Garrett Motion Inc (NYSE:GTX) Q2 2019 Earnings Conference Call - Final Transcript

Jul 30, 2019 • 08:30 am ET


Garrett Motion Inc (NYSE:GTX) Q2 2019 Earnings Conference Call - Final Transcript


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Hello, my name is Nicole and I will be your operator this morning. I would like to welcome everyone to the Garrett Motion Earnings Conference Call. This call is being recorded and a replay will be available later today. After the company's presentation, there will be a Q&A session.

I would now like to hand over the call to Paul Blalock, VP of Investor Relations. Please go ahead.

Paul Blalock

Thank you, Nicole. Good day, everyone, and thanks for listening to Garrett Motion's second quarter 2019 financial results conference call. Before we begin, I'd like to mention that today's presentation and press release are available on the Garrett Motion website, where you will also find links to our SEC filings, along with other important information about Garrett.

Turning to Slide 2, we encourage you to read and understand the risk factors contained in our financial filings, become aware of the risks and uncertainties in this business and understand that forward-looking statements are only estimates of future performance and should be taken as such. Today's presentation also uses numerous non-GAAP terms to describe the way in which we manage and operate our business. We reconcile each of those terms to the closest GAAP term, and you are encouraged to examine those reconciliations, which are found in the appendix to this presentation, both in the press release and in the slide presentation. Also in today's presentation and comments, we will be referring to light-vehicle diesel and light-vehicle gasoline products by using the terms diesel and gasoline only.

On Slide 3, please note the additional disclaimers related to the basis of financial presentation, the nature of our historical carve-out financial information and our stand-alone, post-spin financial results reported today. In accordance with the terms of our indemnification and reimbursement agreement with Honeywell, our consolidated and combined balance sheet reflects a liability of $1,188 million in obligations payable to Honeywell as of June 30, 2019, the indemnification liability. The amount of the indemnification liability is based on information provided to us by Honeywell with respect to Honeywell's assessment of its own asbestos-related liability payments and accounts payable as of such date and is calculated in accordance with the terms of the indemnification and reimbursement agreement. Honeywell estimates its future liability for asbestos-related claims based on a number of factors.

As previously disclosed in our Form 10, and our consolidated and combined financial statements for December 31, 2018, our management has determined that there was a material weakness in our internal control of our financial reporting related to the supporting evidence of our liability to Honeywell under the indemnification and reimbursement agreement. Specifically, we were unable to independently verify the accuracy of certain information Honeywell provided to us that we used to calculate the amount of our indemnification liability, including information provided in Honeywell's actuary report and the amounts of settlement values and insurance receivables. For example, Honeywell did not provide us with sufficient information to make an independent assessment of the probable outcome of the underlying asbestos