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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Unless the context requires otherwise, references in this Annual Report on Form 10-K (Form 10-K) to “PHINIA,” the “Company,” “we, “our” or “us” refer to PHINIA Inc. and its consolidated subsidiaries.
This Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements other than historical fact that provide current expectations or forecasts of future events based on certain assumptions and are not guarantees of future performance. Forward-looking statements use words such as “anticipate,” “believe,” “continue,” “could,” “designed,” “effect,” “estimate,” “evaluate,” “expect,” “forecast,” “goal,” “initiative,” “intend,” “likely,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “pursue,” “seek,” “should,” “target,” “when,” “will,” “would,” or other words of similar meaning. Forward-looking statements are subject to risks, uncertainties, and factors relating to our business and operations, all of which are difficult to predict and which could cause our actual results to differ materially from the expectations expressed in or implied by such forward-looking statements. Risks, uncertainties, and factors that could cause actual results to differ materially from those implied by these forward-looking statements include, but are not limited to:
•adverse changes in general business and economic conditions, including recessions, adverse market conditions or downturns impacting the vehicle and industrial equipment industries;
•our ability to deliver new products, services and technologies in response to changing consumer preferences, increased regulation of greenhouse gas emissions, and acceleration of the market for electric vehicles;
•competitive industry conditions;
•failure to identify, consummate, effectively integrate or realize the expected benefits from acquisitions or partnerships;
•pricing pressures from original equipment manufacturers (OEMs);
•inflation rates and volatility in the costs of commodities used in the production of our products;
•changes in U.S. administrative policy, including changes to existing trade agreements and any resulting changes in international trade relations;
•our ability to protect our intellectual property;
•failure of or disruption in our information technology infrastructure, including a disruption related to cybersecurity;
•our ability to identify, attract, retain and develop a qualified global workforce;
•difficulties launching new vehicle programs;
•failure to achieve the anticipated savings and benefits from restructuring and product portfolio optimization actions;
•extraordinary events, including natural disasters or extreme weather events, political disruptions, terrorist attacks, pandemics or other public health crises, and acts of war;
•risks related to our international operations;
•the impact of economic, political, and market conditions on our business in China;
•our reliance on a limited number of OEM customers;
•supply chain disruptions;
•work stoppages, production shutdowns and similar events or conditions;
•governmental investigations and related proceedings regarding vehicle emissions standards;
•current and future environmental and health and safety laws and regulations;
•the impact of climate change and regulations related to climate change;
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•liabilities related to product warranties, litigation and other claims;
•compliance with legislation, regulations, and policies, investigations and legal proceedings, and new interpretations of existing rules and regulations;
•tax audits and changes in tax laws or tax rates taken by taxing authorities;
•volatility in the credit market environment;
•impairment charges on goodwill and indefinite-lived intangible assets;
•the impact of changes in interest rates and asset returns on our pension funding obligations;
•the impact of restrictive credit agreement covenants and requirements on our financial and operating flexibility;
•our ability to achieve some or all of the benefits that we expect to achieve from the Spin-Off (as defined below);
•a delay or inability to transition key infrastructure, services and solutions in connection with the Spin-Off;
•a determination that the Spin-Off does not qualify as tax-free for U.S. federal income tax purposes;
•restrictions under the Tax Matters Agreement (as defined below);
•difficulty maintaining existing customer relationships and obtaining new customers as a result of being a smaller company following the Spin-Off;
•our or BorgWarner Inc.’s (BorgWarner) failure to perform under various transaction agreements executed in connection with the Spin-Off;
•actual or potential conflicts of interests of certain of our employees related to their financial interests in BorgWarner;
•our limited history as an independent, publicly traded company; and
•other risks and uncertainties described in Item 1A, “Risk Factors” and in our other reports filed from time to time with the Securities and Exchange Commission (the SEC).
We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Use of Non-GAAP Financial Measures
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 provision of these comparable GAAP financial measures for 2023 is not intended to indicate that PHINIA is explicitly or implicitly providing projections on those GAAP financial measures, and actual results for such measures are likely to vary from those presented. 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.
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.
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.
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Item 1. Business
PHINIA Inc. (together with its consolidated subsidiaries, the Company or PHINIA) is a Delaware corporation incorporated in 2023. The Company 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 original equipment manufacturers (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 original equipment service (OES) solutions and remanufactured products as well as an expanded range of products for the independent (non-OEM) aftermarket.
Transition to Standalone Company
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).
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.
Narrative Description of Reportable Segments
The Company reports its results under two reportable segments: Fuel Systems and Aftermarket.
Net sales by reportable segment were as follows:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| (in millions) | 2023 | | 2022 | | 2021 |
| Fuel Systems | $ | 2,407 | | | $ | 2,293 | | | $ | 2,233 | |
| Aftermarket | 1,329 | | | 1,284 | | | 1,218 | |
| Inter-segment eliminations | (236) | | | (229) | | | (224) | |
| Net sales | $ | 3,500 | | | $ | 3,348 | | | $ | 3,227 | |
The sales information presented above does not include the sales by the Company’s unconsolidated joint venture (see sub-heading “Joint Venture” below). Such unconsolidated sales totaled approximately $228 million, $235 million, and $201 million for the years ended December 31, 2023, 2022 and 2021, respectively. In addition, the sales information for the year ended December 31, 2023 includes $50 million of certain contract manufacturing agreements with BorgWarner that were entered into at the time of the Spin-Off.
The Fuel Systems segment provides advanced fuel injection systems, fuel delivery modules, canisters, sensors, electronic control modules and associated software. Our highly engineered fuel injection systems portfolio includes pumps, injectors, fuel rail assemblies, engine control modules, and complete systems, including software and calibration services, that reduce emissions and improve fuel economy for traditional and hybrid applications.
The Aftermarket segment sells products to independent aftermarket customers and OES customers. Its product portfolio includes a wide range of products as well as maintenance, test equipment and vehicle diagnostics solutions. The Aftermarket segment also includes sales of starters and alternators to OEMs.
Financial Information About Reportable Segments
Refer to Note 24, “Reportable Segments and Related Information,” to the Consolidated Financial Statements in Item 8 of this report for financial information about the Company's reportable segments.
As of December 31, 2023, the Company had one unconsolidated joint venture in which it exercises significant influence but has a less-than-100% ownership interest. Results from the unconsolidated joint venture are reported by the Company using the equity method of accounting pursuant to which the Company records its proportionate share of the joint venture’s income or loss each period.
Management of the unconsolidated joint venture is shared with the Company’s joint venture partner. Certain information concerning the Company's unconsolidated joint venture is set forth below:
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| Joint venture | | Products | | Year organized | | Percentage
owned by the
Company | | Location of
operation | | Joint venture partner |
| Delphi-TVS Diesel Systems Ltd | | Diesel fuel injection equipment | | 2001 | | 52.5% | | India | | Cheema TVS Industrial Ventures Private Limited |