PHINIA INC.
For the period ended Dec 31, 2025. Filed Feb 12, 2026.
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.
FY2025 · Filed Feb 12, 2026
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 2024-12-31; filed 2025-02-13.
0001968915-25-000006
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-12.
0001968915-26-000023
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 128 previous paragraphs and 121 current paragraphs.
61 unchanged; 30 reworded; 26 added; 34 removed; 3 previous and 4 current paragraphs rearranged.
Tables are not compared: 5 previous and 9 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 (26)
Current report
On July 3, 2023, PHINIA became an independent publicly traded company as a result of the legal and structural separation of the Fuel Systems and Aftermarket businesses from BorgWarner Inc. (BorgWarner or Former Parent). The separation was completed in the form of a distribution of the outstanding common stock of PHINIA to holders of record of common stock of BorgWarner on a pro rata basis (the Spin-Off). In connection with the Spin-Off, we entered into an agreement with the Former Parent which governs the Company’s and the Former Parent’s respective rights, responsibilities and obligations after the distribution with respect to taxes for any tax period ending on or before the distribution date, as well as tax periods beginning before and ending after the distribution date (Tax Matters Agreement).
Current report
Acquisition of Swedish Electromagnet Invest AB (SEM)
Current report
On August 1, 2025, PHINIA completed the acquisition of Swedish Electromagnet Invest AB (SEM), a provider of advanced natural gas, hydrogen and other alternative fuel ignition systems, injector stators and linear position sensors, for $47 million, comprised of $15 million of cash consideration and $32 million cash used to extinguish debt assumed through the acquisition. See Note 2, “Acquisition”, for further discussion.
Current report
The automotive industry is currently grappling with renewed semi-conductor shortages, supply chain disruptions, and economic and geopolitical tensions. These factors may affect production, pricing, and consumer demand. In addition, new trade restrictions, including export controls, and/or increases in tariffs could have a material impact on our business, financial condition, or results of operations, including increasing our input costs and decreasing demand in the commercial vehicle (CV) and light vehicle (LV) markets, although the nature of those trade restrictions and tariffs remains unclear. These new trade restrictions and tariffs increase the risk for elevated inflation more generally, which may drive an increase in other input costs.
Current report
Use of Non-GAAP Financial Measures
Current report
This Form 10-K contains information about PHINIA’s financial results that is not presented in accordance with accounting principles generally accepted in the United States (GAAP). Such non-GAAP financial measures are reconciled to their most directly comparable GAAP financial measures in this Form 10-K. The reconciliations include all information reasonably available to the Company at the date of this Form 10-K and the adjustments that management can reasonably predict.
Current report
Management believes that these non-GAAP financial measures are useful to management, investors, and banking institutions in their analysis of the Company's business and operating performance. Management also uses this information for operational planning and decision-making purposes.
Current report
Non-GAAP financial measures are not and should not be considered a substitute for any GAAP measure. Additionally, because not all companies use identical calculations, the non-GAAP financial measures as presented by PHINIA may not be comparable to similarly titled measures reported by other companies.
Current report
Restructuring expense
Current report
Restructuring expense was $17 million and $14 million for the year ended December 31, 2025 and 2024, respectively. See Note 4, “Restructuring”, for further discussion.
Current report
Other operating expense, net
Current report
Interest income
Current report
Interest expense
Current report
Other postretirement expense
Current report
Provision for income taxes
Current report
In 2025, the Company recognized discrete tax benefits of $11 million related to unremitted earnings as a result of a favorable change in withholding tax rates and favorable provision to return adjustments of $21 million in various jurisdictions partially offset by an increase in pre-Spin-off and post-Spin-off uncertain tax positions of $21 million and $5 million, respectively.
Current report
The Company’s net earnings per diluted share was $3.24 and $1.76 for the years ended December 31, 2025 and 2024, respectively. The Company’s adjusted net earnings per diluted share was $4.96 and $3.86 for the years ended December 31, 2025 and 2024, respectively. The Company defines adjusted net earnings per diluted share, a non-GAAP measure, as net earnings per diluted share adjusted to exclude: (i) the impact of restructuring expense, separation-related costs, merger and acquisition costs, impairment charges and other gains, losses and tax effects and adjustments not reflective of the Company’s ongoing operations; and (ii) acquisition-related intangibles amortization expense because it pertains to non-cash expenses that the Company does not use to evaluate core operating performance. Management believes that adjusted net earnings per diluted share is useful to investors in assessing the Company’s ongoing financial performance, as it provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the Company’s core operating performance.
Current report
In the fourth quarter of 2025, the Company made a strategic decision to shift a significant portion of the OES business, previously reported in its Aftermarket segment, to the Fuel Systems segment, as distribution will now be handled by the Fuel Systems locations that manufacture the products. This is expected to streamline the sales structure to external customers while also reducing administrative efforts. The reporting segment disclosures have been updated accordingly which included recasting prior period information for the new reporting structure.
Current report
The Fuel Systems segment’s Segment Adjusted Operating margin was 11.2% for the year ended December 31, 2025, compared to 10.7% for the year ended December 31, 2024. The Segment Adjusted Operating margin increase was primarily due to R&D savings and overhead cost control measures, partially offset by unfavorable mix.
Current report
The Aftermarket segment’s Segment Adjusted Operating margin was 16.2% for the year ended December 31, 2025, compared to 16.5% for the year ended December 31, 2024. The Segment Adjusted Operating margin decreased primarily due to the dilutive impact of tariff recoveries.
Current report
Senior Notes
Current report
Net cash provided by operating activities was $312 million for the year ended December 31, 2025, comparable with $308 million in the year ended December 31, 2024.
Current report
Net cash used in financing activities was $310 million and $96 million during the years ended December 31, 2025 and 2024, respectively. The increase is primarily related to the timing of issuance and repayment of debt.
Current report
On October 15, 2025, the Company entered into a settlement agreement (the “Settlement Agreement”) with the Former Parent to resolve previously disclosed claims asserted by the Former Parent against the Company, and counterclaims asserted by the Company against the Former Parent, in Delaware Superior Court related to payments and other obligations under the Tax Matters Agreement. The Settlement Agreement provides for, among other things, the Company to make payments to the Former Parent pursuant to the following schedule: an initial payment of $31 million, which was made in the fourth quarter of 2025, a second payment of $21 million, which was made in the first quarter of 2026, and a third and final payment of $26 million to be made over the course of 2026 as the Company receives refunds related to certain indirect tax payments prior to the Spin-Off from various tax authorities. The Company expects that a substantial portion of these payments will be funded through the refunds obtained by the Company from tax authorities that relate to the indirect tax payments made prior to the Spin-Off, with the remaining portion of the payments to be funded with available liquidity. The Company recorded a $39 million loss in the year ended December 31, 2025 in connection with the settlement, representing the aggregate amount of the payments to be made to the Former Parent less the amount the Company had previously recorded for the matter.
Current report
In addition, the Settlement Agreement required the Former Parent to pay to the Company approximately $7 million, which was received in the fourth quarter of 2025, related to the reimbursement of certain pre-Spin-Off corporate income taxes. The Settlement Agreement also provides for the release of certain other claims asserted by the Former Parent against the Company.
Current report
In connection with the Settlement Agreement, the Company and the Former Parent also entered into an amendment to the Tax Matters Agreement to provide for, among other things, clarification of the Former Parent’s responsibility for certain pre-Spin-Off tax liabilities and the Company’s ability to obtain and use the benefit of certain pre-Spin-Off credits and other offsets. Although the credits remain subject to completion of necessary filings and governmental approvals, the Company believes these credits can result in the Company receiving up to approximately $29 million in cash.
Removed paragraphs (34)
Previous report
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 report
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 report
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 report
Relationship with BorgWarner
Previous report
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 report
Net sales
Previous report
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 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.
Previous 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.
Previous report
•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 report
•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 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.
Previous report
•Cost of sales was impacted by lower supplier costs of approximately $56 million arising primarily from supplier savings and recoveries.
Previous report
•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 report
•Employee costs increased cost of sales by $27 million, primarily related to inflation and incentive compensation.
Previous report
•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 report
•Other manufacturing costs increased cost of sales by $7 million compared to the year ended December 31, 2023.
Previous report
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 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.
Previous report
•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 report
•Intangible amortization expense was $28 million for each of the years ended December 31, 2024 and 2023.
Previous report
•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 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.
Previous 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.
Previous report
•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 report
•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 report
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 report
Adjusted earnings per diluted share
Previous report
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 report
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 report
Issuance of Senior Notes
Previous report
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 report
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 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.
Reworded paragraphs (30)
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), 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.
Current wording
PHINIA is a leader in the development, design and manufacture of integrated components and systems that are designed to optimize performance, enhance efficiency and reduce emissions in combustion and hybrid propulsion systems for commercial vehicles and industrial applications (medium-duty and heavy-duty trucks, buses and other off-highway construction, marine, agricultural and aerospace and defense), 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 or exceed evolving and 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
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 wording
We expect improved earnings and cash generation in 2026, as we expect foreign currency, operational efficiencies, and share gains to more than offset a softening original equipment (OE) market. Continued economic and geopolitical uncertainty is expected to continue to impact LV and CV volumes. In our key markets for 2026, LV and CV volumes are expected to decline by mid-single and low-single digit percentages, respectively. Assuming constant foreign exchange rates and excluding sales from acquisitions, we expect a modest increase in sales. Additionally, we expect to continue to be impacted by other macroeconomic challenges in 2026, including but not limited to elevated inflation, supply chain constraints, market volatility, higher tariffs (particularly in Mexico and China), government shutdowns, and changes in international trade relations.
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, 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.
Current wording
Despite the near-term uncertainties, the Company maintains a positive long-term outlook for its global business and is committed to new product development and strategic investments to support its product leadership and growth strategies. 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 hybrid electric vehicles, adoption of additional product offerings enabling zero- and lower-carbon fuel solutions for combustion vehicles, and expansion in the aerospace and defense industry. 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
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:
Current wording
Net sales for the year ended December 31, 2025 totaled $3,483 million, an increase of $80 million, or 2.4%, from the year ended December 31, 2024. Cost of sales and cost of sales as a percentage of net sales were $2,721 million and 78.1%, respectively, during the year December 31, 2025, compared to $2,647 million and 77.8%, respectively, during the year ended December 31, 2024. The change in net sales, cost of sales, and gross profit for the year ended December 31, 2025 was primarily driven by the impacts below.
Previous wording
Selling, general and administrative expenses
Current wording
Selling, general and administrative expense (SG&A)
Previous 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:
Current wording
SG&A for the year ended December 31, 2025 was $445 million as compared to $442 million for the year ended December 31, 2024. SG&A as a percentage of net sales was 13% for the years ended December 31, 2025 and 2024.
Previous 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:
Current wording
Other operating expense, net was $46 million and $41 million for the year ended December 31, 2025 and 2024, respectively. The change in Other operating expense, net was primarily driven by an increase in separation-related costs, primarily from a $39 million loss in connection with the settlement of separation-related claims with the Former Parent, partially offset by the non-recurrence of non-cash impairment expense related to the write down of property, plant and equipment associated with a Fuel Systems manufacturing plant in Europe. Other operating expense, net was comprised of the following:
Previous 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.
Current wording
Equity in affiliates’ earnings, net of tax was $15 million and $11 million in the years ended December 31, 2025 and 2024, respectively. This line item is driven by the results of the Company’s unconsolidated joint venture.
Previous 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.
Current wording
Interest income was $14 million and $16 million in the years ended December 31, 2025 and 2024, respectively. The decrease was primarily due to decreased cash and cash equivalents balances, as well as lower interest rates on cash and cash equivalents balances.
Previous wording
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 wording
Interest expense was $81 million and $99 million in the years ended December 31, 2025 and 2024, respectively. The decrease was primarily related to the loss on extinguishment as a result of the restructuring of the Company’s debt positions in 2024. See Note 14, “Notes Payable and Debt”, for further discussion.
Previous 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.
Current wording
Other postretirement expense was $4 million and de minimus in the years ended December 31, 2025 and 2024, respectively. The increase in other postretirement expense for the year ended December 31, 2025 was primarily due to higher interest and inflationary costs in 2025.
Previous 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.
Current wording
Provision for income taxes was $68 million for the year ended December 31, 2025 resulting in an effective tax rate of 34%. This compared to $108 million or 58% for the year ended December 31, 2024.
Previous wording
The Company defines adjusted net earnings per diluted share as net earnings per share adjusted to exclude the tax-effected impact of restructuring expense, separation and transaction costs, intangible asset amortization, impairment charges, other net expenses, and other gains, losses and tax amounts not reflective of the Company’s ongoing operations.
Current wording
Net earnings per diluted share and adjusted net earnings per diluted share
Previous wording
Segment Adjusted Operating Income (AOI) is the measure of segment income or loss used by the Company. Segment AOI is comprised of segment operating income adjusted for restructuring, separation and transaction costs, intangible asset amortization expense, impairment charges and other items not reflective of ongoing operating income or loss. The Company believes Segment AOI is most reflective of the operational profitability or loss of its reportable segments.
Current wording
Segment Adjusted Operating Income (AOI) is the measure of segment income or loss used by the Company. Segment AOI is comprised of segment operating income adjusted for restructuring, separation-related costs, merger and acquisition costs, intangible asset amortization expense, impairment charges and other items not reflective of ongoing operating income or loss. The Company believes Segment AOI is most reflective of the operational profitability or loss of its reportable segments.
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 $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.
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 $104 million and $92 million for the years ended December 31, 2025 and 2024, respectively. The increase in corporate expenses was primarily related to additional costs resulting from moving to a fully staffed standalone company and exiting the transition service agreements with the Former Parent and the addition of a second tranche of performance stock units under the Company's stock incentive plan.
Previous 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.
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, 2025, the Company had no outstanding borrowings under the Revolving Facility, and availability of $500 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
Previous wording
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 wording
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 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.
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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.
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, 2025, the Company sold $162 million of receivables under these arrangements.
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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.
Current wording
As of December 31, 2025 the Company had cash and cash equivalent balance of $359 million, of which $330 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 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.
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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.
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On February 13, 2025, May 21, 2025, July 31, 2025 and October 30, 2025, the Company’s Board of Directors declared quarterly cash dividends of $0.27 per share of common stock. These dividends were paid on March 14, 2025, June 16, 2025, September 12, 2025 and December 12, 2025, respectively. On January 29, 2026, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.30 per share of common stock, payable on March 20, 2026.
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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.
Current wording
Net cash used in investing activities was $132 million and $101 million in the years ended December 31, 2025 and 2024, respectively, primarily related to capital expenditures and the SEM acquisition. As a percentage of sales, capital expenditures were 3.6% and 3.1% for the years ended December 31, 2025 and 2024, respectively.
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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.
Current wording
The Company’s significant cash requirements for contractual obligations as of December 31, 2025, 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 Facility, notes payable and long-term debt was $981 million as of December 31, 2025. The projected interest payments over the terms of that debt were $333 million as of December 31, 2025. Refer to Note 14, “Notes Payable and Debt,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information.
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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.
Current wording
As of December 31, 2025, non-cancelable lease obligations were $58 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 $37 million as of December 31, 2025.
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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.
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, 2025, all legal funding requirements had been met. The Company contributed $8 million and $5 million to its defined benefit pension plans in the years ended December 31, 2025 and 2024, respectively.
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The Company expects to contribute a total of $5 million to $9 million into its defined benefit pension plans during 2025. Of the $5 million to $9 million in projected 2025 contributions, $2 million are contractually obligated, while any remaining payments would be discretionary.
Current wording
The Company expects to contribute a total of $12 million to $14 million into its defined benefit pension plans during 2026.
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The funded status of all pension plans was a net unfunded position of $113 million and $133 million at December 31, 2024 and 2023, respectively. The decrease in the net unfunded position was a result of higher discount rates, partially offset by lower asset returns.
Current wording
The funded status of all pension plans was a net unfunded position of $142 million and $113 million at December 31, 2025 and 2024, respectively. The increase in the net unfunded position was a result of higher interest costs, partially offset by higher asset returns.
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It is not possible to predict with certainty whether or not the Company will ultimately be successful in any of these commercial and legal matters or, if not, what the impact might be. The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in commercial and legal matters that could affect the amount of any accrual and developments that would make a loss contingency both probable and reasonably estimable. If a loss contingency is not both probable and reasonably estimable, the Company does not establish an accrued liability. Except as set forth below, the Company’s management does not expect that an adverse outcome in any of these commercial and legal claims, actions and complaints that are currently pending will have a material adverse effect on the Company’s results of operations, financial position or cash flows. An adverse outcome could, nonetheless, be material to the results of operations, financial position or cash flows.
Current wording
It is not possible to predict with certainty whether or not the Company will ultimately be successful in any of these commercial and legal matters or, if not, what the impact might be. The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in commercial and legal matters that could affect the amount of any accrual and developments that would make a loss contingency both probable and reasonably estimable. If a loss contingency is not both probable and reasonably estimable, the Company does not establish an accrued liability. The Company’s management does not expect that an adverse outcome in any of these commercial and legal claims, actions and complaints that are currently pending will have a material adverse effect on the Company’s results of operations, financial position or cash flows. An adverse outcome could, nonetheless, be material to the results of operations, financial position or cash flows.
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At December 31, 2024, the total accrued warranty liability was $61 million. The accrual is represented as $36 million in Other current liabilities and $25 million in Other non-current liabilities on the Consolidated Balance Sheets.
Current wording
At December 31, 2025, the total accrued warranty liability was $74 million. The accrual is represented as $35 million in Other current liabilities and $39 million in Other non-current liabilities on the Consolidated Balance Sheets.
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Actual returns on U.K. pension assets were (6.2)% and 2.4% for the years ended December 31, 2024 and 2023, respectively, compared to the expected rate of return assumption of 5.25% and 5.5%, respectively, for the same years ended.
Current wording
Actual returns on U.K. pension assets were 3.7% and (6.2)% for the years ended December 31, 2025 and 2024, respectively, compared to the expected rate of return assumption of 5.75% and 5.25%, respectively, for the same years ended.
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•Discount rate The discount rate is used to calculate pension obligations. In determining the discount rate, the Company utilizes a full-yield approach in the estimation of service and interest components by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. For its significant plans, the Company used discount rates ranging from 1.7% to 22.3% to determine its pension obligations as of December 31, 2024, including weighted average discount rates of 5.9% (including 5.6% in the U.K.). The U.K. discount rate reflects the fact that the pension plan has been closed for new participants.
Current wording
•Discount rate The discount rate is used to calculate pension obligations. In determining the discount rate, the Company utilizes a full-yield approach in the estimation of service and interest components by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. For its significant plans, the Company used discount rates ranging from 2.45% to 23.5% to determine its pension obligations as of December 31, 2025, including weighted average discount rates of 5.8% (including 5.5% in the U.K.). The U.K. discount rate reflects the fact that the pension plan has been closed for new participants.
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Net sales and Cost of sales
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Equity in affiliates’ earnings, net of tax
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The following table presents the year-over-year change in net sales and Segment AOI for the Company’s reportable segments for the year ended:
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Facility was fully repaid in connection with the issuance of the 6.625% Senior Notes due 2032 on September 17, 2024, as discussed below.
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Cost of sales and gross profit
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•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.
Previous report — wording carried elsewhere
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