30, 2021 4.50 to 1.00 December 31, 2021 4.25 to 1.00 March 31, 2022 3.75 to 1.00 June 30, 2022 3.50 to 1.00 • Maximum Cash: Commencing with the fiscal month ending June 30, 2020, the Company must not permit the average amount of available unrestricted cash of the restricted group under the Credit Agreement based on the balance for each of the last five business days of the fiscal month to exceed $ 165 million. Upon the occurrence of a Covenant Relief Termination Event or the conclusion of the Relief Period, the total leverage ratio and interest coverage ratio covenants included in the Credit Agreement will again apply. The minimum liquidity, net secured leverage ratio and maximum cash covenants will no longer apply following the conclusion of the Relief Period. The “Relief Period” will conclude on the earlier of (a) June 30, 2022 and (b) the date on which the administrative agent receives a certificate from a financial officer of the Company certifying as of such date that (i) the Company is in compliance with the total leverage ratio and interest coverage ratio covenants included in the Credit Agreement as they would apply without giving effect to the Relief Period for the most recently ended period of four consecutive fiscal quarters ended on or prior to such date and (ii) if such date is on or prior to the date of delivery of the Company’s financial statements with respect to the period of four consecutive quarters ending June 30, 2022, based on a financial model provided to the administrative agent, the Company expects in good faith that it will be in compliance with such total leverage ratio and interest coverage ratio covenants as they would apply without giving effect to the Relief Period from the end of the quarter in which such certificate is given until and including the period of four consecutive quarters ending June 30, 2022. A “Covenant Relief Termination Event” will occur if any member of the restricted group under the Credit Agreement (including Garrett ASASCO Inc. (“Garrett ASASCO”), a wholly owned indirect subsidiary of the Company) makes any payment under the Subordinated Indemnity Agreement but excluding the payment in respect of the second fiscal quarter of 2020. As of the date of this Quarterly Report on Form 10-Q, based on the Company’s current forecasts, we do not anticipate that a Covenant Relief Termination Event will occur prior to 2022. Each of the Revolving Facility and Term A Facility continues to mature on September 27, 2023, and the Term B Facility continues to mature on September 27, 2025. Pursuant to the 2020 Amendment, (i) the margin applicable to loans under the Term B Facility will increase by 75 basis points through the maturity date and (ii) the margin applicable to loans under the Revolving Facility and Term A Facility will increase by 25 basis points until the Company delivers consolidated financial statements as of and for its first fiscal quarter ending on or after the last day of the Relief Period. In addition, pursuant to the 2020 Amendment, if (a) our corporate family rating by Moody’s is B2 or lower or there is no corporate family rating of the Company by Moody’s and, at the same time, (b) our corporate rating from S&P is B+ or lower or there is no corporate rating of the Company by S&P, then upon the first occurrence of this ratings event the margin applicable to loans under our Senior Credit Facilities will increase by 25 basis points through the maturity date. The 2020 Amendment also tightened certain of the baskets applicable to our ability to incur additional indebtedness, create liens, and make investments and restricted payments. These increased restrictions will no longer apply following the conclusion of the Relief Period. The 2020 Amendment also modifies the conditions to drawdown under the Revolving Facility and makes certain other changes to the Senior Credit Facilities. The 2020 Amendment qualified as a debt modification that did not result in an extinguishment or have a material impact on our Consolidated Interim Financial Statements. 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 Subordinated Indemnity Agreement with Honeywell entered into on September 12, 2018, under which Garrett ASASCO is 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 Subordinated Indemnity 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. We are currently engaged in litigation against Honeywell in connection with the Subordinated Indemnity Agreement. For additional information, see Note 17, Commitments and Contingencies. 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 “201 9 Form 10-K”). The results of operations for the three and six months ended June 30, 20 20 and cash flows for the six months ended June 30, 20 20 should not necessarily be taken as indicative of the entire year. 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 June 30, 2020. Our actual closing dates for the three months ended June 30, 2020 and 2019 were June 27, 2020 and June 29, 2019, respectively. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 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 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 | 6 Months Ended |
Jun. 30, 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 June 30, 2020 OEM Aftermarket Other Total United States $ 33 $ 32 $ 1 $ 66 Europe 160 22 6 188 Asia 202 11 5 218 Other International — 5 — 5 $ 395 $ 70 $ 12 $ 477 Six months ended June 30, 2020 OEM Aftermarket Other Total United States $ 125 $ 72 $ 1 $ 198 Europe 554 52 15 621 Asia 361 19 11 391 Other International 3 9 — 12 $ 1,043 $ 152 $ 27 $ 1,222 Three months ended June 30, 2019 OEM Aftermarket Other Total United States $ 77 $ 49 $ 2 $ 128 Europe 416 31 8 455 Asia 190 13 7 210 Other International 4 5 — 9 $ 687 $ 98 $ 17 $ 802 Six months ended June 30, 2019 OEM Aftermarket Other Total United States $ 160 $ 94 $ 3 $ 257 Europe 845 68 20 933 Asia 389 26 14 429 Other International 8 10 — 18 $ 1,402 $ 198 $ 37 $ 1,637 Contract Balances The following table summarizes our contract assets and liabilities balances: 2020 Contract assets—January 1 $ 6 Contract assets—June 30 32 Change in contract assets—Increase/(Decrease) 26 Contract liabilities—January 1 $ (3 ) Contract liabilities—June 30 (3 ) Change in contract liabilities—(Increase)/Decrease $ — |
Research, Development & Enginee
Research, Development & Engineering | 6 Months Ended |
Jun. 30, 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 June 30, Six Months Ended June 30, 2020 2019 2020 2019 Research and development costs $ 25 $ 29 $ 52 $ 61 Engineering-related expenses 3 1 7 4 $ 28 $ 30 $ 59 $ 65 |
Other Expense, Net
Other Expense, Net | 6 Months Ended |
Jun. 30, 2020 | |
Other Income And Expenses [Abstract] | |
Other Expense, Net | Note 5. Other Expense, Net Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Indemnification related — post Spin-Off $ 12 $ 17 $ 27 $ 36 Indemnification related — litigation 2 — 3 — Factoring and notes receivables discount fees 1 — 1 — $ 15 $ 17 $ 31 $ 36 |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 6. Income Taxes For the Three Months Ended June 30, For the Six Months Ended June 30, 2020 2019 2020 2019 (Dollars in millions) Tax expense $ 11 $ 21 $ 12 $ 45 Effective tax rate 550 % 24.1 % 21.8 % 24.5 % For the period ended June 30, 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 earnings 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 June 30, 2020 . The effective tax rate for the three months ended June 30, 2020 is significantly higher than the effective tax rate for the three months ended June 30, 2019 primarily because of substantially lower earnings due to the adverse economic impacts of COVID-19 and, to a lesser extent, an increase in tax reserves. The effective tax rate for the six months ended June 30, 2020 is lower than the effective tax rate for the six months ended June 30, 2019 because of a decrease in withholding taxes related to undistributed earnings, partially offset by the impacts of lower earnings. The effective tax rate for the three months ended June 30, 2020 was higher than the U.S. federal statutory rate of 21% primarily due to lower earnings, the impacts of non-deductible asbestos related expenses which have no correlation to earnings and tax reserves. The effective tax rate for the three months ended June 30, 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 | 6 Months Ended |
Jun. 30, 2020 | |
Receivables [Abstract] | |
Accounts, Notes and Other Receivables—Net | Note 7. Accounts, Notes and Other Receivables—Net June 30, 2020 December 31, 2019 Trade receivables $ 438 $ 574 Notes receivables 55 68 Other receivables 70 69 $ 563 $ 711 Less—Allowance for doubtful accounts (9 ) (4 ) $ 554 $ 707 Trade Receivables include $32 million and $4 million of unbilled balances as of June 30, 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 $32 million and $6 million of contract assets as of June 30, 2020 and December 31, 2019, respectively. See Note 3, Revenue Recognition and Contracts with Customers. |
Factoring and Notes Receivable
Factoring and Notes Receivable | 6 Months Ended |
Jun. 30, 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 receivable. During the periods ended June 30, 2020 and December 31, 2019, the Company sold $66 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 June 30, 2020 and December 31, 2019, the Company sold $47 and $105 million of bank notes, respectively, without recourse, and accounted for these as true sales. |
Inventories-Net
Inventories-Net | 6 Months Ended |
Jun. 30, 2020 | |
Inventory Disclosure [Abstract] | |
Inventories-Net | Note 9. Inventories—Net June 30, 2020 December 31, 2019 Raw materials $ 158 $ 142 Work in process 22 18 Finished products 83 85 $ 263 $ 245 Less—Reserves (29 ) (25 ) $ 234 $ 220 |
Other Assets
Other Assets | 6 Months Ended |
Jun. 30, 2020 | |
Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract] | |
Other Assets | Note 10 . Other Assets June 30, December 31, 2020 2019 Advanced discounts to customers, non-current $ 61 $ 62 Operating right-of-use assets (Note 13) 34 35 Undesignated cross-currency swap at fair value 1 — Other 10 11 $ 106 $ 108 |
Accrued Liabilities
Accrued Liabilities | 6 Months Ended |
Jun. 30, 2020 | |
Accrued Liabilities Current [Abstract] | |
Accrued Liabilities | Note 11. Accrued Liabilities June 30, 2020 December 31, 2019 Customer pricing reserve $ 88 $ 90 Compensation, benefit and other employee related 62 64 Repositioning 6 4 Product warranties and performance guarantees 25 29 Taxes 23 33 Advanced discounts from suppliers, current 19 19 Customer advances and deferred income (a) 18 12 Accrued interest 5 5 Short-term lease liability (Note 13) 8 8 Other (primarily operating expenses) 30 46 $ 284 $ 310 (a) Customer advances and deferred income include $2 million and $3 million The Company accrued repositioning costs related to projects to optimize its product costs and right-size 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 3 — 3 Usage—cash (6 ) (2 ) (8 ) Adjustments and reclassifications (6 ) 1 (5 ) Foreign currency translation — — — Balance at June 30, 2019 $ 4 $ 1 $ 5 Severance Costs Exit Costs Total Balance at December 31, 2019 $ 3 $ 1 $ 4 Charges 6 — 6 Usage—cash (4 ) — (4 ) Adjustments and reclassifications — — — Foreign currency translation — — — Balance at June 30, 2020 $ 5 $ 1 $ 6 |
Other Liabilities
Other Liabilities | 6 Months Ended |
Jun. 30, 2020 | |
Other Liabilities Disclosure [Abstract] | |
Other Liabilities | Note 1 2 . Other Liabilities June 30, December 31, 2020 2019 Pension and other employee related $ 93 $ 94 Advanced discounts from suppliers 37 46 Uncertain tax positions 80 79 Long-term lease liability (Note 13) 27 28 Other 25 27 $ 262 $ 274 |
Leases
Leases | 6 Months Ended |
Jun. 30, 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 June 30, Six Months Ended June 30, 2020 2019 2020 2019 Operating lease cost $ 3 $ 3 $ 6 $ 6 Supplemental cash flow information related to operating leases is as follows: Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 3 $ 3 $ 5 $ 6 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 5 $ 3 $ 5 $ 8 Supplemental balance sheet information related to operating leases is as follows: June 30, 2020 December 31, 2019 Other assets $ 34 $ 35 Accrued liabilities 8 8 Other liabilities 27 28 June 30, 2020 December 31, 2019 Weighted-average lease term 5.83 6.30 Weighted-average discount rate 6.23 6.36 Maturities of operating lease liabilities were as follows: June 30, 2020 2020 $ 5 2021 8 2022 7 2023 6 2024 5 Thereafter 11 Total lease payments 42 Less imputed interest (7 ) $ 35 |
Financial Instruments and Fair
Financial Instruments and Fair Value Measures | 6 Months Ended |
Jun. 30, 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 June 30, 2020 and December 31, 2019, we had contracts with aggregate gross notional amounts of $1,399 million and 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 June 30, 2020 and December 31, 2019: Fair Value Notional Amounts Assets Liabilities June 30, 2020 December 31, 2019 June 30, 2020 December 31, 2019 June 30, 2020 December 31, 2019 Designated forward currency exchange contracts $ 286 $ 392 $ 4 $ 5 (a) $ 1 $ 1 (b) Undesignated instruments: Undesignated cross-currency swap 418 420 1 — (c) — 1 (d) Undesignated interest rate swap 471 561 — — 2 1 (d) Undesignated forward currency exchange contracts 224 447 2 2 (a) — 3 (b) $ 1,399 $ 1,820 $ 7 $ 7 $ 3 $ 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: June 30, 2020 Carrying Value Fair Value Long-term debt and related current maturities $ 1,407 $ 1,309 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) | 6 Months Ended |
Jun. 30, 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 25 2 — 27 Amounts reclassified from accumulated other comprehensive income (loss) — — 1 1 Net current period other comprehensive income (loss) 25 2 1 28 Balance at June 30, 2019 $ 111 $ 2 $ (12 ) $ 101 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 (11 ) (2 ) — (13 ) Amounts reclassified from accumulated other comprehensive income (loss) — — — — Net current period other comprehensive income (loss) (11 ) (2 ) (13 ) Balance at June 30, 2020 $ 142 $ 2 $ (27 ) $ 117 |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Jun. 30, 2020 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Note 16. Earnings Per Share The details of the earnings per share (“EPS”) calculations for the three and six months ended June 30, 2020 and 2019 are as follows: Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Basic Net (loss) Income $ (9 ) $ 66 $ 43 $ 139 Weighted average common shares outstanding 75,595,991 74,591,478 75,316,827 74,414,450 EPS – Basic $ (0.12 ) $ 0.88 $ 0.57 $ 1.87 Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Diluted Net (loss) Income $ (9 ) $ 66 $ 43 $ 139 Weighted average common shares outstanding – Basic 75,595,991 74,591,478 75,316,827 74,414,450 Dilutive effect of unvested RSUs and other contingently issuable shares 249,520 2,309,066 520,632 1,715,371 Weighted average common shares outstanding – Diluted 75,845,511 76,900,544 75,837,459 76,129,821 EPS – Diluted $ (0.12 ) $ 0.86 $ 0.57 $ 1.83 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 and six months ended June 30, 2020, the weighted number of stock options excluded from the computations was 437,333 and 439,649, respectively. These stock options were outstanding for the three and six months ended June 30, 2020, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 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, Garrett ASASCO, a wholly owned indirect subsidiary of the Company, entered into the Subordinated Indemnity Agreement with Honeywell on September 12, 2018. As of the Spin-Off date of October 1, 2018, Garrett ASASCO is 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 Subordinated Indemnity Agreement, Garrett ASASCO is 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 Garrett ASASCO is required to make to Honeywell pursuant to the terms of the Subordinated Indemnity Agreement will not be deductible for U.S. federal income tax purposes. The Subordinated Indemnity 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. As of the date of this Quarterly Report on Form 10-Q, we do not anticipate that ASASCO will make any additional payments under the Subordinated Indemnity Agreement, other than the Q2 Payment, prior to 2022, in accordance with the payment deferral mechanism contained in the Subordinated Indemnity Agreement, which is described in additional detail in our 2019 Form 10-K. In accordance with the Subordinated Indemnity Agreement, we anticipate that the deferred payments will be partially settled on April 30, 2023, up to the available capacity to make such payments under the Credit Agreement , assuming we remain in compliance with the financial maintenance covenants in the Credit Agreement at that time. We expect to pay the remaining balance of deferred amounts from 2023 onwards. These amounts do not reflect any increases to the aggregate amount owed to Honeywell. In conjunction with the 2020 Amendment, on June 12, 2020, Garrett ASASCO entered into an amendment (the “Subordinated Indemnity Amendment”) to the Subordinated Indemnity Agreement. The Subordinated Indemnity Amendment: • Amends the negative covenants contained in Exhibit L of the Subordinated Indemnity Agreement to reflect amendments made by the 2020 Amendment to the corresponding negative covenants in the Credit Agreement; and • Modifies the Subordinated Indemnity Agreement such that we may not agree to an amendment or waiver of (i) the minimum liquidity, net secured leverage ratio and maximum cash covenants under the Credit Agreement as amended by the 2020 Amendment that would make those covenants more restrictive to us and (ii) during the Relief Period, the additional drawdown condition for revolving borrowings, in each case, without the prior written consent of Honeywell. On December 2, 2019, the Company and its subsidiary Garrett ASASCO, 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, filed a Complaint in the NY Supreme Court in connection with the Action. The lawsuit arises from the Subordinated Indemnity Agreement. The Company is seeking declaratory relief; compensatory damages in an amount to be determined at trial; rescission of the Subordinated Indemnity 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 Subordinated Indemnity Agreement is not enforceable, in whole or in part. On March 5, 2020, Honeywell filed a “Notice of Motion to Dismiss Garrett’s Complaint.” On June 18, 2020, by agreement of the parties, Honeywell withdrew its motion to dismiss and Garrett agreed to file an amended complaint on September 15, 2020. 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, Garrett ASASCO 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 Garrett ASASCO’s total aggregate payments to Honeywell with respect to the mandatory transition tax will be $240 million with $193 million in payments remaining as of June 30, 2020. Under the terms of the Tax Matters Agreement, Garrett ASASCO is 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, Garrett ASASCO paid the first annual installment in October 2018, with subsequent annual installments to be paid in April of each year. The annual installment due on April 1, 2020 has been deferred to December 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. On July 17, 2020, we provided notice to Honeywell asserting that Honeywell has caused material breaches of the Tax Matters Agreement and that the Tax Matters Agreement is unenforceable. The following table summarizes our Obligation payable to Honeywell related to these agreements: Six Months Ended June 30, 2020 Asbestos and environmental Tax Matters Total Beginning of year $ 1,090 $ 261 $ 1,351 Accrual for update to estimated liability — — — Legal fees expensed 27 — 27 Payments to Honeywell (35 ) — (35 ) Currency translation adjustment (2 ) — (2 ) End of period $ 1,080 $ 261 $ 1,341 Current — 37 37 Non-current 1,080 224 1,304 Total $ 1,080 $ 261 $ 1,341 Asbestos Matters The accounting for the majority of our asbestos-related liability payments and accounts payable reflect the terms of the Subordinated Indemnity Agreement with Honeywell entered into by Garrett ASASCO on September 12, 2018, under which Garrett ASASCO is 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 Subordinated Indemnity 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: Six Months Ended June 30, Year Ended December 31, Claims Activity 2020 2019 Claims Unresolved at the beginning of the period 6,480 6,209 Claims Filed 1,013 2,659 Claims Resolved (1,195 ) (2,388 ) Claims Unresolved at the end of the period 6,298 6,480 Six Months Ended June 30, Years Ended December 31, Disease Distribution of Unresolved Claims 2020 2019 Mesothelioma and Other Cancer Claims 3,278 3,399 Nonmalignant Claims 3,020 3,081 Total Claims 6,298 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 | 6 Months Ended |
Jun. 30, 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, of which $3 million has been contributed through the first six months of the year. Net periodic benefit costs for our significant defined benefit plans include the following components: Three Months Ended June 30, Six Months Ended June 30, U.S. Plans Non-U.S. Plan, U.S. Plans Non-U.S. Plan, 2020 2019 2020 2019 2020 2019 2020 2019 Service cost $ — $ — $ 2 $ 1 $ 1 $ — $ 5 $ 2 Interest cost 1 — — — 3 1 1 1 Expected return on plan assets (3 ) — (1 ) — (5 ) (1 ) (3 ) (1 ) Amortization of prior service (credit) — — — — — — — — $ (2 ) $ — $ 1 $ 1 $ (1 ) $ — $ 3 $ 2 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 | 6 Months Ended |
Jun. 30, 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 and Garrett (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 was due. The China Purchase Agreement was amended to extend the date of the transfer of the equity interests in Garrett China from September 20, 2019 to June 30, 2020. Prior to the transfer of the equity interests, Garrett China was considered a variable interest entity for which Garrett is the primary beneficiary because the China Purchase Agreement provided Garrett control to direct the management and operation of Garrett China as well as all economic benefits and losses. The intent of the agreement was 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 were recognized at their carrying amounts. On June 3, 2020 Honeywell transferred 100% of the equity interests of Garrett China in accordance with the China Purchase Agreement. Following the transfer, Garret continues to consolidate Garrett China. However, Garrett China is no longer considered to be a variable interest entity as Garrett now owns 100% of the equity interests. There was no change in the basis of the net assets of Garrett China as the transaction did not result in a change of control under U.S. GAAP. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 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. |
Background and Basis of Prese_2
Background and Basis of Presentation (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Schedule of Consolidated Net Secured Leverage Ratio | • Net Secured Leverage Ratio: As of the end of each fiscal quarter, commencing with fiscal quarter ending June 30, 2020, the ratio of (a)(i) consolidated secured debt minus (ii) the lesser of available unrestricted cash on such day and $100 million to (b) consolidated EBITDA (as defined in the Credit Agreement) over the last twelve months, must not exceed the ratio set out in the table below: Fiscal Quarter Ending Consolidated Net Secured June 30, 2020 5.75 to 1.00 September 30, 2020 9.25 to 1.00 December 31, 2020 10.75 to 1.00 March 31, 2021 11.75 to 1.00 June 30, 2021 6.50 to 1.00 September 30, 2021 4.50 to 1.00 December 31, 2021 4.25 to 1.00 March 31, 2022 3.75 to 1.00 June 30, 2022 3.50 to 1.00 |
Revenue Recognition and Contr_2
Revenue Recognition and Contracts with Customers (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Revenue From Contract With Customer [Abstract] | |
Summary of Net Sales by Region and Channel | Net sales by region (determined based on country of shipment) and channel are as follows: Three months ended June 30, 2020 OEM Aftermarket Other Total United States $ 33 $ 32 $ 1 $ 66 Europe 160 22 6 188 Asia 202 11 5 218 Other International — 5 — 5 $ 395 $ 70 $ 12 $ 477 Six months ended June 30, 2020 OEM Aftermarket Other Total United States $ 125 $ 72 $ 1 $ 198 Europe 554 52 15 621 Asia 361 19 11 391 Other International 3 9 — 12 $ 1,043 $ 152 $ 27 $ 1,222 Three months ended June 30, 2019 OEM Aftermarket Other Total United States $ 77 $ 49 $ 2 $ 128 Europe 416 31 8 455 Asia 190 13 7 210 Other International 4 5 — 9 $ 687 $ 98 $ 17 $ 802 Six months ended June 30, 2019 OEM Aftermarket Other Total United States $ 160 $ 94 $ 3 $ 257 Europe 845 68 20 933 Asia 389 26 14 429 Other International 8 10 — 18 $ 1,402 $ 198 $ 37 $ 1,637 |
Summary of Contract Assets and Liabilities | The following table summarizes our contract assets and liabilities balances: 2020 Contract assets—January 1 $ 6 Contract assets—June 30 32 Change in contract assets—Increase/(Decrease) 26 Contract liabilities—January 1 $ (3 ) Contract liabilities—June 30 (3 ) Change in contract liabilities—(Increase)/Decrease $ — |
Research, Development & Engin_2
Research, Development & Engineering (Tables) | 6 Months Ended |
Jun. 30, 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 June 30, Six Months Ended June 30, 2020 2019 2020 2019 Research and development costs $ 25 $ 29 $ 52 $ 61 Engineering-related expenses 3 1 7 4 $ 28 $ 30 $ 59 $ 65 |
Other Expenses, Net (Tables)
Other Expenses, Net (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Other Income And Expenses [Abstract] | |
Schedule of Other Operating Cost and Expense | Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Indemnification related — post Spin-Off $ 12 $ 17 $ 27 $ 36 Indemnification related — litigation 2 — 3 — Factoring and notes receivables discount fees 1 — 1 — $ 15 $ 17 $ 31 $ 36 |
Income Taxes (Tables)
Income Taxes (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Tax Expense (Benefit) and Effective Tax Rate | For the Three Months Ended June 30, For the Six Months Ended June 30, 2020 2019 2020 2019 (Dollars in millions) Tax expense $ 11 $ 21 $ 12 $ 45 Effective tax rate 550 % 24.1 % 21.8 % 24.5 % |
Accounts, Notes and Other Rec_2
Accounts, Notes and Other Receivables—Net (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Receivables [Abstract] | |
Schedule of Accounts, Notes and Other Receivables Net | June 30, 2020 December 31, 2019 Trade receivables $ 438 $ 574 Notes receivables 55 68 Other receivables 70 69 $ 563 $ 711 Less—Allowance for doubtful accounts (9 ) (4 ) $ 554 $ 707 |
Inventories-Net (Tables)
Inventories-Net (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Inventory Disclosure [Abstract] | |
Summary of Inventories | June 30, 2020 December 31, 2019 Raw materials $ 158 $ 142 Work in process 22 18 Finished products 83 85 $ 263 $ 245 Less—Reserves (29 ) (25 ) $ 234 $ 220 |
Other Assets (Tables)
Other Assets (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract] | |
Schedule of Other Assets | June 30, December 31, 2020 2019 Advanced discounts to customers, non-current $ 61 $ 62 Operating right-of-use assets (Note 13) 34 35 Undesignated cross-currency swap at fair value 1 — Other 10 11 $ 106 $ 108 |
Accrued Liabilities (Tables)
Accrued Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Accrued Liabilities Current [Abstract] | |
Summary of Accrued Liabilities | June 30, 2020 December 31, 2019 Customer pricing reserve $ 88 $ 90 Compensation, benefit and other employee related 62 64 Repositioning 6 4 Product warranties and performance guarantees 25 29 Taxes 23 33 Advanced discounts from suppliers, current 19 19 Customer advances and deferred income (a) 18 12 Accrued interest 5 5 Short-term lease liability (Note 13) 8 8 Other (primarily operating expenses) 30 46 $ 284 $ 310 (a) Customer advances and deferred income include $2 million and $3 million |
Summary of Expenses Related to the Repositioning Accruals | The Company accrued repositioning costs related to projects to optimize its product costs and right-size 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 3 — 3 Usage—cash (6 ) (2 ) (8 ) Adjustments and reclassifications (6 ) 1 (5 ) Foreign currency translation — — — Balance at June 30, 2019 $ 4 $ 1 $ 5 Severance Costs Exit Costs Total Balance at December 31, 2019 $ 3 $ 1 $ 4 Charges 6 — 6 Usage—cash (4 ) — (4 ) Adjustments and reclassifications — — — Foreign currency translation — — — Balance at June 30, 2020 $ 5 $ 1 $ 6 |
Other Liabilities (Tables)
Other Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of Other Liabilities | June 30, December 31, 2020 2019 Pension and other employee related $ 93 $ 94 Advanced discounts from suppliers 37 46 Uncertain tax positions 80 79 Long-term lease liability (Note 13) 27 28 Other 25 27 $ 262 $ 274 |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Leases [Abstract] | |
Summary of Components of Lease Expense | The components of lease expense are as follows: Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Operating lease cost $ 3 $ 3 $ 6 $ 6 |
Summary of Supplemental Cash Flow Information Related to Operating Leases | Supplemental cash flow information related to operating leases is as follows: Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 3 $ 3 $ 5 $ 6 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 5 $ 3 $ 5 $ 8 |
Summary of Supplemental Balance Sheet Information Related to Operating Leases | Supplemental balance sheet information related to operating leases is as follows: June 30, 2020 December 31, 2019 Other assets $ 34 $ 35 Accrued liabilities 8 8 Other liabilities 27 28 June 30, 2020 December 31, 2019 Weighted-average lease term 5.83 6.30 Weighted-average discount rate 6.23 6.36 |
Schedule of Maturities of Operating Lease Liabilities | Maturities of operating lease liabilities were as follows: June 30, 2020 2020 $ 5 2021 8 2022 7 2023 6 2024 5 Thereafter 11 Total lease payments 42 Less imputed interest (7 ) $ 35 |
Financial Instruments and Fai_2
Financial Instruments and Fair Value Measures (Tables) | 6 Months Ended |
Jun. 30, 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 June 30, 2020 and December 31, 2019: Fair Value Notional Amounts Assets Liabilities June 30, 2020 December 31, 2019 June 30, 2020 December 31, 2019 June 30, 2020 December 31, 2019 Designated forward currency exchange contracts $ 286 $ 392 $ 4 $ 5 (a) $ 1 $ 1 (b) Undesignated instruments: Undesignated cross-currency swap 418 420 1 — (c) — 1 (d) Undesignated interest rate swap 471 561 — — 2 1 (d) Undesignated forward currency exchange contracts 224 447 2 2 (a) — 3 (b) $ 1,399 $ 1,820 $ 7 $ 7 $ 3 $ 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: June 30, 2020 Carrying Value Fair Value Long-term debt and related current maturities $ 1,407 $ 1,309 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income (Loss) (Tables) | 6 Months Ended |
Jun. 30, 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 25 2 — 27 Amounts reclassified from accumulated other comprehensive income (loss) — — 1 1 Net current period other comprehensive income (loss) 25 2 1 28 Balance at June 30, 2019 $ 111 $ 2 $ (12 ) $ 101 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 (11 ) (2 ) — (13 ) Amounts reclassified from accumulated other comprehensive income (loss) — — — — Net current period other comprehensive income (loss) (11 ) (2 ) (13 ) Balance at June 30, 2020 $ 142 $ 2 $ (27 ) $ 117 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of Basic and Diluted Earnings Per Share | The details of the earnings per share (“EPS”) calculations for the three and six months ended June 30, 2020 and 2019 are as follows: Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Basic Net (loss) Income $ (9 ) $ 66 $ 43 $ 139 Weighted average common shares outstanding 75,595,991 74,591,478 75,316,827 74,414,450 EPS – Basic $ (0.12 ) $ 0.88 $ 0.57 $ 1.87 Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Diluted Net (loss) Income $ (9 ) $ 66 $ 43 $ 139 Weighted average common shares outstanding – Basic 75,595,991 74,591,478 75,316,827 74,414,450 Dilutive effect of unvested RSUs and other contingently issuable shares 249,520 2,309,066 520,632 1,715,371 Weighted average common shares outstanding – Diluted 75,845,511 76,900,544 75,837,459 76,129,821 EPS – Diluted $ (0.12 ) $ 0.86 $ 0.57 $ 1.83 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 6 Months Ended |
Jun. 30, 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: Six Months Ended June 30, 2020 Asbestos and environmental Tax Matters Total Beginning of year $ 1,090 $ 261 $ 1,351 Accrual for update to estimated liability — — — Legal fees expensed 27 — 27 Payments to Honeywell (35 ) — (35 ) Currency translation adjustment (2 ) — (2 ) End of period $ 1,080 $ 261 $ 1,341 Current — 37 37 Non-current 1,080 224 1,304 Total $ 1,080 $ 261 $ 1,341 |
Summary of Asbestos Claim Activity | The following tables present information regarding Bendix related asbestos claims activity: Six Months Ended June 30, Year Ended December 31, Claims Activity 2020 2019 Claims Unresolved at the beginning of the period 6,480 6,209 Claims Filed 1,013 2,659 Claims Resolved (1,195 ) (2,388 ) Claims Unresolved at the end of the period 6,298 6,480 Six Months Ended June 30, Years Ended December 31, Disease Distribution of Unresolved Claims 2020 2019 Mesothelioma and Other Cancer Claims 3,278 3,399 Nonmalignant Claims 3,020 3,081 Total Claims 6,298 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) | 6 Months Ended |
Jun. 30, 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 June 30, Six Months Ended June 30, U.S. Plans Non-U.S. Plan, U.S. Plans Non-U.S. Plan, 2020 2019 2020 2019 2020 2019 2020 2019 Service cost $ — $ — $ 2 $ 1 $ 1 $ — $ 5 $ 2 Interest cost 1 — — — 3 1 1 1 Expected return on plan assets (3 ) — (1 ) — (5 ) (1 ) (3 ) (1 ) Amortization of prior service (credit) — — — — — — — — $ (2 ) $ — $ 1 $ 1 $ (1 ) $ — $ 3 $ 2 |
Background and Basis of Prese_3
Background and Basis of Presentation - Additional Information (Details) | Jun. 12, 2020 | Sep. 27, 2018USD ($) | Sep. 12, 2018USD ($) | Jun. 30, 2020USD ($) | Sep. 27, 2018EUR (€) |
Subordinated Indemnity 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 Subordinated Indemnity 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 | Subordinated Indemnity Agreement | |||||
Background And Basis Of Presentation [Line Items] | |||||
Percentage of net insurance receipts | 90.00% | ||||
Honeywell International Inc | Subordinated Indemnity 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 | Subordinated Indemnity Agreement | |||||
Background And Basis Of Presentation [Line Items] | |||||
Percentage of asbestos and environmental liabilities liable to pay | 90.00% | ||||
Credit Agreement | |||||
Background And Basis Of Presentation [Line Items] | |||||
Line of credit, minimum available of unrestricted cash | $ 100,000,000 | ||||
Line of credit, maximum available of unrestricted cash | $ 165,000,000 | ||||
Credit Agreement | Term B Facility | |||||
Background And Basis Of Presentation [Line Items] | |||||
Line of credit, term | 7 years | ||||
Line of credit, maximum borrowing capacity | $ 425,000,000 | € 375,000,000 | |||
Line of credit, mature date | Sep. 27, 2025 | ||||
Credit Agreement | Term A Facility | |||||
Background And Basis Of Presentation [Line Items] | |||||
Line of credit, term | 5 years | ||||
Line of credit, maximum borrowing capacity | € | 330,000,000 | ||||
Line of credit, mature date | Sep. 27, 2023 | ||||
Credit Agreement | Revolving Facility | |||||
Background And Basis Of Presentation [Line Items] | |||||
Line of credit, term | 5 years | ||||
Line of credit, maximum borrowing capacity | € | € 430,000,000 | ||||
Minimum liquidity | $ 125,000,000 | ||||
Minimum liquidity thereafter | $ 200,000,000 | ||||
Line of credit, mature date | Sep. 27, 2023 | ||||
2020 Amendment Credit Agreement | Term B Facility | |||||
Background And Basis Of Presentation [Line Items] | |||||
Increase in basis points | 0.75% | ||||
2020 Amendment Credit Agreement | Term A Facility | |||||
Background And Basis Of Presentation [Line Items] | |||||
Increase in basis points | 0.25% | ||||
2020 Amendment Credit Agreement | Revolving Facility | |||||
Background And Basis Of Presentation [Line Items] | |||||
Increase in basis points | 0.25% | ||||
2020 Amendment Credit Agreement | Senior Credit Facilities | |||||
Background And Basis Of Presentation [Line Items] | |||||
Increase in basis points | 0.25% |
Background and Basis of Prese_4
Background and Basis of Presentation - Schedule of Consolidated Net Secured Leverage Ratio (Details) - Credit Agreement | 3 Months Ended | ||||||||
Jun. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | |
Background And Basis Of Presentation [Line Items] | |||||||||
Consolidated Net Secured Leverage Ratio | 5.75 | ||||||||
Scenario Forecast | |||||||||
Background And Basis Of Presentation [Line Items] | |||||||||
Consolidated Net Secured Leverage Ratio | 3.50 | 3.75 | 4.25 | 4.50 | 6.50 | 11.75 | 10.75 | 9.25 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Millions | Jan. 01, 2020 | Mar. 31, 2020 |
Significant Accounting Policies [Line Items] | ||
Cumulative-effect adjustment to opening retained earnings | $ (5) | |
ASU 2016-13 | ||
Significant Accounting Policies [Line Items] | ||
Cumulative-effect adjustment to opening retained earnings | $ 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 | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Disaggregation Of Revenue [Line Items] | ||||
Net sales | $ 477 | $ 802 | $ 1,222 | $ 1,637 |
United States | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net sales | 66 | 128 | 198 | 257 |
Europe | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net sales | 188 | 455 | 621 | 933 |
Asia | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net sales | 218 | 210 | 391 | 429 |
Other International | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net sales | 5 | 9 | 12 | 18 |
OEM | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net sales | 395 | 687 | 1,043 | 1,402 |
OEM | United States | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net sales | 33 | 77 | 125 | 160 |
OEM | Europe | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net sales | 160 | 416 | 554 | 845 |
OEM | Asia | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net sales | 202 | 190 | 361 | 389 |
OEM | Other International | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net sales | 4 | 3 | 8 | |
Aftermarket | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net sales | 70 | 98 | 152 | 198 |
Aftermarket | United States | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net sales | 32 | 49 | 72 | 94 |
Aftermarket | Europe | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net sales | 22 | 31 | 52 | 68 |
Aftermarket | Asia | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net sales | 11 | 13 | 19 | 26 |
Aftermarket | Other International | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net sales | 5 | 5 | 9 | 10 |
Other | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net sales | 12 | 17 | 27 | 37 |
Other | United States | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net sales | 1 | 2 | 1 | 3 |
Other | Europe | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net sales | 6 | 8 | 15 | 20 |
Other | Asia | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net sales | $ 5 | $ 7 | $ 11 | $ 14 |
Revenue Recognition and Contr_4
Revenue Recognition and Contracts with Customers - Summary of Contract Assets and Liabilities (Details) $ in Millions | 6 Months Ended |
Jun. 30, 2020USD ($) | |
Contract With Customer Asset And Liability [Abstract] | |
Contract assets—January 1 | $ 6 |
Contract assets—June 30 | 32 |
Change in contract assets—Increase/(Decrease) | 26 |
Contract liabilities—January 1 | (3) |
Contract liabilities—June 30 | $ (3) |
Research, Development & Engin_3
Research, Development & Engineering - Summary of Research, Development & Engineering Activities (Details) - Cost of Goods Sold - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Research And Development Arrangement Contract To Perform For Others [Line Items] | ||||
Research, development & engineering expense, total | $ 28 | $ 30 | $ 59 | $ 65 |
Research and Development Costs | ||||
Research And Development Arrangement Contract To Perform For Others [Line Items] | ||||
Research, development & engineering expense, total | 25 | 29 | 52 | 61 |
Engineering-Related Expenses | ||||
Research And Development Arrangement Contract To Perform For Others [Line Items] | ||||
Research, development & engineering expense, total | $ 3 | $ 1 | $ 7 | $ 4 |
Other Expense, Net - Schedule o
Other Expense, Net - Schedule of Other Operating Cost and Expense (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Other Income And Expenses [Abstract] | ||||
Indemnification related — post Spin-Off | $ 12 | $ 17 | $ 27 | $ 36 |
Indemnification related — litigation | 2 | 3 | ||
Factoring and notes receivables discount fees | 1 | 1 | ||
Other Expense, Net | $ 15 | $ 17 | $ 31 | $ 36 |
Income Taxes - Tax Expense (Ben
Income Taxes - Tax Expense (Benefit) and Effective Tax Rate (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | ||||
Tax expense (Note 6) | $ 11 | $ 21 | $ 12 | $ 45 |
Effective tax rate | 550.00% | 24.10% | 21.80% | 24.50% |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) | 3 Months Ended | |
Jun. 30, 2020 | Jun. 30, 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 | Jun. 30, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | ||
Trade receivables | $ 438 | $ 574 |
Notes receivables | 55 | 68 |
Other receivables | 70 | 69 |
Accounts, notes and other receivables, gross | 563 | 711 |
Less—Allowance for doubtful accounts | (9) | (4) |
Accounts, notes and other receivables, net | $ 554 | $ 707 |
Accounts, Notes and Other Rec_4
Accounts, Notes and Other Receivables Net - Additional Information (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | ||
Unbilled balances | $ 32 | $ 4 |
Unbilled contracts assets | $ 32 | $ 6 |
Factoring and Notes Receivable
Factoring and Notes Receivable - Additional Information (Details) - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended |
Jun. 30, 2020 | Dec. 31, 2019 | |
Receivables [Abstract] | ||
Sale of trade receivables | $ 66 | $ 27 |
Proceeds from sale of bank notes | $ 47 | $ 105 |
Inventories-Net - Summary of In
Inventories-Net - Summary of Inventories (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Dec. 31, 2019 |
Inventory Combining Work In Process And Raw Materials Alternative Gross [Abstract] | ||
Raw materials | $ 158 | $ 142 |
Work in process | 22 | 18 |
Finished products | 83 | 85 |
Inventory, gross | 263 | 245 |
Less—Reserves | (29) | (25) |
Inventories | $ 234 | $ 220 |
Other Assets - Schedule of Othe
Other Assets - Schedule of Other Assets (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Dec. 31, 2019 |
Other Assets [Line Items] | ||
Advanced discounts to customers, non-current | $ 61 | $ 62 |
Operating right-of-use assets (Note 13) | $ 34 | $ 35 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | us-gaap:OtherAssetsNoncurrent | us-gaap:OtherAssetsNoncurrent |
Other | $ 10 | $ 11 |
Total | 106 | $ 108 |
Undesignated as Hedging | Cross-currency Swap | ||
Other Assets [Line Items] | ||
Undesignated cross-currency swap at fair value | $ 1 |
Accrued Liabilities - Summary o
Accrued Liabilities - Summary of Accrued Liabilities (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Dec. 31, 2019 |
Accrued Liabilities Current [Abstract] | ||
Customer pricing reserve | $ 88 | $ 90 |
Compensation, benefit and other employee related | 62 | 64 |
Repositioning | 6 | 4 |
Product warranties and performance guarantees | 25 | 29 |
Taxes | 23 | 33 |
Advanced discounts from suppliers, current | 19 | 19 |
Customer advances and deferred income | 18 | 12 |
Accrued interest | 5 | 5 |
Short-term lease liability (Note 13) | 8 | 8 |
Other (primarily operating expenses) | 30 | 46 |
Accrued Liabilities | $ 284 | $ 310 |
Accrued Liabilities - Summary_2
Accrued Liabilities - Summary of Accrued Liabilities (Parenthetical) (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Dec. 31, 2019 |
Accrued Liabilities Current [Abstract] | ||
Contract liabilities | $ 2 | $ 3 |
Accrued Liabilities - Summary_3
Accrued Liabilities - Summary of Expenses Related to the Repositioning Accruals (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Restructuring Cost And Reserve [Line Items] | ||
Balance at beginning of period | $ 4 | $ 15 |
Charges | 6 | 3 |
Usage—cash | (4) | (8) |
Adjustments and reclassifications | (5) | |
Balance at end of period | 6 | 5 |
Severance Costs | ||
Restructuring Cost And Reserve [Line Items] | ||
Balance at beginning of period | 3 | 13 |
Charges | 6 | 3 |
Usage—cash | (4) | (6) |
Adjustments and reclassifications | (6) | |
Balance at end of period | 5 | 4 |
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 | Jun. 30, 2020 | Dec. 31, 2019 |
Other Liabilities Disclosure [Abstract] | ||
Pension and other employee related | $ 93 | $ 94 |
Advanced discounts from suppliers | 37 | 46 |
Uncertain tax positions | 80 | 79 |
Long-term lease liability (Note 13) | 27 | 28 |
Other | 25 | 27 |
Other Liabilities | $ 262 | $ 274 |
Leases - Additional Information
Leases - Additional Information (Details) | 6 Months Ended |
Jun. 30, 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 | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Leases [Abstract] | ||||
Operating lease cost | $ 3 | $ 3 | $ 6 | $ 6 |
Leases - Summary of Supplementa
Leases - Summary of Supplemental Cash Flow Information Related to Operating Leases (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Leases [Abstract] | ||||
Operating cash outflows from operating leases | $ 3 | $ 3 | $ 5 | $ 6 |
Right-of-use assets obtained in exchange for lease obligations, operating leases | $ 5 | $ 3 | $ 5 | $ 8 |
Leases - Summary of Supplemen_2
Leases - Summary of Supplemental Balance Sheet Information Related to Operating Leases (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Dec. 31, 2019 |
Leases [Abstract] | ||
Other assets | $ 34 | $ 35 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | us-gaap:OtherAssetsNoncurrent | us-gaap:OtherAssetsNoncurrent |
Accrued liabilities | $ 8 | $ 8 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | us-gaap:AccruedLiabilitiesCurrent | us-gaap:AccruedLiabilitiesCurrent |
Other liabilities | $ 27 | $ 28 |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | us-gaap:OtherLiabilitiesNoncurrent | us-gaap:OtherLiabilitiesNoncurrent |
Weighted-average lease term | 5 years 9 months 29 days | 6 years 3 months 18 days |
Weighted-average discount rate | 6.23% | 6.36% |
Leases - Schedule of Maturities
Leases - Schedule of Maturities of Operating Lease Liabilities (Details) $ in Millions | Jun. 30, 2020USD ($) |
Leases [Abstract] | |
2020 | $ 5 |
2021 | 8 |
2022 | 7 |
2023 | 6 |
2024 | 5 |
Thereafter | 11 |
Total lease payments | 42 |
Less imputed interest | (7) |
Operating lease, liabilities | $ 35 |
Financial Instruments and Fai_3
Financial Instruments and Fair Value Measures - Additional Information (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | ||
Derivative, aggregate gross notional amount | $ 1,399,000,000 | $ 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 ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Notional Amounts | $ 1,399,000,000 | $ 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 | 1,000,000 | |
Fair Value Measurements Recurring | Level 2 | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Notional Amounts | 1,399,000,000 | 1,820,000,000 |
Fair Value, Assets | 7,000,000 | 7,000,000 |
Fair Value, Liabilities | 3,000,000 | 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 | 286,000,000 | 392,000,000 |
Fair Value, Assets | 4,000,000 | 5,000,000 |
Fair Value, Liabilities | 1,000,000 | 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 | 224,000,000 | 447,000,000 |
Fair Value, Assets | 2,000,000 | 2,000,000 |
Fair Value, Liabilities | 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 | 418,000,000 | 420,000,000 |
Fair Value, Assets | 1,000,000 | |
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 | 471,000,000 | 561,000,000 |
Fair Value, Liabilities | $ 2,000,000 | $ 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 | Jun. 30, 2020USD ($) |
Carrying Value | |
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | |
Long-term debt and related current maturities | $ 1,407 |
Fair Value | Level 2 | |
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | |
Long-term debt and related current maturities | $ 1,309 |
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 | 6 Months Ended | ||||
Jun. 30, 2020 | Mar. 31, 2020 | Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Accumulated Other Comprehensive Income Loss [Line Items] | ||||||
Beginning balance | $ (2,046) | $ (2,133) | $ (2,376) | $ (2,517) | $ (2,133) | $ (2,517) |
Total other comprehensive (loss) income, net of tax | (52) | 39 | (35) | 63 | (13) | 28 |
Ending balance | (2,103) | (2,046) | (2,341) | (2,376) | (2,103) | (2,341) |
Foreign Exchange Translation Adjustment | ||||||
Accumulated Other Comprehensive Income Loss [Line Items] | ||||||
Beginning balance | 153 | 86 | 153 | 86 | ||
Other comprehensive income (loss) before reclassifications | (11) | 25 | ||||
Total other comprehensive (loss) income, net of tax | (11) | 25 | ||||
Ending balance | 142 | 111 | 142 | 111 | ||
Changes in Fair Value of Effective Cash Flow Hedges | ||||||
Accumulated Other Comprehensive Income Loss [Line Items] | ||||||
Beginning balance | 4 | 4 | ||||
Other comprehensive income (loss) before reclassifications | (2) | 2 | ||||
Total other comprehensive (loss) income, net of tax | (2) | 2 | ||||
Ending balance | 2 | 2 | 2 | 2 | ||
Pension Adjustments | ||||||
Accumulated Other Comprehensive Income Loss [Line Items] | ||||||
Beginning balance | (27) | (13) | (27) | (13) | ||
Amounts reclassified from accumulated other comprehensive income (loss) | 1 | |||||
Total other comprehensive (loss) income, net of tax | 1 | |||||
Ending balance | (27) | (12) | (27) | (12) | ||
Total Accumulated Other Comprehensive Income (Loss) | ||||||
Accumulated Other Comprehensive Income Loss [Line Items] | ||||||
Beginning balance | 169 | 130 | 136 | 73 | 130 | 73 |
Other comprehensive income (loss) before reclassifications | (13) | 27 | ||||
Amounts reclassified from accumulated other comprehensive income (loss) | 1 | |||||
Total other comprehensive (loss) income, net of tax | (52) | 39 | (35) | 63 | (13) | 28 |
Ending balance | $ 117 | $ 169 | $ 101 | $ 136 | $ 117 | $ 101 |
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 | 6 Months Ended | ||||
Jun. 30, 2020 | Mar. 31, 2020 | Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Basic | ||||||
Net (loss) income | $ (9) | $ 52 | $ 66 | $ 73 | $ 43 | $ 139 |
Weighted average common shares outstanding – Basic | 75,595,991 | 74,591,478 | 75,316,827 | 74,414,450 | ||
EPS – Basic | $ (0.12) | $ 0.88 | $ 0.57 | $ 1.87 | ||
Diluted | ||||||
Net (loss) income | $ (9) | $ 52 | $ 66 | $ 73 | $ 43 | $ 139 |
Weighted average common shares outstanding – Basic | 75,595,991 | 74,591,478 | 75,316,827 | 74,414,450 | ||
Dilutive effect of unvested RSUs and other contingently issuable shares | 249,520 | 2,309,066 | 520,632 | 1,715,371 | ||
Weighted average common shares outstanding – Diluted | 75,845,511 | 76,900,544 | 75,837,459 | 76,129,821 | ||
EPS – Diluted | $ (0.12) | $ 0.86 | $ 0.57 | $ 1.83 |
Earnings Per Share - Additional
Earnings Per Share - Additional Information (Details) - shares | 3 Months Ended | 6 Months Ended |
Jun. 30, 2020 | Jun. 30, 2020 | |
Earnings Per Share [Abstract] | ||
Antidilutive shares excluded from computation of diluted EPS | 437,333 | 439,649 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) $ in Millions | Oct. 01, 2018USD ($)Installment | Sep. 12, 2018USD ($) | Mar. 31, 2020USD ($) | Jun. 30, 2020USD ($) |
Subordinated Indemnity 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 Subordinated Indemnity 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 | $ 193 | |||
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 | Subordinated Indemnity 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 subordinated indemnity agreement | As of the Spin-Off date of October 1, 2018, Garrett ASASCO is 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 Subordinated Indemnity Agreement, Garrett ASASCO is 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 $175 million in respect of such liabilities arising in any given calendar year. | |||
Bendix | Honeywell International Inc | Subordinated Indemnity Agreement | ||||
Loss Contingencies [Line Items] | ||||
Percentage of asbestos and environmental liabilities liable to pay | 90.00% |
Commitments and Contingencies_2
Commitments and Contingencies - Summary of Obligation Payable to Honeywell (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2020 | Dec. 31, 2019 | |
Loss Contingencies [Line Items] | ||
Current | $ 37 | $ 69 |
Non-current | 1,304 | $ 1,282 |
Exit Costs | Honeywell International Inc | ||
Loss Contingencies [Line Items] | ||
Beginning of year | 1,351 | |
Legal fees expensed | 27 | |
Payments to Honeywell | (35) | |
Currency translation adjustment | (2) | |
End of period | 1,341 | |
Current | 37 | |
Non-current | 1,304 | |
Total | 1,341 | |
Exit Costs | Honeywell International Inc | Asbestos and Environmental | ||
Loss Contingencies [Line Items] | ||
Beginning of year | 1,090 | |
Legal fees expensed | 27 | |
Payments to Honeywell | (35) | |
Currency translation adjustment | (2) | |
End of period | 1,080 | |
Non-current | 1,080 | |
Total | 1,080 | |
Exit Costs | Honeywell International Inc | Tax Matters Agreement | ||
Loss Contingencies [Line Items] | ||
Beginning of year | 261 | |
End of period | 261 | |
Current | 37 | |
Non-current | 224 | |
Total | $ 261 |
Commitments and Contingencies_3
Commitments and Contingencies - Summary of Asbestos Claims Activity (Details) - Bendix - Claim | 6 Months Ended | 12 Months Ended |
Jun. 30, 2020 | Dec. 31, 2019 | |
Claims Activity | ||
Claims Unresolved at the beginning of the period | 6,480 | 6,209 |
Claims Filed | 1,013 | 2,659 |
Claims Resolved | (1,195) | (2,388) |
Claims Unresolved at the end of the period | 6,298 | 6,480 |
Commitments and Contingencies_4
Commitments and Contingencies - Summary of Asbestos Disease Distribution of Unresolved Claims (Details) - Bendix - Claim | Jun. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Disease Distribution of Unresolved Claims | |||
Mesothelioma and Other Cancer Claims | 3,278 | 3,399 | |
Nonmalignant Claims | 3,020 | 3,081 | |
Total Claims | 6,298 | 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 $ in Millions | 6 Months Ended |
Jun. 30, 2020USD ($) | |
Defined Benefit Plan Disclosure [Line Items] | |
Expected pension contribution in the next fiscal year | $ 7 |
Pension contribution | $ 3 |
Pension Benefits - Summary of N
Pension Benefits - Summary of Net Periodic Benefit Cost (Details) - Pension Benefits - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
United States | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | $ 1 | |||
Interest cost | $ 1 | 3 | $ 1 | |
Expected return on plan assets | (3) | (5) | (1) | |
Net periodic benefit costs | (2) | (1) | ||
Non-U.S. Plans | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | 2 | $ 1 | 5 | 2 |
Interest cost | 1 | 1 | ||
Expected return on plan assets | (1) | (3) | (1) | |
Net periodic benefit costs | $ 1 | $ 1 | $ 3 | $ 2 |
China Variable Interest Entity
China Variable Interest Entity - Additional Information (Details) - shares | 1 Months Ended | |
Sep. 30, 2018 | Jun. 03, 2020 | |
Honeywell International Inc | Garrett China | ||
Variable Interest Entity [Line Items] | ||
Equity interest ownership percentage | 100.00% | |
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 |