Phinia Inc.
10/29/2026 | Press release | Distributed by Public on 10/29/2026 09:03
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
INTRODUCTION
PHINIA is a diversified industrial supplier and global leader in the development of fuel systems, electrical systems, and aftermarket solutions, with a strong portfolio of trusted brands that includes DELPHI®, DELCO REMY®, HARTRIDGE™ and stoba®. With over 100 years of manufacturing expertise and industry relationships, PHINIA has approximately 13,500 talented employees and over 40 locations in 21 countries and is headquartered in Auburn Hills, Michigan, USA. Our systems and solutions are designed to keep combustion engines operating at peak performance across a variety of applications: medium- and heavy-duty commercial vehicle (on-road vehicles used for commercial transport classified as class 4-8, 14,001 pounds or heavier), light commercial vehicle (on-road vehicles used for commercial transport classified as class 1-3, 14,000 pounds or lighter), light passenger vehicle (on-road vehicles used primarily for carrying passengers), and off-highway, industrial, and other (including construction and agricultural machinery, vocational vehicles, marine, industrial applications, power generation, and aerospace and defense). PHINIA's service solutions include vehicle repair and replacement parts, offering both new and remanufactured products through the original equipment manufacturer dealer network and the independent aftermarket channel.
Key Trends and Economic Factors
The global economy continues to grapple with semi-conductor shortages, supply chain disruptions, and economic and geopolitical tensions. These factors have affected and may continue to affect production, pricing, and consumer demand. In addition, evolving trade restrictions, including export controls, and increases in tariffs could have a material impact on our business, financial condition, or results of operations, including increasing our input costs and decreasing the demand for our products. Although the nature of these trade restrictions and tariffs continue to change, they increase the risk for elevated inflation more generally, which may drive and has driven an increase in our other input costs.
Trade Policy and Tariffs
As of September 30, 2026, we expect to receive tariff reimbursements from the federal government related to the International Emergency Economic Powers Act (IEEPA) and tariff rulings from the United States Supreme Court and the Court of International Trade. Although we have started to receive reimbursements for certain claims, the ultimate timing of collection is uncertain and subject to changes in trade policy. The tariff environment remains highly dynamic, and the specific tariffs applicable to goods imported continue to evolve, including with respect to the U.S.-Mexico-Canada Agreement, which is currently under trilateral review.
Outlook
We expect improved earnings and cash generation in 2026 as compared to 2025, 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 light vehicle (LV) volumes, which are expected to decline by mid-single digit percentages in our key markets. Commercial vehicle (CV) volumes are now expected to increase by low-single digit percentages in our key markets. 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 the fourth quarter of 2026, which may include but are not limited to elevated inflation, supply chain constraints, market volatility, higher tariffs (particularly in Mexico and China), evolving trade restrictions, government shutdowns, geopolitical tensions, and changes in international trade relations.
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 expansion in the CV market, growth in overall
vehicle parc that supports aftermarket solutions demand, increased consumer interest in hybrid and plug-in hybrid electric vehicles, adoption of additional product offerings enabling lower-carbon fuel solutions for combustion vehicles, and continued 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.
Use of Non-GAAP Financial Measures
This Form 10-Q 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-Q. The reconciliations include all information reasonably available to the Company at the date of this Form 10-Q 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.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2026 vs. Three Months Ended September 30, 2025
The following table presents a summary of the Company's operating results:
| Three Months Ended September 30, | |||||||||||||||||||||||
| (in millions) | 2026 | 2025 | |||||||||||||||||||||
| Net sales | % of net sales | % of net sales | |||||||||||||||||||||
| Power Systems | $ | 599 | 65.7 | % | $ | 610 | 67.2 | % | |||||||||||||||
| Aftermarket Solutions | 351 | 38.5 | % | 337 | 37.1 | % | |||||||||||||||||
| Inter-segment eliminations | (38) | (4.2) | % | (39) | (4.3) | % | |||||||||||||||||
| Total net sales | 912 | 100.0 | % | 908 | 100.0 | % | |||||||||||||||||
| Cost of sales | 708 | 77.6 | % | 708 | 78.0 | % | |||||||||||||||||
| Gross profit | 204 | 22.4 | % | 200 | 22.0 | % | |||||||||||||||||
| Selling, general and administrative expenses | 111 | 12.2 | % | 105 | 11.6 | % | |||||||||||||||||
| Restructuring expense | 5 | 0.5 | % | 4 | 0.4 | % | |||||||||||||||||
| Other operating expense, net | 4 | 0.5 | % | 57 | 6.3 | % | |||||||||||||||||
| Operating income | 84 | 9.2 | % | 34 | 3.7 | % | |||||||||||||||||
| Equity in affiliates' earnings, net of tax | (4) | (0.4) | % | (3) | (0.3) | % | |||||||||||||||||
| Interest income | (2) | (0.2) | % | (3) | (0.3) | % | |||||||||||||||||
| Interest expense | 21 | 2.3 | % | 20 | 2.2 | % | |||||||||||||||||
| Other postretirement (income) expense, net | (1) | (0.2) | % | 1 | 0.1 | % | |||||||||||||||||
| Earnings before income taxes | 70 | 7.7 | % | 19 | 2.0 | % | |||||||||||||||||
| Provision for income taxes | 3 | 0.4 | % | 6 | 0.7 | % | |||||||||||||||||
| Net earnings | $ | 67 | 7.3 | % | $ | 13 | 1.3 | % | |||||||||||||||
Net sales and Cost of sales
Net sales for the three months ended September 30, 2026 totaled $912 million, an increase of $4 million, or 0.4%, compared to the three months ended September 30, 2025. Cost of sales and cost of sales as a percentage of net sales were $708 million and 78% during both the three months ended September 30, 2026 and 2025 . The change in net sales, cost of sales, and gross profit for the three months ended September 30, 2026 was primarily driven by the impacts below.
| (in millions) | Net Sales | Cost of Sales | Gross Profit | ||||||||||||||
| Three Months Ended September 30, 2025 | $ | 908 | $ | 708 | $ | 200 | |||||||||||
| Volume and mix | 31 | 19 | 12 | ||||||||||||||
| Customer pricing | (10) | - | (10) | ||||||||||||||
| Supplier costs | - | (13) | 13 | ||||||||||||||
|
Tariff cost and recovery1
|
(21) | (24) | 3 | ||||||||||||||
| Employee costs | - | 10 | (10) | ||||||||||||||
| Foreign currency and other | 4 | 8 | (4) | ||||||||||||||
| Three Months Ended September 30, 2026 | $ | 912 | $ | 708 | $ | 204 | |||||||||||
|
1 Cost of sales in the three months ended September 30, 2026 included a benefit related to one-time tariff refunds, while net sales included a reduction related to estimated amounts to be returned to customers and the reversal of amounts previously expected to be recovered from customers related to these amounts.
|
||
Selling, general and administrative expenses (SG&A)
SG&A for the three months ended September 30, 2026 was $111 million as compared to $105 million for the three months ended September 30, 2025. SG&A as a percentage of net sales was 12% for the three months ended September 30, 2026 and 2025. SG&A expenses increased period-over-period, primarily attributable to timing of R&D costs.
| Three Months Ended September 30, | |||||||||||||||||
| (in millions) | 2026 | 2025 | Change ($) | ||||||||||||||
| Employee costs | $ | 42 | $ | 43 | $ | (1) | |||||||||||
| Research & development | 25 | 20 | 5 | ||||||||||||||
| Amortization of acquisition-related intangibles | 8 | 8 | - | ||||||||||||||
| Information technology | 4 | 3 | 1 | ||||||||||||||
| Other | 32 | 31 | 1 | ||||||||||||||
| Selling, general and administrative expenses | $ | 111 | $ | 105 | $ | 6 | |||||||||||
Restructuring expense
Restructuring expense was $5 million and $4 million for the three months ended September 30, 2026 and 2025, respectively. See Note 4, "Restructuring", for further discussion.
Other operating expense, net
Other operating expense, net was $4 million and $57 million for the three months ended September 30, 2026 and 2025, respectively. The change in other operating expense, net was primarily driven by a decrease in separation-related costs due to the Company recognizing a $39 million loss in connection with the settlement of separation-related claims with the Former Parent in the prior period. Other operating expense, net was comprised of the following:
| Three Months Ended September 30, | |||||||||||||||||
| (in millions) | 2026 | 2025 | Change ($) | ||||||||||||||
| Merger and acquisition expense | $ | 2 | $ | 4 | $ | (2) | |||||||||||
| Separation-related costs | 2 | 53 | (51) | ||||||||||||||
| Losses (gains) for other one-time events | 1 | (2) | 3 | ||||||||||||||
| Other operating (income) expense, net | (1) | 2 | (3) | ||||||||||||||
| Other operating expense, net | $ | 4 | $ | 57 | $ | (53) | |||||||||||
Equity in affiliates' earnings, net of tax
Equity in affiliates' earnings, net of tax was $4 million and $3 million in the three months ended September 30, 2026 and 2025, respectively. This line item is driven by the results of the Company's unconsolidated joint venture.
Interest income
Interest income was $2 million and $3 million in the three months ended September 30, 2026 and 2025, respectively. The interest income is primarily related to interest earned on funds held in money market, local overnight deposits, and short term investments.
Interest expense
Interest expense was $21 million and $20 million in the three months ended September 30, 2026 and 2025, respectively.
Provision for income taxes
Provision for income taxes was $3 million for the three months ended September 30, 2026, resulting in an effective tax rate of 4%. This is compared to $6 million, or 32%, for the three months ended September 30, 2025. The effective tax rate for the three months ended September 30, 2026 decreased as compared to the prior year due to favorable provision to return adjustments for tax returns filed in the period and a reduction in U.S. tax on foreign earnings.
For further details, see Note 7, "Income Taxes," to the Condensed Consolidated Financial Statements for the three months ended September 30, 2026 and 2025.
Net earnings per diluted share and adjusted net earnings per diluted share
The Company's net earnings per diluted share was $1.80 and $0.33 for the three months ended September 30, 2026 and 2025, respectively. The Company's adjusted net earnings per diluted share was $1.83 and $1.59 for the three months ended September 30, 2026 and 2025, 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.
The following table provides a reconciliation of net earnings per diluted share to adjusted net earnings per diluted share:
| Three Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net earnings per diluted share | $ | 1.80 | $ | 0.33 | |||||||
| Amortization of acquisition-related intangibles | 0.22 | 0.20 | |||||||||
| Restructuring expense | 0.13 | 0.10 | |||||||||
| Merger and acquisition expense | 0.05 | 0.10 | |||||||||
| Separation-related benefits | 0.05 | 1.34 | |||||||||
| Losses (gains) for other one-time events | 0.03 | (0.05) | |||||||||
| Tax effects and adjustments | (0.45) | (0.43) | |||||||||
| Adjusted net earnings per diluted share | $ | 1.83 | $ | 1.59 | |||||||
Results by Reportable Segment for the three months ended September 30, 2026 and 2025
The Company's business is comprised of two reportable segments: Power Systems and Aftermarket Solutions.
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 Solutions segment, to the Power Systems segment, as distribution will now be handled by the Power 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.
Segment 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, acquisition-related 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.
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 $26 million for each of the three months ended September 30, 2026 and 2025.
Refer to Note 21, "Reportable Segments and Related Information" to the Condensed Consolidated Financial Statements, for more information.
The following table presents Net sales and Segment AOI for the Company's reportable segments:
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| (in millions) | Net Sales to Customers | Segment AOI | % Margin | Net Sales to Customers | Segment AOI | % Margin | |||||||||||||||||||||||||||||
| Power Systems | $ | 561 | $ | 68 | 12.1 | % | $ | 571 | $ | 76 | 13.3 | % | |||||||||||||||||||||||
| Aftermarket Solutions | 351 | 60 | 17.1 | % | 337 | 51 | 15.1 | % | |||||||||||||||||||||||||||
| Totals | $ | 912 | $ | 128 | $ | 908 | $ | 127 | |||||||||||||||||||||||||||
The following table presents the year-over-year change in net sales and Segment AOI for the Company's reportable segments for the three months ended:
| Power Systems | Aftermarket Solutions | ||||||||||||||||||||||||||||||||||
| (in millions) | Net sales | Segment AOI | % Margin | Net sales | Segment AOI | % Margin | |||||||||||||||||||||||||||||
| September 30, 2025 | $ | 571 | $ | 76 | 13.3 | % | $ | 337 | $ | 51 | 15.1 | % | |||||||||||||||||||||||
| Core business drivers | (5) | (6) | (1.0) | % | 26 | 9 | 1.4 | % | |||||||||||||||||||||||||||
| Tariff cost and recovery | (10) | 2 | 0.6 | % | (11) | 1 | 0.8 | % | |||||||||||||||||||||||||||
| Foreign currency, SG&A and all other | 5 | (4) | (0.8) | % | (1) | (1) | (0.2) | % | |||||||||||||||||||||||||||
| September 30, 2026 | $ | 561 | $ | 68 | 12.1 | % | $ | 351 | $ | 60 | 17.1 | % | |||||||||||||||||||||||
RESULTS OF OPERATIONS
Nine Months Ended September 30, 2026 vs. Nine Months Ended September 30, 2025
The following table presents a summary of the Company's operating results:
| Nine Months Ended September 30, | |||||||||||||||||||||||
| (in millions) | 2026 | 2025 | |||||||||||||||||||||
| Net sales | % of net sales | % of net sales | |||||||||||||||||||||
| Power Systems | $ | 1,791 | 65.6 | % | $ | 1,731 | 66.7 | % | |||||||||||||||
| Aftermarket Solutions | 1,036 | 37.9 | % | 977 | 37.7 | % | |||||||||||||||||
| Inter-segment eliminations | (97) | (3.5) | % | (114) | (4.4) | % | |||||||||||||||||
| Total net sales | 2,730 | 100.0 | % | 2,594 | 100.0 | % | |||||||||||||||||
| Cost of sales | 2,122 | 77.7 | % | 2,025 | 78.1 | % | |||||||||||||||||
| Gross profit | 608 | 22.3 | % | 569 | 21.9 | % | |||||||||||||||||
| Selling, general and administrative expenses | 354 | 13.0 | % | 324 | 12.5 | % | |||||||||||||||||
| Restructuring expense | 16 | 0.6 | % | 11 | 0.4 | % | |||||||||||||||||
| Other operating expense, net | 5 | 0.2 | % | 49 | 1.9 | % | |||||||||||||||||
| Operating income | 233 | 8.5 | % | 185 | 7.1 | % | |||||||||||||||||
| Equity in affiliates' earnings, net of tax | (13) | (0.5) | % | (11) | (0.4) | % | |||||||||||||||||
| Interest income | (6) | (0.2) | % | (11) | (0.4) | % | |||||||||||||||||
| Interest expense | 62 | 2.3 | % | 60 | 2.3 | % | |||||||||||||||||
| Other postretirement (income) expense, net | (4) | (0.2) | % | 3 | 0.1 | % | |||||||||||||||||
| Earnings before income taxes | 194 | 7.1 | % | 144 | 5.5 | % | |||||||||||||||||
| Provision for income taxes | 50 | 1.8 | % | 59 | 2.3 | % | |||||||||||||||||
| Net earnings | $ | 144 | 5.3 | % | $ | 85 | 3.2 | % | |||||||||||||||
Net sales and Cost of sales
Net sales for the nine months ended September 30, 2026 totaled $2,730 million, an increase of $136 million, or 5%, compared to the nine months ended September 30, 2025. Cost of sales and cost of sales as a percentage of net sales were $2,122 million and 78%, respectively, during the nine months ended September 30, 2026, compared to $2,025 million and 78%, respectively, during the nine months ended September 30, 2025. The change in net sales and cost of sales for the nine months ended September 30, 2026 was primarily driven by the impacts below.
| (in millions) | Net Sales | Cost of Sales | Gross Profit | ||||||||||||||
| Nine Months Ended September 30, 2025 | $ | 2,594 | $ | 2,025 | $ | 569 | |||||||||||
| Volume and mix | 63 | 55 | 8 | ||||||||||||||
| Customer pricing | (7) | - | (7) | ||||||||||||||
| Supplier costs | - | (25) | 25 | ||||||||||||||
|
Tariff cost and recovery1
|
(16) | (33) | 17 | ||||||||||||||
| Employee costs | - | 25 | (25) | ||||||||||||||
| SEM acquisition | 32 | 24 | 8 | ||||||||||||||
| Foreign currency and other | 64 | 51 | 13 | ||||||||||||||
| Nine Months Ended September 30, 2026 | $ | 2,730 | $ | 2,122 | $ | 608 | |||||||||||
|
1 Cost of sales in the nine months ended September 30, 2026 included a benefit related to one-time tariff refunds, while net sales included a reduction related to estimated amounts to be returned to customers and the reversal of amounts previously expected to be recovered from customers related to these amounts.
|
||
Selling, general and administrative expenses (SG&A)
SG&A for the nine months ended September 30, 2026 was $354 million as compared to $324 million for the nine months ended September 30, 2025. SG&A as a percentage of net sales was 13% for the nine months ended September 30, 2026 and 2025. SG&A expenses increased period-over-period, primarily attributable to increased employee costs which includes stock-based compensation, timing of R&D costs, and foreign currency exchange impacts.
| Nine Months Ended September 30, 2026 | |||||||||||||||||
| (in millions) | 2026 | 2025 | Change ($) | ||||||||||||||
| Employee costs | $ | 131 | $ | 118 | $ | 13 | |||||||||||
| Research & development | 87 | 78 | 9 | ||||||||||||||
| Information technology | 15 | 18 | (3) | ||||||||||||||
| Amortization of acquisition-related intangibles | 24 | 22 | 2 | ||||||||||||||
| Other | 97 | 88 | 9 | ||||||||||||||
| Selling, general and administrative expenses | $ | 354 | $ | 324 | $ | 30 | |||||||||||
Restructuring expense
Restructuring expense was $16 million and $11 million for the nine months ended September 30, 2026 and 2025, respectively. See Note 4, "Restructuring," for further discussion.
Other operating expense, net
Other operating expense, net was $5 million and $49 million for the nine months ended September 30, 2026 and 2025, respectively. The change in other operating expense, net was primarily driven by a decrease in separation-related costs due to the Company recognizing a $39 million loss in connection with the settlement of separation-related claims with the Former Parent in the prior period. Other operating expense, net was comprised of the following:
| Nine Months Ended September 30, | |||||||||||||||||
| (in millions) | 2026 | 2025 | Change ($) | ||||||||||||||
| Merger and acquisition expense | $ | 5 | $ | 9 | $ | (4) | |||||||||||
| Separation-related costs | 3 | 43 | (40) | ||||||||||||||
| Losses (gains) for other one-time events | 1 | (2) | 3 | ||||||||||||||
| Other operating income, net | (4) | (1) | (3) | ||||||||||||||
| Other operating expense, net | $ | 5 | $ | 49 | $ | (44) | |||||||||||
Equity in affiliates' earnings, net of tax
Equity in affiliates' earnings, net of tax was $13 million and $11 million in the nine months ended September 30, 2026 and 2025, respectively. This line item is driven by the results of the Company's unconsolidated joint venture.
Interest income
Interest income was $6 million and $11 million in the nine months ended September 30, 2026 and 2025, respectively. The interest income is primarily related to interest earned on funds held in money market, local overnight deposits, and short term investments. The decrease in interest income was primarily due to lower average cash balances and decreasing interest rates.
Interest expense
Interest expense was $62 million and $60 million in the nine months ended September 30, 2026 and 2025, respectively.
Provision for income taxes
Provision for income taxes was $50 million for the nine months ended September 30, 2026, resulting in an effective tax rate of 26%, compared to $59 million, or 41%, for the nine months ended September 30, 2025. The effective tax rate for the nine months ended September 30, 2026 decreased as compared to the prior year due to favorable provision to return adjustments for tax returns filed in the period, a reduction in U.S. tax on foreign earnings and the recognition of an uncertain tax position recorded discretely in the nine month period ended September 30, 2025 that did not recur in the nine month period ended September 30, 2026.
Excluding the impact of items not related to the Company's ongoing operations, the Company's effective tax rate associated with ongoing operations was 28% for the nine months ended September 30, 2026 compared to 33% for the nine months ended September 30, 2025.
For further details, see Note 7, "Income Taxes," to the Condensed Consolidated Financial Statements for the nine months ended September 30, 2026 and 2025.
Net earnings per diluted share and adjusted net earnings per diluted share
The Company's net earnings per diluted share was $3.79 and $2.10 for the nine months ended September 30, 2026 and 2025, respectively. The Company's adjusted net earnings per diluted share was $4.64 and $3.79 for the nine months ended September 30, 2026 and 2025, 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 expense, 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.
The following table provides a reconciliation of net earnings per diluted share to adjusted net earnings per diluted share:
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net earnings per diluted share | $ | 3.79 | $ | 2.10 | |||||||
| Amortization of acquisition-related intangibles | 0.63 | 0.55 | |||||||||
| Restructuring expense | 0.42 | 0.27 | |||||||||
| Merger and acquisition expense | 0.13 | 0.22 | |||||||||
| Separation-related expense | 0.08 | 1.07 | |||||||||
| Losses (gains) for other one-time events | 0.03 | (0.05) | |||||||||
| Tax effects and adjustments | (0.44) | (0.37) | |||||||||
| Adjusted net earnings per diluted share | $ | 4.64 | $ | 3.79 | |||||||
Results by Reportable Segment for the nine months ended September 30, 2026 and 2025
The Company's business is aggregated into two reportable segments: Power Systems and Aftermarket Solutions.
Segment 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, acquisition-related 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.
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 $78 million and $75 million for the nine months ended September 30, 2026 and 2025, respectively. The increase in corporate expenses was primarily related to employee compensation mainly driven by the addition of a third tranche of performance stock units under the Company's stock incentive plan.
Refer to Note 21, "Reportable Segments and Related Information" to the Condensed Consolidated Financial Statements, for more information.
The following table presents Net sales and Segment AOI for the Company's reportable segments:
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| (in millions) | Net Sales to Customers | Segment AOI | % Margin | Net Sales to Customers | Segment AOI | % Margin | |||||||||||||||||||||||||||||
| Power Systems | $ | 1,694 | $ | 183 | 10.8 | % | $ | 1,617 | $ | 184 | 11.4 | % | |||||||||||||||||||||||
| Aftermarket Solutions | 1,036 | 177 | 17.1 | % | 977 | 159 | 16.3 | % | |||||||||||||||||||||||||||
| Totals | $ | 2,730 | $ | 360 | $ | 2,594 | $ | 343 | |||||||||||||||||||||||||||
The following table presents the year-over-year change in net sales and Segment AOI for the Company's reportable segments for the nine months ended:
| Power Systems | Aftermarket Solutions | ||||||||||||||||||||||||||||||||||
| (in millions) | Net sales | Segment AOI | % Margin | Net sales | Segment AOI | % Margin | |||||||||||||||||||||||||||||
| September 30, 2025 | $ | 1,617 | $ | 184 | 11.4 | % | $ | 977 | $ | 159 | 16.3 | % | |||||||||||||||||||||||
| Core business drivers | 11 | (6) | (0.5) | % | 45 | 13 | 0.5 | % | |||||||||||||||||||||||||||
| Tariff cost and recovery | (11) | 5 | 0.4 | % | (5) | 12 | 1.3 | % | |||||||||||||||||||||||||||
| SEM acquisition | 32 | 4 | - | % | - | - | - | % | |||||||||||||||||||||||||||
| Foreign currency, SG&A and all other | 45 | (4) | (0.5) | % | 19 | (7) | (1.0) | % | |||||||||||||||||||||||||||
| September 30, 2026 | $ | 1,694 | $ | 183 | 10.8 | % | $ | 1,036 | $ | 177 | 17.1 | % | |||||||||||||||||||||||
LIQUIDITY AND CAPITAL RESOURCES
Overview
The Company maintains various liquidity sources, including cash and cash equivalents and the unused portion of its $500 million revolving credit facility maturing in July 2028 (the Revolving Facility). As of September 30, 2026, the Company had liquidity of $813 million, comprised of cash and cash equivalent balances of $436 million and availability on the Revolving Facility of $377 million. Given the Company's strong liquidity position, management believes that it will have sufficient liquidity and will maintain compliance with all covenants through at least the next 12 months.
At September 30, 2026 and December 31, 2025, the Company had $436 million and $359 million of cash and cash equivalents, respectively, of which $361 million and $330 million, respectively, 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. At September 30, 2026, the Company had total debt of $1,093 million. During the quarter ended September 30, 2026, the Company borrowed under the Revolving Facility to prepare for the purchase of the stoba Group, which closed on October 1, 2026. Those amounts borrowed under the Revolving Facility are reflected in Cash and Cash Equivalents, as well as a reduction from the borrowing availability under the Revolving Facility, for the quarter ended September 30, 2026.
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 any outstanding receivables.
Cash Flows
Operating Activities
Net cash provided by operating activities was $231 million and $216 million in the nine months ended September 30, 2026 and 2025, respectively. The increase in cash from operating activities for the nine months ended September 30, 2026 compared with the nine months ended September 30, 2025 was primarily due to higher net earnings performance, which contributed to stronger cash generation during the period.
Investing Activities
Net cash used in investing activities was $70 million and $103 million in the nine months ended September 30, 2026 and 2025, respectively. The decrease is primarily related to timing of capital expenditures, as well as the SEM acquisition in the prior period. As a percentage of sales, capital expenditures were 2.6% and 3.7% for the nine months ended September 30, 2026 and 2025, respectively.
Financing Activities
Net cash used in financing activities was $87 million and $245 million in the nine months ended September 30, 2026 and 2025, respectively. The decrease is primarily due to borrowings on the Revolving Facility in order to support acquisition initiatives and regional liquidity needs, lower stock repurchases, and the extinguishment of debt assumed through the SEM acquisition in the prior period.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Critical accounting policies and estimates disclosures appear in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies And Estimates," in the Company's Form 10-K filed on February 12, 2026. There were no material changes to this information during the quarter ended September 30, 2026.
Phinia Inc. published this content on October 29, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 29, 2026 at 15:04 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]