PHINIA INC
For the period ended Dec 31, 2024. Filed Feb 13, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 13, 2025
PHIN$68.94-0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-28.
0001968915-24-000007
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-13.
0001968915-25-000006
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 127 previous paragraphs and 128 current paragraphs.
56 unchanged; 51 reworded; 20 added; 17 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 5 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (20)
Current report
We expect earnings and cash generation in 2025 to be challenged as we expect foreign currency and a softening of the original equipment (OE) markets to outpace our ability to drive operational efficiencies and grow our Aftermarket sales. Continued economic and political uncertainty has caused the commercial vehicle (CV) and light vehicle (LV) markets to soften. LV volumes in our key markets for 2025 are expected to decline by mid-single digit percentages. CV volumes in our key markets are expected to rebound from 2024 levels in the low-single digit percentages, however weighted to the latter part of the year. Assuming constant foreign exchange rates, we expect flat to a modest increase in sales as strong growth in our Aftermarket segment is expected to offset the softened OE markets. Additionally, we may be impacted by other macroeconomic challenges in 2025, including but not limited to inflation, supply chain constraints, market volatility, higher tariffs relevant to our operations (particularly in Mexico and China) and changes in international trade relations.
Current report
•Unfavorable volume and net new business decreased sales by approximately $104 million or 3%. This decrease was primarily driven by lower commercial vehicle sales in Europe and lower sales in China within the Fuel Systems segment, partially offset by favorable volume in Europe within the Aftermarket segment.
Current report
•Due to the contract manufacturing agreements with the Former Parent coming to an end, sales decreased $27 million. No additional sales from these agreements are expected.
Current report
•Lower volume, mix and net new business decreased cost of sales by approximately $78 million. This decrease was primarily driven by lower commercial vehicle sales in Europe and lower sales in China in the Fuel Systems segment, partially offset by favorable volume in Europe within the Aftermarket segment.
Current report
•Cost of sales was impacted by lower supplier costs of approximately $56 million arising primarily from supplier savings and recoveries.
Current report
•Employee costs increased cost of sales by $27 million, primarily related to inflation and incentive compensation.
Current report
•Employee-related costs were $163 million for the year ended December 31, 2024, an increase of $25 million, primarily due to inflation, incentive compensation, and increases in headcount associated with the transition to a standalone company.
Current report
•During the year ended December 31, 2024, the Company recorded a non-cash impairment expense of $21 million related to the write down of property, plant and equipment associated with a Fuel Systems manufacturing plant in Europe.
Current report
•Restructuring expense was $14 million and $12 million for the years ended December 31, 2024 and 2023, respectively, related to individually approved restructuring actions that primarily related to reductions in headcount. The Company continues to evaluate different options across its operations to reduce existing structural costs. As we continue to assess our performance and the needs of our business, additional restructuring could be required and may result in significant costs. Refer to Note 4 “Other operating expense (income), net” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information.
Current report
•For the years ended December 31, 2024 and 2023, the Company recognized a gain of $7 million and a loss of $3 million, respectively, related to other one-time events, primarily due to insurance recoveries and associated losses related to a supplier fire.
Current report
Interest expensewas $99 million and $56 million in the years ended December 31, 2024 and 2023, respectively. The increase was primarily related to the issuance of debt in connection with the Spin-Off as well as the loss on extinguishment of debt of $22 million in 2024. See Note 12, “Notes Payable and Debt”, for further discussion of the loss on extinguishment of debt.
Current report
In 2024, the Company recognized discrete tax expense of $21 million related to the establishment of a valuation allowance on its Polish operations as a result of the changes in judgment related to the recovery of its deferred tax assets. This expense was fully offset by a discrete tax benefit related to unremitted earnings as a result of change in structure and favorable provision to return adjustments in various jurisdictions.
Current report
Credit Agreement
Current report
Issuance of Senior Notes
Current report
On April 4, 2024, the Company issued $525 million aggregate principal amount of 6.75% Senior Secured Notes due 2029 (the 2029 Notes) pursuant to an indenture among the Company, as issuer, certain subsidiaries of the
Current report
Company named as guarantors, and U.S. Bank Trust Company, National Association, as trustee and as collateral agent. The 2029 Notes were sold to investors at 100% plus accrued interest, if any, from April 4, 2024 in a private transaction exempt from the registration requirements of the Securities Act. The net proceeds of the offering of the 2029 Notes were used to repay all of the Company’s outstanding borrowings and accrued interest under the Term Loan B Facility and the Revolving Facility, and to pay fees and expenses in connection with the offering. During the second quarter of 2024, the Company recorded a non-cash pre-tax loss on extinguishment of $20 million related to the difference between the repayment amount and net carrying amount of the Term Loan B Facility, which is included in the Interest expense line item on the Condensed Consolidated Statements of Operations.
Current report
On September 17, 2024, the Company issued $450 million aggregate principal amount of 6.625% Senior Notes due 2032 (the 2032 Notes) pursuant to an indenture among the Company, as issuer, certain subsidiaries of the Company named as guarantors, and U.S. Bank Trust Company, National Association, as trustee. The 2032 Notes were sold to investors at 100% plus accrued interest, if any, from September 17, 2024 in a private transaction exempt from the registration requirements of the Securities Act. The net proceeds of the offering of the 2032 Notes were used to repay all of the Company’s outstanding borrowings under the Term Loan A Facility, to pay fees and expenses in connection with the offering, and for general corporate purposes. During the third quarter of 2024, the Company recorded a non-cash pre-tax loss on extinguishment of $2 million related to the difference between the repayment amount and net carrying amount of the Term Loan A Facility, which is included in the Interest expense line item on the Condensed Consolidated Statements of Operations.
Current report
Refer to Note 12. “Notes Payable and Debt” for further information on the Credit Agreement, the 2029 Notes and the 2032 Notes.
Current report
BorgWarner Dispute
Current report
In September 2024, the Former Parent filed a claim against the Company in Delaware Superior Court seeking, inter alia, a judicial declaration that the Company is obligated under the Tax Matters Agreement to remit to the Former Parent monies refunded, or to be refunded, to the Company from tax authorities that relate to certain indirect tax payments made prior to the Spin-Off. In November 2024, the Company filed, in Delaware Superior Court, a response to the Former Parent’s claim and asserted a number of counterclaims and, in December 2024, the Former Parent filed a motion to dismiss the Company’s counterclaims. The Former Parent’s motion is pending. The Company believes it has meritorious arguments in response to the Former Parent’s claim and with respect to its own claims, however, the Company is unable to determine the ultimate outcome of this matter or determine an estimate of potential losses. It is reasonably possible, but not probable, that the resolution of this matter could have a material adverse effect on the Company’s financial position, results of operations and/or cash flows.
Removed paragraphs (17)
Previous report
In 2023, following non-contractual negotiations, the Company reached agreement for the pass through and recovery of higher costs with various customers. These agreements did not enable the Company to recover 100 percent of its increased costs, and as a result, the Company’s operating margins have been negatively impacted.
Previous report
We expect strong earnings and cash generation in 2024 as we continue to drive operational efficiencies, exit agreements with our Former Parent and grow our Aftermarket sales. On the original equipment (OE) side, industry-wide commercial vehicle (CV) volumes in 2024 are expected to decline mid to high single digits percent in North America and Europe, while other global CV markets are expected to be flat. Global light vehicle (LV) volumes are expected to be slightly down with engine production declining approximately 4%. Assuming constant foreign exchange rates, in 2024 PHINIA expects modest year-over-year growth driven by higher Aftermarket segment sales.
Previous report
In connection with the Spin-Off, we have been installing and implementing information technology infrastructure to support certain of our business functions, including accounting and financial reporting, human resources, legal and compliance, communications, engineering, manufacturing and distribution, and sourcing. We may incur substantially higher costs than currently anticipated as we transition from the existing BorgWarner transactional and operational systems and data centers we currently use. If we are unable to transition effectively, we may incur temporary interruptions in business operations. Any delay in implementing, or operational interruptions suffered while implementing, our new information technology infrastructure could disrupt our business and have a material adverse effect on our results of operations.
Previous report
•Favorable volume, mix and net new business increased sales by approximately $56 million or 2%. This increase was primarily driven by higher demand for the Company’s products, partially offset by lower commercial vehicle sales in China.
Previous report
•Higher sales volume, mix and net new business increased cost of sales by approximately $50 million.
Previous report
•Cost of sales was also impacted by higher supplier-related and inflationary costs of approximately $49 million, primarily driven by $87 million non-contractual commercial negotiations with the Company’s suppliers and normal contractual supplier commodity pass-through arrangements partially offset by $30 million of net supply chain savings initiatives and other savings of $8 million.
Previous report
•Employee-related costs were $138 million for the year ended December 31, 2023, an increase of $35 million, primarily related to additional corporate costs incurred as a stand-alone Company, incentive compensation and inflation.
Previous report
•IT costs incurred directly by the Company were $33 million for the year ended December 31, 2023, an increase of $6 million.
Previous report
•General expense allocations from BorgWarner, which ended subsequent to the Spin-off, were $16 million for the year ended December 31, 2023, a decrease of $37 million.
Previous report
•Other SG&A expenses were $90 million for the year ended December 31, 2023, a decrease of $2 million.
Previous report
Restructuring expensewas $12 million and $11 million for the years ended December 31, 2023 and 2022, respectively, primarily related to employee benefit costs. Refer to Note 3 “Restructuring” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information.
Previous report
•During the year ended December 31, 2022 the Company recorded expense of $5 million related to the closure of operations in Russia, primarily for the impairment of an intangible asset related to this business.
Previous report
Interest expensewas $56 million and $20 million in the years ended December 31, 2023 and 2022, respectively. The increase was primarily related to the issuance of our Term Loan A Facility and Term Loan B Facility (each as defined below), as well as interest incurred on the drawdown of the Revolving Facility (as defined below).
Previous report
For the year ended December 31, 2023, the Company’s effective tax rate increased compared to the year ended December 31, 2022 as a result of a change in the jurisdictional mix of pre-tax earnings, most notably an increase in pre-tax losses where no tax benefit is recognized. In addition, the Company recognized increases in its U.S. taxes on foreign earnings based on the post Spin-Off structure. During 2023, the Company recognized discrete tax benefits of $2 million, primarily due to structural changes concluded in the fourth quarter.
Previous report
Borrowings under the Credit Agreement bear interest at varying rates, depending on the type of loan and, in some cases, the rates of designated benchmarks and the Company’s related election. For borrowings under the Credit Agreement, the Company may choose among the following interest rates: (i) solely in the case of U.S. dollar-denominated loans, an interest rate equal to the highest of (1) the prime rate in effect from time to time, (2) the federal funds effective rate in effect from time to time plus 0.5%, (3) adjusted term Secured Overnight Financing Rate (SOFR) (which includes a 0.10% credit spread adjustment to term SOFR) for a one month interest period plus 1.00%, and (4) 1.00%, in each case plus a rate (x) with respect to the Revolving Facility and the Term Loan A Facility, ranging from 1.50% to 2.00% depending on the Company’s consolidated net leverage ratio or (y) with respect to the Term Loan B Facility, 3.00%; or (ii) an interest rate equal to (1) solely in the case of U.S. dollar- denominated loans, adjusted term SOFR, (2) solely in the case of euro-denominated loans, Euro Interbank Offered Rate (EURIBOR), or (3) solely in the case of pound sterling-denominated loans, adjusted Sterling Overnight Index Average Reference Rate (SONIA) (which includes a 0.0326% credit spread adjustment to SONIA), as applicable, in each case for the applicable interest period plus a rate (x) with respect to adjusted term SOFR for the Revolving Facility and the Term Loan A Facility, EURIBOR and SONIA, ranging from 2.50% to 3.00% depending on our consolidated net leverage ratio, and (y) with respect to adjusted term SOFR for the Term Loan B Facility, 4.00%. Additionally, the Company will pay a quarterly commitment fee based on the actual daily amount of the available Revolving Facility commitment.
Previous report
As of December 31, 2023, the Company had $75 million of outstanding borrowings under the Revolving Facility. The Credit Agreement contains customary covenants relating to us and our subsidiaries concerning, among other things, investments, dispositions of assets, indebtedness, liens on assets, and dividends and other distributions. Solely in respect of the Revolving Facility and the Term Loan A Facility, the Credit Agreement also contains financial covenants requiring (i) the consolidated net leverage ratio of the Company, determined as of the end of each fiscal quarter, not to exceed 3.00 to 1.00 (or, at our election and subject to certain conditions, 3.50 to 1.00 for the period in which such election is made and the next succeeding testing period and, thereafter, 3.25 to 1.00 for the next two succeeding testing periods) and (ii) the consolidated interest coverage ratio of the Company, determined as of the end of each fiscal quarter, to be at least 3.00 to 1.00. The Company was in compliance with all covenants as of December 31, 2023.
Previous report
To manage liquidity and fund operations prior to the Spin-Off, we participated in BorgWarner’s cash pooling arrangements and BorgWarner has participated in our cash pooling arrangements. Any balances owed to the Company from BorgWarner as a result of these cash arrangements that were anticipated to be settled in cash were reflected as Receivables, net and Investments and long-term receivables. Any balances due from the Company to BorgWarner as a result of these cash arrangements that were anticipated to be settled in cash were reflected as Other non-current liabilities. Certain other cash pooling balances that were not anticipated to be settled in cash are presented within Former Parent investment in our Consolidated Financial Statements included elsewhere in this Form 10-K.
Reworded paragraphs (51)
Previous wording
PHINIA is a leader in the development, design and manufacture of integrated components and systems that are designed to optimize performance, increase efficiency and reduce emissions in combustion and hybrid propulsion for commercial vehicles and industrial applications (medium-duty and heavy-duty trucks, buses and other off-highway construction, marine, agricultural and industrial applications) and light vehicles (passenger cars, trucks, vans and sport-utility vehicles). We are a global supplier to most major OEMs seeking to meet and exceed increasingly stringent global regulatory requirements and satisfy consumer demands for an enhanced user experience. Additionally, we offer a wide range of OES solutions and remanufactured products as well as an expanded range of products for the independent (non-OEM) aftermarket.
Current wording
PHINIA is a leader in the development, design and manufacture of integrated components and systems that are designed to optimize performance, increase efficiency and reduce emissions in combustion and hybrid propulsion for commercial vehicles and industrial applications (medium-duty and heavy-duty trucks, buses and other off-highway construction, marine, agricultural and industrial applications), light commercial vehicles (vans and trucks) and light passenger vehicles (passenger cars, mini-vans, cross-overs and sport-utility vehicles). We are a global supplier to most major OEMs seeking to meet and exceed increasingly stringent global regulatory requirements and satisfy consumer demands for an enhanced user experience. Additionally, we offer a wide range of OES solutions and remanufactured products as well as an expanded range of products for the independent (non-OEM) aftermarket.
Previous wording
On December 6, 2022, BorgWarner announced plans for the complete legal and structural separation of its Fuel Systems and Aftermarket businesses by the spin-off of its wholly-owned subsidiary, PHINIA, which was formed on February 9, 2023.
Current wording
On December 6, 2022, BorgWarner Inc., a manufacturer and supplier of automotive industry components and parts (BorgWarner, or Former Parent), announced plans for the complete legal and structural separation of its Fuel Systems and Aftermarket businesses by the spin-off of its wholly-owned subsidiary, PHINIA, which was formed on February 9, 2023 (the Spin-Off).
Previous wording
On July 3, 2023, BorgWarner completed the Spin-Off in a transaction intended to qualify as tax-free to the Company’s stockholders for U.S. federal income tax purposes, which was accomplished by the distribution of the outstanding common stock of PHINIA to holders of record of common stock of BorgWarner on a pro rata basis. Each holder of record of BorgWarner common stock received one share of PHINIA common stock for every five shares of BorgWarner common stock held on June 23, 2023, the record date. In lieu of fractional shares of PHINIA, BorgWarner stockholders received cash. As a result of these transactions, all of the assets, liabilities, and legal entities comprising BorgWarner’s Fuel Systems and Aftermarket businesses are now owned directly, or indirectly through its subsidiaries, by PHINIA. PHINIA is an independent public company trading under the symbol “PHIN” on the New York Stock Exchange.
Current wording
On July 3, 2023, BorgWarner completed the Spin-Off in a transaction intended to qualify as tax-free to BorgWarner’s stockholders for U.S. federal income tax purposes, which was accomplished by the distribution of the outstanding common stock of PHINIA to holders of record of common stock of BorgWarner on a pro rata basis. Each holder of record of BorgWarner common stock received one share of PHINIA common stock for every five shares of BorgWarner common stock held on June 23, 2023, the record date. In lieu of fractional shares of PHINIA, BorgWarner stockholders received cash. As a result of these transactions, all of the assets, liabilities, and legal entities comprising BorgWarner’s Fuel Systems and Aftermarket businesses are now owned directly, or indirectly through its subsidiaries, by PHINIA. PHINIA is an independent public company trading under the symbol “PHIN” on the New York Stock Exchange.
Previous wording
and precious metals (e.g., palladium). In addition, many global economies are experiencing elevated levels of inflation more generally, which is driving an increase in other input costs. As a result, the Company has experienced, and is continuing to experience, higher costs.
Current wording
Commodities and Other Inflationary Impacts. Prices for commodities remain volatile, and since the beginning of 2021, the Company’s business has experienced price increases for base metals (e.g., steel, aluminum and copper) while slightly decreasing in 2024. In addition, many global economies are experiencing elevated levels of inflation more generally, which is driving an increase in other input costs. As a result, the Company has experienced, and is continuing to experience, higher costs.
Previous wording
The Company maintains a positive long-term outlook for its global business and is committed to new product development and strategic investments to enhance its product leadership strategy. There are several trends that are driving the Company’s long-term growth that management expects to continue, including market share expansion in the CV market, increased overall vehicle parc driving that supports aftermarket demand, adoption of product offerings enabling renewable fuels and hydrogen solutions for combustion vehicles to serve as a viable alternative to electrification or fuel cell solutions and increasingly stringent global emissions standards that support demand for the Company’s products driving efficiency and reduced emissions. In addition, we believe we are well positioned to continue to expand differentiated offerings in electronics, software and complete systems capabilities.
Current wording
The Company maintains a positive long-term outlook for its global business and is committed to new product development and strategic investments to enhance its product leadership strategy. There are several trends that are driving the Company’s long-term growth that management expects to continue, including market share expansion in the CV market, growth in overall vehicle parc that supports aftermarket demand, increased consumer interest in hybrid and plug-in vehicles, and adoption of additional product offerings enabling zero- and lower-carbon fuel solutions for combustion vehicles. In addition, we believe we are well positioned to continue to expand our differentiated offerings and capabilities across electronics, software and complete systems.
Previous wording
Historically, we have relied on BorgWarner to provide various corporate functions. Following the Spin-Off, BorgWarner does not provide us with assistance other than the limited transition and other services described under “Certain Relationships and Related Person Transactions” in our Information Statement furnished with the Company’s Registration Statement on Form 10-12B/A filed on June 9, 2023. BorgWarner is only obligated to provide the transition services for limited periods following completion of the Spin-Off. Following the Spin-Off and the cessation of any transition services agreements, we will need to provide internally, or obtain from unaffiliated third parties, the services we will no longer receive from BorgWarner. We may be unable to replace these services in a timely manner or on terms and conditions as favorable as those we receive from BorgWarner. The Company entered into several agreements with BorgWarner that govern the relationship between the parties following the Spin-Off and are described in our Form 8-K filed on July 7, 2023.
Current wording
Historically, we have relied on BorgWarner to provide various corporate functions. Following the Spin-Off, BorgWarner has not provided us with assistance other than the limited transition and other services described under the heading “Certain Relationships and Related Party Transactions” in the Company’s proxy statement for its 2024 Annual Meeting of Stockholders filed on March 27, 2024. The Company entered into several agreements with BorgWarner that govern the relationship between the parties following the Spin-Off that are described in our Form 8-K filed on July 7, 2023. BorgWarner was only obligated to provide the transition services for limited periods following the completion of the Spin-Off. As of June 30, 2024, the Company had successfully exited all transition services agreements. We have installed and implemented information technology infrastructure to support certain of our business functions, including accounting and financial reporting, human resources, legal and compliance, communications, engineering, manufacturing and distribution, and sourcing.
Previous wording
A detailed comparison of the Company’s 2021 operating results to its 2022 operating results can be found in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in the Company’s final Information Statement filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on June 13, 2023.
Current wording
A detailed comparison of the Company’s 2023 operating results to its 2022 operating results can be found in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in the Company’s Annual Report on Form 10-K filed on February 28, 2024.
Previous wording
Net sales for the year ended December 31, 2023 totaled $3,500 million, an increase of $152 million, or 5%, from the year ended December 31, 2022. The change in net sales for the year ended December 31, 2023 was primarily driven by the following:
Current wording
Net sales for the year ended December 31, 2024 totaled $3,403 million, a decrease of $97 million, or 3%, from the year ended December 31, 2023. The change in net sales for the year ended December 31, 2024 was primarily driven by the following:
Previous wording
•Fluctuations in foreign currencies resulted in a year-over-year decrease in sales of approximately $18 million primarily due to the weakening of the Chinese Renminbi relative to the U.S. Dollar, slightly offset by the strengthening of the Euro and British Pound relative to the U.S. Dollar.
Current wording
•Fluctuations in foreign currencies resulted in a year-over-year decrease in sales of approximately $1 million primarily due to the weakening of the Chinese Renminbi and Brazilian Real, offset by the strengthening of the British Pound, each relative to the U.S. Dollar.
Previous wording
•Customer pricing increased net sales by approximately $64 million. This includes an increase of approximately $57 million related to recoveries from the Company’s customers for cost inflation arising from non-contractual commercial negotiations with those customers and normal contractual customer commodity pass-through arrangements.
Current wording
•Customer pricing increased net sales by approximately $35 million. This is primarily related to an increase in recoveries of inflationary costs from the Company’s customers due to non-contractual commercial negotiations with those customers and normal contractual customer commodity pass-through arrangements.
Previous wording
Cost of sales and cost of sales as a percentage of net sales were $2,776 million and 79.3%, respectively, during the year ended December 31, 2023, compared to $2,627 million and 78.5%, respectively, during the year ended December 31, 2022. The change in cost of sales for the year ended December 31, 2023 was primarily driven by the following:
Current wording
Cost of sales and cost of sales as a percentage of net sales were $2,647 million and 77.8%, respectively, during the year ended December 31, 2024, compared to $2,776 million and 79.3%, respectively, during the year ended December 31, 2023. The change in cost of sales for the year ended December 31, 2024 was primarily driven by the following:
Previous wording
•Cost of sales increased $50 million related to certain contract manufacturing agreements with Former Parent that were entered into in connection with the Spin-Off.
Current wording
•Cost of sales decreased $27 million related to certain contract manufacturing agreements with Former Parent that were entered into in connection with the Spin-Off.
Previous wording
•Fluctuations in foreign currencies resulted in a year-over-year decrease in cost of sales of approximately $13 million primarily due to the weakening of the Chinese Renminbi relative to the U.S. Dollar, slightly offset by the strengthening of the Euro relative to the U.S. Dollar.
Current wording
•Fluctuations in foreign currencies resulted in a year-over-year decrease in cost of sales of approximately $2 million primarily due to the weakening of the Chinese Renminbi and Brazilian Real, offset by the strengthening of the British Pound, each relative to the U.S. Dollar.
Previous wording
•Other manufacturing costs increased cost of sales by $13 million compared to the year ended December 31, 2022.
Current wording
•Other manufacturing costs increased cost of sales by $7 million compared to the year ended December 31, 2023.
Previous wording
Gross profit and gross margin were $724 million and 20.7%, respectively, during the year ended December 31, 2023 compared to $721 million and 21.5%, respectively, during the year ended December 31, 2022. The decrease in gross margin was primarily due to the factors discussed above.
Current wording
Gross profit and gross margin were $756 million and 22.2%, respectively, during the year ended December 31, 2024 compared to $724 million and 20.7%, respectively, during the year ended December 31, 2023. The increase in gross margin was primarily due to the factors discussed above.
Previous wording
Selling, general and administrative (SG&A) expenses for the year ended December 31, 2023 were $413 million as compared to $407 million for the year ended December 31, 2022. SG&A expenses as a percentage of net sales were 11.8% and 12.2% for the years ended December 31, 2023 and 2022, respectively. The change in SG&A expenses was primarily attributable to:
Current wording
Selling, general and administrative (SG&A) expenses for the year ended December 31, 2024 were $442 million as compared to $413 million for the year ended December 31, 2023. SG&A expenses as a percentage of net sales were 13.0% and 11.8% for the years ended December 31, 2024 and 2023, respectively. The change in SG&A expenses was primarily attributable to:
Previous wording
•Research and development (R&D) costs were $108 million for the year ended December 31, 2023, an increase of $4 million. R&D costs, net of customer reimbursements, were 3.1% of net sales in the year ended December 31, 2023, compared to 3.1% of net sales in the year ended December 31, 2022. The Company will continue to invest in R&D programs, which are necessary to support short- and long-term growth. The Company’s current long-term expectation for R&D spending is 3% of net sales.
Current wording
•Research and development (R&D) costs were $112 million for the year ended December 31, 2024, an increase of $4 million. R&D costs, net of customer reimbursements, were 3.3% of net sales in the year ended December 31, 2024, compared to 3.1% of net sales in the year ended December 31, 2023. The Company will continue to invest in R&D programs, which are necessary to support short- and long-term growth. The Company’s current long-term expectation for R&D spending is 3% of net sales.
Previous wording
Other operating expense (income), net was expense of $58 million and income of $15 million for the years ended December 31, 2023 and 2022, respectively. Other Operating Expense (Income), Net was comprised of the following:
Current wording
Other operating expense, net was $55 million and $70 million for the years ended December 31, 2024 and 2023, respectively. Other operating expense, net was comprised of the following:
Previous wording
•For the years ended December 31, 2023 and 2022, separation and transaction costs were $80 million and $31 million, respectively, primarily related to professional fees associated with the Spin-Off.
Current wording
•For the years ended December 31, 2024 and 2023, separation and transaction costs were $31 million and $80 million, respectively, primarily related to professional fees and other costs associated with the Spin-Off.
Previous wording
•For the years ended December 31, 2023 and 2022, the Company recognized royalty income related to licensing of the Delphi Technologies trade name and product-related intellectual properties to other BorgWarner businesses in the amount of $17 million and $31 million, respectively. These royalty arrangements have not continued subsequent to the completion of the Spin-Off.
Current wording
•For the year ended December 31, 2023, the Company recognized royalty income related to licensing of the Delphi Technologies trade name and product-related intellectual properties to other Former Parent businesses in the amount of $17 million. These royalty arrangements did not continue subsequent to the completion of the Spin-Off.
Previous wording
•For the years ended December 31, 2023 and 2022, the Company recognized income related to application testing and other R&D services for other BorgWarner businesses of $2 million and $11 million, respectively. These services have not continued subsequent to the completion of the Spin-Off.
Current wording
•For the year ended December 31, 2023, the Company recognized income related to application testing and other R&D services for other Former Parent businesses of $2 million. These services did not continue subsequent to the completion of the Spin-Off.
Previous wording
Equity in affiliates’ earnings, net of taxwas $10 million and $11 million in the years ended December 31, 2023 and 2022, respectively. This line item is driven by the results of the Company’s unconsolidated joint venture.
Current wording
Equity in affiliates’ earnings, net of taxwas $11 million and $10 million in the years ended December 31, 2024 and 2023, respectively. This line item is driven by the results of the Company’s unconsolidated joint venture.
Previous wording
Interest incomewas $13 million and $6 million in the years ended December 31, 2023 and 2022, respectively. The increase was primarily due to increased cash and cash equivalents balances, as well as higher interest rates on cash and cash equivalents balances.
Current wording
Interest incomewas $16 million and $13 million in the years ended December 31, 2024 and 2023, respectively. The increase was primarily due to increased cash and cash equivalents balances, as well as higher interest rates on cash and cash equivalents balances.
Previous wording
Other postretirement loss (income) was a loss of $2 million and income of $32 million in the years ended December 31, 2023 and 2022, respectively. The decrease in other postretirement loss (income) for the year ended December 31, 2023 was primarily due to higher interest and inflationary costs in 2023.
Current wording
Other postretirement expense was de minimus and $2 million in the years ended December 31, 2024 and 2023, respectively. The decrease in other postretirement expense for the year ended December 31, 2024 was primarily due to higher interest and inflationary costs in 2023.
Previous wording
Provision for income taxes was $104 million for the year ended December 31, 2023 resulting in an effective tax rate of 50%. This compared to $85 million or 24% for the year ended December 31, 2022.
Current wording
Provision for income taxes was $108 million for the year ended December 31, 2024 resulting in an effective tax rate of 58%. This compared to $104 million or 50% for the year ended December 31, 2023.
Previous wording
During 2022, the Company recognized discrete tax benefits of $7 million, primarily due to certain unrecognized tax benefits and accrued interest related to a matter for which the statute of limitations had lapsed.
Current wording
In 2023, the Company recognized discrete tax benefits of $7 million, primarily due to certain unrecognized tax benefits and accrued interest related to a matter for which the statute of limitations had lapsed.
Previous wording
The Company’s business is aggregated into two reportable segments: Fuel Systems and Aftermarket.
Current wording
The Company’s business is comprised of two reportable segments: Fuel Systems and Aftermarket.
Previous wording
Segment AOI excludes certain corporate costs, which primarily represent corporate expenses not directly attributable to the individual segments. Corporate expenses not allocated to Segment AOI were $64 million and $79 million for the years ended December 31, 2023 and 2022, respectively. The decrease in corporate expenses in 2023 is primarily due to lower allocations from BorgWarner prior to the completion of the Spin-Off.
Current wording
Segment AOI excludes certain corporate costs, which primarily represent corporate expenses not directly attributable to the individual segments. Corporate expenses not allocated to Segment AOI were $92 million and $47 million for the years ended December 31, 2024 and 2023, respectively. The increase in corporate expenses in 2024 is primarily related to additional costs resulting from operating as a standalone company.
Previous wording
The Fuel Systems segment’s net sales for the year ended December 31, 2023 increased $105 million, or 5%, and Segment AOI decreased $37 million, or 14.7%, from the year ended December 31, 2022. Foreign currencies resulted in a year-over-year decrease in sales of approximately $18 million primarily due to the weakening of the Chinese Renminbi, partially offset by the strengthening of the Euro and British Pound relative to the U.S. Dollar. The increase excluding the impact of foreign currencies was primarily due to approximately $43 million from non-contractual commercial negotiations with the Company’s customers and normal contractual customer commodity pass-through arrangements, $50 million related to certain contract manufacturing agreements with BorgWarner, and approximately $30 million of volume, mix and net new business driven by higher weighted average market production compared to the prior year. Segment Adjusted Operating margin was 9.9% in the year ended December 31, 2023, compared to 12.2% in the year ended December 31, 2022. The Segment Adjusted Operating margin decrease was primarily due to product mix and higher supplier costs.
Current wording
The Fuel Systems segment’s net sales for the year ended December 31, 2024 decreased $157 million, or 7%, and Segment AOI increased $3 million, or 1.4%, from the year ended December 31, 2023. Foreign currencies resulted in a year-over-year decrease in sales of approximately $5 million primarily due to the weakening of the Chinese Renminbi and Brazilian Real, partially offset by the strengthening of the British Pound, each relative to the U.S. Dollar. The decrease excluding the impact of foreign currencies was primarily due to approximately $130 million of unfavorable volume and net new business driven by lower commercial vehicle sales in Europe and lower sales in China, $27 million related to the end of certain contract manufacturing agreements with BorgWarner, partially offset by approximately $5 million from non-contractual commercial negotiations with the Company’s customers and normal contractual customer commodity pass-through arrangements. Segment Adjusted Operating margin was 10.8% in the year ended December 31, 2024, compared to 9.9% in the year ended December 31, 2023. The Segment Adjusted Operating margin increase was primarily due to a lump sum supplier settlement.
Previous wording
The Aftermarket segment’s net sales for the year ended December 31, 2023 increased $47 million, or 4%, and Segment AOI increased $5 million, or 2.6%, from the year ended December 31, 2022. Foreign currencies did not have a significant impact on year-over-year sales. The increase was primarily due to approximately $26 million of volume, mix and net new business driven by increased demand for the Company’s products and approximately $21 million of pricing. Segment Adjusted Operating margin was 14.8% in the year ended December 31, 2023, compared to 15.0% in the year ended December 31, 2022. The Segment Adjusted Operating margin decreased slightly primarily due to inflationary cost increases.
Current wording
The Aftermarket segment’s net sales for the year ended December 31, 2024 increased $60 million, or 5%, and Segment AOI increased $24 million, or 12.2%, from the year ended December 31, 2023. Foreign currencies resulted in a year-over-year increase in sales of approximately $4 million primarily due to the strengthening of the British Pound partially offset by the weakening of the Brazilian Real, each relative to the U.S. Dollar. The increase excluding the impact of foreign currencies was primarily due to approximately $30 million of pricing and $26 million of favorable volume and net new business driven by increased demand for the Company’s products, primarily in Europe. Segment Adjusted Operating margin was 15.9% in the year ended December 31, 2024, compared to 14.8% in the year ended December 31, 2023. The Segment Adjusted Operating margin increased primarily due to customer pricing.
Previous wording
On July 3, 2023, the Company entered into a $1.225 billion Credit Agreement consisting of a $500 million revolving credit facility (the “Revolving Facility”), a $300 million Term Loan A Facility (the “Term Loan A Facility”) and a $425 million Term Loan B Facility (the “Term Loan B Facility”; together with the Revolving Facility and the Term Loan A Facility, collectively, the “Facilities”) in connection with the Spin-Off that occurred on the same date. Subject to extension by the lenders, at their option, upon the Company’s request, the Facilities mature on July 3, 2028; [provided, however, that if earlier, the Revolving Facility and the Term Loan A Facility will mature 91 calendar days prior to the scheduled maturity of the Term Loan B Facility or any refinancing or replacement thereof in an aggregate principal amount exceeding $100 million that is secured pari passu with the Revolving Facility and the Term Loan A Facility and matures on or prior to July 3, 2028.
Current wording
On July 3, 2023, the Company entered into a $1.225 billion Credit Agreement (as amended, the Credit Agreement) consisting of a $500 million revolving credit facility (the Revolving Facility), a $300 million Term Loan A Facility (the Term Loan A Facility) and a $425 million Term Loan B Facility (the Term Loan B Facility; together with the Revolving Facility and the Term Loan A Facility, collectively, the Facilities) in connection with the Spin-Off that occurred on the same date, maturing on July 3, 2028. As of December 31, 2024, the Company had no outstanding borrowings under the Revolving Facility, and availability of $499 million. The Term Loan B Facility was fully repaid in connection with the issuance of the 6.75% Senior Secured Notes due 2029 on April 4, 2024, as discussed below. The Term Loan A Facility was fully repaid in connection with the issuance of the 6.625% Senior Notes due 2032 on September 17, 2024, as discussed below.
Previous wording
We utilize certain arrangements with various financial institutions to sell eligible trade receivables from certain customers in North America and Europe. We may terminate any or all of these arrangements at any time subject to prior written notice. While we do not depend on these arrangements for our liquidity, if we elected to terminate these arrangements, there would be a one-time unfavorable timing impact on the collection of the outstanding receivables.
Current wording
We utilize certain arrangements with various financial institutions to sell eligible trade receivables from certain customers in North America and Europe. We may terminate any or all of these arrangements at any time subject to prior written notice. While we do not depend on these arrangements for our liquidity, if we elected to terminate these arrangements, there would be a one-time unfavorable timing impact on the collection of the outstanding receivables. During the year ended December 31, 2024, the Company sold $122 million of receivables under these arrangements.
Previous wording
As of December 31, 2023 the Company had cash and cash equivalent balance of $365 million, of which $347 million was held by our subsidiaries outside of the United States. We believe our existing cash and cash flows generated from operations and indebtedness incurred in conjunction with the Spin-Off discussed below will be responsive to the needs of our current and planned operations for at least the next 12 months and the foreseeable future thereafter.
Current wording
As of December 31, 2024 the Company had cash and cash equivalent balance of $484 million, of which $409 million was held by our subsidiaries outside of the United States. We believe our existing cash and cash flows generated from operations and the revolving credit facility will be responsive to the needs of our current and planned operations for at least the next 12 months and the foreseeable future thereafter.
Previous wording
On August 31, 2023 and November 15, 2023, the Company’s Board of Directors declared quarterly cash dividends of $0.25 per share of common stock. These dividends were paid on September 22, 2023 and December 15, 2023, respectively. On February 1, 2024, the Company’s Board of Directors declared quarterly cash dividends of $0.25 per share of common stock, payable on March 15, 2024.
Current wording
On February 1, 2024, May 9, 2024, August 1, 2024 and November 14, 2024, the Company’s Board of Directors declared quarterly cash dividends of $0.25 per share of common stock. These dividends were paid on March 15, 2024, June 14, 2024, September 13, 2024 and December 13, 2024, respectively. On February 13, 2025, the Company announced that its Board of Directors declared an increased quarterly cash dividend of $0.27 per share of common stock, payable on March 14, 2025.
Previous wording
Net cash provided by operating activities was $250 million and $303 million in the years ended December 31, 2023 and 2022, respectively. The decrease for the year ended December 31, 2023, compared with the year ended December 31, 2022, was primarily due to lower net earnings, partially offset by improved working capital.
Current wording
Net cash provided by operating activities was $308 million and $250 million in the years ended December 31, 2024 and 2023, respectively. The increase for the year ended December 31, 2024, compared with the year ended December 31, 2023, was primarily due to improved working capital and higher net earnings adjusted for non-cash items.
Previous wording
Net cash used in investing activities was $150 million and $105 million in the years ended December 31, 2023 and 2022, respectively. As a percentage of sales, capital expenditures were 4.3% and 3.2% for the years ended December 31, 2023 and 2022, respectively.
Current wording
Net cash used in investing activities was $101 million and $150 million in the years ended December 31, 2024 and 2023, respectively. As a percentage of sales, capital expenditures were 3.1% and 4.3% for the years ended December 31, 2024 and 2023, respectively.
Previous wording
Net cash provided by financing activities was $20 million during the year ended December 31, 2023 compared to net cash used in financing activities of $185 million in the year ended December 31, 2022. Net cash provided by financing activities during the year ended December 31, 2023 was primarily related to external borrowings, largely offset by payments to Former Parent.
Current wording
Net cash used in financing activities was $96 million during the year ended December 31, 2024 compared to net cash provided by financing activities of $20 million in the year ended December 31, 2023. Net cash used in financing activities during the year ended December 31, 2024 was primarily related to the repayment of Term Loan A and Term Loan B Facilities, stock repurchases, dividend payments to PHINIA stockholders, largely offset by the issuances of the 2029 Notes and 2032 Notes.
Previous wording
The Company’s significant cash requirements for contractual obligations as of December 31, 2023, primarily consisted of the principal and interest payments on its notes payable and long-term debt, non-cancelable lease obligations, and capital spending obligations. The principal amount of revolving credit facility, notes payable and long-term debt was $822 million as of December 31, 2023. The projected interest payments over the terms of that debt were $343 million as of December 31, 2023. Refer to Note 13, “Notes Payable and Debt,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information.
Current wording
The Company’s significant cash requirements for contractual obligations as of December 31, 2024, primarily consisted of the principal and interest payments on its notes payable and long-term debt, non-cancelable lease obligations, and capital spending obligations. The principal amount of revolving credit facility, notes payable and long-term debt was $1,001 million as of December 31, 2024. The projected interest payments over the terms of that debt were $399 million as of December 31, 2024. Refer to Note 12, “Notes Payable and Debt,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information.
Previous wording
As of December 31, 2023, non-cancelable lease obligations were $70 million. Refer to Note 21, “Leases and Commitments,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information. Capital spending obligations were $48 million as of December 31, 2023.
Current wording
As of December 31, 2024, non-cancelable lease obligations were $62 million. Refer to Note 19, “Leases and Commitments,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information. Capital spending obligations were $51 million as of December 31, 2024.
Previous wording
The Company’s policy is to fund its defined benefit pension plans in accordance with applicable government regulations and to make additional contributions when appropriate. At December 31, 2023, all legal funding requirements had been met. The Company contributed $5 million and $3 million to its defined benefit pension plans in the years ended December 31, 2023 and 2022, respectively.
Current wording
The Company’s policy is to fund its defined benefit pension plans in accordance with applicable government regulations and to make additional contributions when appropriate. At December 31, 2024, all legal funding requirements had been met. The Company contributed $5 million to its defined benefit pension plans in each of the years ended December 31, 2024 and 2023.
Showing the first 40 of 51 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
In the normal course of business, the Company is party to various commercial and legal claims, actions and complaints, including matters involving warranty claims, intellectual property claims, governmental investigations and related proceedings, including relating to alleged or actual violations of vehicle emissions standards, general liability and various other risks.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Commodities and Other Inflationary Impacts. Prices for commodities remain volatile, and since the beginning of 2021, the Company’s business has experienced price increases for base metals (e.g., steel, aluminum and nickel)
Previous report — wording carried elsewhere
•Sales increased $50 million related to certain contract manufacturing agreements with Former Parent that were entered into in connection with the Spin-Off. Sales from these agreements are expected to continue through 2024.
Previous report — wording carried elsewhere
(including 4.6% in the U.K.). The U.K. discount rate reflects the fact that the pension plan has been closed for new participants.