PHINIA Inc. (NYSE: PHIN), a leader in premium fuel systems,
electrical systems, and aftermarket products, today reported its
fourth quarter and full year ended December 31, 2023 results.
Fourth Quarter Highlights:
- U.S. GAAP net sales of $882 million, an increase of 3.6%
compared with Q4 2022.
- Excluding $24 million of contract manufacturing sales, sales
were up slightly compared to Q4 2022. Positive customer pricing,
positive FX and growth in light vehicle original equipment (OE)
sales were partially offset by lower commercial vehicle (CV) OE
sales in China.
- Operating income of $81 million and adjusted operating income
of $89 million, resulting in an operating margin of 9.2% and an
adjusted operating margin of 10.4%, a year-over-year decrease of
100 basis points (bps) and 80 bps, respectively.
- Q4 2023 segment adjusted operating margins were healthy at
12.6%, 90 bps ahead of the average segment adjusted operating
margin for the first 9 months of the year. Operating margins
declined from the prior year primarily from lower CV volumes in
China and higher non-commodity inflationary costs that were not
fully recovered from customers.
- U.S. GAAP net earnings of $0.70 per diluted share.
- Excluding $0.01 per diluted share related to non-comparable
items (detailed in the non-GAAP appendix below), adjusted net
earnings of $0.71 per diluted share.
- Net earnings of $33 million with net margin of 3.7% and
adjusted EBITDA of $127 million with adjusted EBITDA margin of
14.8%, a year-over-year decrease of 20 bps.
- Net cash provided by operating activities of $62 million.
- Adjusted free cash flow was $55 million.
Full Year 2023 Highlights:
- U.S. GAAP net sales of $3,500 million, an increase of 4.5%
compared with 2022.
- Excluding $50 million of contract manufacturing sales, sales
were up slightly compared to 2022. Positive customer pricing and
growth in light vehicle OE sales was partially offset by lower CV
OE sales in China and weaker foreign currency translation effect,
primarily Chinese Renminbi.
- Operating income of $241 million and adjusted operating income
of $347 million, resulting in an operating margin of 6.9% and an
adjusted operating margin of 10.1%, a year-over-year decrease of
260 bps and 80 bps, respectively.
- Operating margins declined primarily from lower CV volumes in
China and higher non-commodity inflationary costs that were not
fully recovered from customers.
- U.S. GAAP net earnings of $2.17 per diluted share.
- Excluding $1.96 per diluted share related to non-comparable
items (detailed in the non-GAAP appendix below), adjusted net
earnings of $4.13 per diluted share.
- Net earnings of $102 million with net margin of 2.9% and
adjusted EBITDA of $490 million with adjusted EBITDA margin of
14.2%, a year-over-year decrease of 90 bps.
- Net cash provided by operating activities of $250 million.
- Adjusted free cash flow was $161 million.
Key Wins in Strategic Growth Markets:
New business wins remained strong across all end markets.
Notable examples of new business awards in Q4 include:
- Conquest business win to supply GDi fuel system to a leading
OEM specializing in hybrid and low emission powertrain technology
in the light vehicle segment, for their European and Asian
business.
- Contract to supply next generation heavy duty Diesel Fuel
Systems to a leading Global OEM, extending existing relationship in
core commercial vehicle segment.
- Important business win to supply medium duty Diesel Fuel
Systems to a leading Global OEM, securing existing business and
expanding market share in the commercial vehicle segment.
Brady Ericson, President, and Chief Executive Officer of PHINIA
commented: "Our Q4 results were stronger than expected as the North
American strike impact was lower than anticipated, foreign currency
moved in our favor, and we executed well with strong cost controls.
Working capital continued to improve from Q3 as the team focused on
efficiency. We continue to demonstrate resilient core operational
performance with total segment adjusted operating margins coming in
stronger than the first 9-month average results. I’m pleased with
our teams’ focus on serving our customers while closing out 2023
with solid cost and margin performance. PHINIA continues to win new
business at a record pace that we expect will support average
annual low single digit top line growth through this decade. We
ended the quarter with $365 million in cash on hand and net
leverage of less than 1 times EBITDA - leaving us in a solid
financial position.
During the quarter, we continued to return capital to our
shareholders paying another roughly $11 million in dividends and
buying back our shares at an increased pace, repurchasing $15
million in the quarter for a total of $24 million in 2023. We
expect to continue to be opportunistic in terms of future share
repurchases.”
2024 Full Year Guidance:
We expect strong earnings and cash generation in 2024 as we
continue to drive operational efficiencies, exit agreements with
our former parent and grow our Aftermarket sales. On the OE side,
industry-wide CV volumes in 2024 are expected to decline mid to
high single digits percent in North America and Europe, while other
global CV markets are expected to be up slightly. Global LV volumes
are expected to be down slightly with engine production declining
mid-single digits. In 2024, PHINIA expects net sales of $3.42
billion to $3.57 billion, adjusted sales of $3.40 billion to $3.55
billion (down 1% to up 3% versus 2023 adjusted sales), net earnings
and margin of $125 million to $160 million and 3.7% to 4.5%,
respectively, adjusted EBITDA of $470 million to $510 million, and
adjusted EBITDA margins of 13.8% to 14.4%. PHINIA expects to
generate $160 to $200 million in adjusted free cash flow. Adjusted
tax rate is expected to be 28-32%.
The Company will host a conference call to review fourth quarter
2023 results and full year 2024 outlook and take questions from the
investment community at 8:30 a.m. ET today. This call will be
webcast at PHINIA Q4 2023 Earnings Call. Additional presentation
materials will be available at investors.phinia.com.
About PHINIA
PHINIA is an independent, market-leading, premium solutions and
components provider with over 100 years of manufacturing expertise
and industry relationships, with a strong brand portfolio that
includes DELPHI®, DELCO REMY® and HARTRIDGE®. With 13,200 employees
across 44 locations in 20 countries, PHINIA is headquartered in
Auburn Hills, Michigan, USA.
Working across commercial vehicle and industrial applications
(heavy-duty and medium-duty trucks, off-highway construction,
marine and agricultural), and light vehicles (passenger cars,
trucks, vans and sport-utility vehicles), we develop fuel systems,
electrical systems and aftermarket solutions designed to keep
combustion engines operating at peak performance, as cleanly and
efficiently as possible, while at the same time investing in future
technologies that will unlock the potential of alternative
fuels.
By providing what the market needs today, to become more
efficient and sustainable, while also developing innovative
products and solutions designed to contribute to a cleaner
tomorrow, we are the partner of choice for a diverse array of
industrial and aftermarket customers –powering our shared journey
toward a carbon-neutral and carbon-free tomorrow.
(DELCO REMY is a registered trademark of General Motors LLC
licensed to PHINIA Technologies Inc.)
Forward-Looking Statements: This press release 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; 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; other risks relating to the Spin-Off,
including a delay or inability to transition key infrastructure,
services and solutions, 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, and our or BorgWarner
Inc.’s failure to perform under various transaction agreements; and
other risks and uncertainties described in our reports filed from
time to time with the Securities and Exchange Commission.
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.
PHINIA Inc.
Condensed Consolidated Statements of
Operations (Unaudited)
(in millions)
Three Months Ended
December 31,
Year Ended
December 31,
2023
2022
2023
2022
Fuel Systems
$
556
$
527
$
2,177
$
2,072
Aftermarket
326
324
1,323
1,276
Net sales
882
851
3,500
3,348
Cost of sales
696
663
2,776
2,627
Gross profit
186
188
724
721
Gross margin
21.1
%
22.1
%
20.7
%
21.5
%
Selling, general and administrative
expenses
107
106
413
407
Restructuring expense
2
3
12
11
Other operating expense (income), net1
(4
)
(8
)
58
(15
)
Operating income
81
87
241
318
Equity in affiliates’ earnings, net of
tax
(2
)
(3
)
(10
)
(11
)
Interest expense
22
6
56
20
Interest income
(4
)
(3
)
(13
)
(6
)
Other postretirement expense (income)
3
(7
)
2
(32
)
Earnings before income taxes
62
94
206
347
Provision for income taxes
29
19
104
85
Net earnings
$
33
$
75
$
102
$
262
Earnings per share — diluted
$
0.70
$
1.60
$
2.17
$
5.57
Weighted average shares outstanding —
diluted
47.0
47.0
47.0
47.0
___________________________________
1
During the course of preparing the
Company's consolidated financial statements to be included in the
Annual Report on Form 10-K for the fiscal year ended December 31,
2023 (Form 10-K), the Company identified an intercompany loan that
had not properly been accounted for in connection with the Spin-Off
resulting in expense being understated by $12 million in the
Company's income statement for the fiscal quarter ended September
30, 2023. The Company is correcting the misstatement, which will be
more fully described in Note 26 of the Form 10-K.
PHINIA Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)
December 31,
2023
2022
ASSETS
Cash and cash equivalents
$
365
$
251
Receivables, net
1,017
891
Inventories
487
459
Prepayments and other current assets
58
40
Total current assets
1,927
1,641
Property, plant and equipment, net
921
922
Other non-current assets
1,193
1,511
Total assets
$
4,041
$
4,074
LIABILITIES AND EQUITY
Short-term borrowings and current portion
of long-term debt
$
89
$
—
Accounts payable
639
686
Other current liabilities
420
484
Total current liabilities
1,148
1,170
Long-term debt
709
26
Other non-current liabilities
297
1,235
Total liabilities
2,154
2,431
Total equity
1,887
1,643
Total liabilities and equity
$
4,041
$
4,074
PHINIA Inc.
Condensed Consolidated Statements of
Cash Flows (Unaudited)
(in millions)
Three Months Ended December
31,
Year Ended December 31,
2023
2022
2023
2022
OPERATING
Net cash provided by operating
activities
$
62
$
181
$
250
$
303
INVESTING
Capital expenditures, including tooling
outlays
(33
)
(21
)
(150
)
(107
)
Payments for investment in equity
securities
—
—
(2
)
—
Proceeds from asset disposals and other,
net
—
(4
)
2
2
Net cash used in investing activities
(33
)
(25
)
(150
)
(105
)
FINANCING
Proceeds from issuance of long-term debt,
net of discount
—
—
708
—
Payments for debt issuance costs
—
—
(14
)
—
Borrowings under Revolving Facility
—
—
75
—
Repayments of debt, including current
portion
(3
)
(1
)
(4
)
(1
)
Payments for stock-based compensation
items
(1
)
—
(1
)
—
Cash inflows related to debt due from
Former Parent
—
111
36
140
Purchase of noncontrolling interest
—
—
—
(3
)
Dividends paid to PHINIA Inc.
stockholders
(11
)
—
(23
)
—
Payments for purchase of treasury
stock
(15
)
—
(24
)
—
Cash outflows related to debt due to
Former Parent
—
(4
)
(728
)
(117
)
Net transfers (to) from Former Parent
—
(188
)
(5
)
(204
)
Net cash (used in) provided by financing
activities
(30
)
(82
)
20
(185
)
Effect of exchange rate changes on
cash
(1
)
7
(6
)
(21
)
Net (decrease) increase in cash and cash
equivalents
(2
)
81
114
(8
)
Cash and cash equivalents at beginning of
period
367
170
251
259
Cash and cash equivalents at end of
year
$
365
$
251
$
365
$
251
PHINIA Inc.
Net Debt (Unaudited)
(in millions)
December 31,
2023
2022
Total debt, including amounts due to
Former Parent
$
798
$
1,270
Cash and cash equivalents
365
251
Net debt
$
433
$
1,019
Non-GAAP Financial Measures
This press release 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 below. The reconciliations
include all information reasonably available to the Company on this
date 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.
A reconciliation of each of projected Adjusted EBITDA, Adjusted
EBITDA Margin and Adjusted Free Cash Flow, which are
forward-looking non-GAAP financial measures, to the most directly
comparable GAAP financial measure, is not provided because the
Company is unable to provide such reconciliation without
unreasonable effort. The inability to provide each reconciliation
is due to the unpredictability of the amounts and timing of events
affecting the items we exclude from the non-GAAP measure.
Adjusted EBITDA and Adjusted EBITDA Margin
The Company defines adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA) as net earnings less
interest, taxes, depreciation and amortization, adjusted to exclude
the impact of restructuring expense, separation and transaction
costs, other postretirement expense (income), equity in affiliates'
earnings, net of tax, impairment charges, other net expenses, and
other gains and losses not reflective of our ongoing operations.
Adjusted EBITDA margin is defined as adjusted EBITDA divided by
adjusted sales.
Adjusted Operating Income and Adjusted Operating
Margin
The Company defines adjusted operating income as operating
income adjusted to exclude the impact of restructuring expense,
separation and transaction costs, intangible asset amortization
expense, impairment charges, other net expenses, and other gains
and losses not reflective of the Company’s ongoing operations.
Adjusted operating margin is defined as adjusted operating income
divided by adjusted sales.
Adjusted Sales
The Company defines adjusted sales as net sales adjusted to
exclude certain contract manufacturing agreements with BorgWarner
that were entered into in connection with the spin-off.
Adjusted Net Earnings Per Diluted Share
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.
Adjusted Free Cash Flow
The Company defines adjusted free cash flow as net cash provided
by operating activities after adding back adjustments related to
the ongoing effects of separation-related transactions, less
capital expenditures, including tooling outlays.
Adjusted Sales (Unaudited)
(in millions)
Three Months Ended
December 31,
Year Ended
December 31,
2023
2022
2023
2022
Fuel Systems net sales
$
556
$
527
$
2,177
$
2,072
Contract manufacturing sales
(24
)
—
(50
)
—
Fuel Systems adjusted sales
$
532
$
527
$
2,127
$
2,072
Aftermarket net sales
$
326
$
324
$
1,323
$
1,276
Adjusted sales
$
858
$
851
$
3,450
$
3,348
Adjusted Operating Income and Adjusted
Operating Income Margin (Unaudited)
(in millions)
Three Months Ended
December 31,
Year Ended
December 31,
2023
2022
2023
2022
Operating income
$
81
$
87
$
241
$
318
Separation and transaction costs
(4
)
4
80
31
Intangible asset amortization
7
7
28
28
Restructuring expense
2
3
12
11
Asset impairments
—
1
—
5
Royalty income from Former Parent
—
(9
)
(17
)
(31
)
Other
3
2
3
2
Adjusted operating income
$
89
$
95
$
347
$
364
Net sales
$
882
$
851
$
3,500
$
3,348
Operating margin %
9.2
%
10.2
%
6.9
%
9.5
%
Adjusted sales
$
858
$
851
$
3,450
$
3,348
Adjusted operating margin %
10.4
%
11.2
%
10.1
%
10.9
%
____________________________
Segment Adjusted Operating Income and
Segment Adjusted Operating Income Margin (Unaudited)
(in millions)
Three Months Ended
December 31,
Year Ended
December 31,
2023
2022
2023
2022
Fuel Systems
$
55
$
59
$
215
$
252
Margin %
10.3
%
11.2
%
10.1
%
12.2
%
Aftermarket
53
54
196
191
Margin %
16.3
%
16.7
%
14.8
%
15.0
%
Segment adjusted operating income
108
113
411
443
Margin %
12.6
%
13.3
%
11.9
%
13.2
%
Fuel Systems adjusted sales
532
527
2,127
2,072
Aftermarket adjusted sales
326
324
1,323
1,276
Adjusted sales
$
858
$
851
$
3,450
$
3,348
____________________________
Adjusted EBITDA and EBITDA Margin
(Unaudited)
(in
millions)
Three Months Ended
December 31,
Year Ended
December 31,
2023
2022
2023
2022
Net earnings
$
33
$
75
$
102
$
262
Depreciation and tooling amortization
38
33
143
142
Provision for income taxes
29
19
104
85
Intangible asset amortization
7
7
28
28
Interest expense
22
6
56
20
Interest income
(4
)
(3
)
(13
)
(6
)
EBITDA
125
137
420
531
Separation and transaction costs
(4
)
4
80
31
Restructuring expense
2
3
12
11
Other postretirement expense (income)
3
(7
)
2
(32
)
Asset impairments
—
1
—
5
Royalty income from Former Parent
—
(9
)
(17
)
(31
)
Equity in affiliates’ earnings, net of
tax
(2
)
(3
)
(10
)
(11
)
Other
3
2
3
2
Adjusted EBITDA
$
127
$
128
$
490
$
506
Adjusted sales
$
858
$
851
$
3,450
$
3,348
Adjusted EBITDA margin %
14.8
%
15.0
%
14.2
%
15.1
%
Net Earnings to Adjusted Net Earnings
(Unaudited)
(in millions)
Three Months Ended
December 31,
Year Ended
December 31,
2023
2022
2023
2022
Net earnings
$
33
$
75
$
102
$
262
Separation and transaction costs
(7
)
4
74
31
Intangible asset amortization
6
7
25
28
Restructuring expense
1
3
9
11
Royalty income from Former Parent
—
(9
)
(17
)
(31
)
Asset impairments and lease
modifications
—
1
—
5
Tax adjustments
—
—
1
—
Adjusted net earnings
33
$
81
$
194
$
306
Adjusted Net Earnings Per Diluted Share
(Unaudited)
Three Months Ended December
31,
Year Ended
December 31,
2023
2022
2023
2022
Net earnings per diluted share
$
0.70
$
1.60
$
2.17
$
5.57
Separation and transaction costs
(0.15
)
0.09
1.57
0.66
Intangible asset amortization
0.13
0.15
0.53
0.60
Restructuring expense
0.02
0.10
0.19
0.23
Royalty income from Former Parent
—
(0.19
)
(0.36
)
(0.66
)
Asset impairments and lease
modifications
—
0.02
—
0.11
Tax adjustments
0.01
(0.02
)
0.03
—
Adjusted net earnings per diluted
share
$
0.71
$
1.75
$
4.13
$
6.51
Free Cash Flow (Unaudited)
(in millions)
Three Months Ended December
31,
Year Ended
December 31,
2023
2022
2023
2022
Net cash provided by operating
activities
$
62
$
181
$
250
$
303
Capital expenditures, including tooling
outlays
(33
)
(21
)
(150
)
(107
)
Effects of separation-related
transactions
26
4
61
31
Adjusted free cash flow
$
55
$
164
$
161
$
227
Adjusted Sales Guidance
(Unaudited)
(in millions)
Full Year 2024 Guidance
Low
High
Net sales
$
3,415
$
3,570
Spin-off agreement adjustment
(15
)
(20
)
Adjusted sales
$
3,400
$
3,550
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240221690343/en/
IR contact: Michael Heifler VP Investor Relations
investors@phinia.com +1 947-262-1992 Media contact: Kevin Price
Global Brand & Communications Director media@phinia.com +44 (0)
7795 463871
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