Garrett Motion (US:GTX)2026-02-19 12:03Financial Performance - In 2025, net income increased to $310 million, up from $282 million in 2024, primarily due to lower interest expenses and increased gross profit [216]. - Total net sales for 2025 were $3,584 million, representing a 3.1% increase from $3,475 million in 2024, driven by higher demand in gasoline and commercial vehicles [203][204]. - For the year ended December 31, 2025, net income increased by $28 million to $310 million compared to $282 million in 2024 [226]. - Adjusted EBIT for 2025 was $510 million, an increase of $25 million from $485 million in 2024, driven by higher sales volumes and productivity [227]. - Cash provided by operating activities increased by $5 million to $413 million in 2025, supported by a $28 million increase in net income [245]. Sales and Revenue - Revenue from Europe in 2025 was $1,745 million, accounting for 49% of total revenue, an increase from $1,642 million or 47% in 2024 [201]. - Diesel product sales increased by $10 million or 1% in 2025, while gasoline product sales rose by $87 million or 6% [205][206]. Expenses and Costs - Selling, general and administrative expenses remained flat at $240 million, constituting 6.7% of sales in 2025 [211]. - The effective tax rate increased to 20.9% in 2025 from 17.8% in 2024, primarily due to unrecognized tax benefits in Switzerland and China [215]. - Cash used for investing activities increased by $27 million to $41 million in 2025, primarily due to lower proceeds from the sale of a joint venture [246]. - Cash used for financing activities decreased by $194 million to $326 million in 2025, compared to $520 million in 2024, due to lower debt repayments [247]. Share Repurchase and Capital Expenditures - The company repurchased $208 million of common stock, including 7.5 million shares for $103 million from Oaktree Capital Management [198]. - The company entered into a new $250 million share repurchase program valid from January 1, 2026, until December 31, 2026 [242]. - The company expects capital expenditures to increase in 2026 compared to 2025, primarily for investments in zero emissions technology [250]. Production and Market Trends - Turbocharger production is expected to rise from approximately 49 million units in 2024 to nearly 50 million units in 2025, before declining in subsequent years due to electric vehicle penetration [196]. - The company anticipates steady demand for turbochargers in the short to medium term, driven by hybridized powertrains in response to emissions standards [199]. Financial Instruments and Risks - As of December 31, 2025, the net fair value of financial instruments exposed to currency risk was a $163 million liability, with a potential impact of $225 million from a 10% adverse change in exchange rates [269]. - A 50 basis point change in interest rates would affect interest expense by $3 million for borrowings under the Credit Agreement as of December 31, 2025 [271]. - Approximately 79% of the cost of sales consists of purchased components, with a 10% variation in commodity prices potentially impacting costs by up to $39 million annually [273]. Accounting and Liabilities - Revenue is recognized based on shipping terms, with adjustments for variable considerations such as price concessions [252]. - The company is subject to contingent liabilities from lawsuits and claims, with potential losses assessed and recognized based on legal analysis [253]. - Warranty costs are estimated based on past experience and obligations, with adjustments made as circumstances change [254]. - The company sponsors defined benefit pension plans, with costs and liabilities determined from actuarial valuations influenced by market conditions [255][256].