PHIN 10-K & 10-Q changes, risk factors and insider trading

Adverse changes in general business and economic conditions, including recessions, adverse market conditions or downturns and other factors, including geopolitical tensions and related trade restrictions, impacting the vehicletransportation and industrial equipment industries, have in the past and may in the future adversely affect our business, financial condition, and results of operations.

Our business, financial condition and results of operations are sensitive to global and regional business and economic conditions, particularly those specific to the global vehicleautomotive and industrial equipment industries. Commercial vehicle, light commercial vehicle, light passenger vehicle, and industrial application and light vehicle production and sales are cyclical and sensitive to general economic conditions and other factors, including inflation,geopolitical tensions, inflation (including related to the cost of labor and the price of commodities), interest rates, consumer credit, and consumer spending and preferences. Economic declines resulting in significant reductions in commercial vehicle, light commercial vehicle orand light passenger vehicle production have in the past adversely affected our business, financial condition and results of operations, including our sales to OEMs, and could againhave similar effects in the future. Many global economies have continued to experienceexperienced elevated levels of inflation more generally, which has led to an increase in other input costs. As a result, the Company has experienced, and may continue to experience, higher costs. In addition, geopolitical tensions and related trade restrictions, including export controls, and tariff increases could have a material impact on our business, financial condition and results of operations, including increasing our input costs and decreasing demand in the commercial vehicle and light vehicle markets, although the nature of those trade restrictions and tariffs remains unclear. These new trade restrictions and tariffs increase the risk for further elevated inflation more generally, which may drive an increase in other input costs. Although the Company has had success offsettingoffset higher costs through a combination of productivity and customer recoveries,recoveries in the past, there can be no guarantee that the Company will continue to be successful in doing so in the future,future should inflation remain at elevated levels.levels or further increase.

If we do not deliver new products, services and technologies in response to changing consumer preferences and increasedevolving regulationexhaust ofemissions- greenhouse gas emissions,regulations, or if the market for electric vehicles grows faster than expected and the market for alternative fuel technologies, including for use in internal combustion engines, develops slower than expected, our business, financial condition, and results of operations could be adversely impacted.

The global vehicletransportation industry has been, and is largely expected to continue to be, focused on increased fuel efficiency and reduced emissions, including the development of hybrid electric and electricalternative fuel vehicles, primarily as a result of changing consumer preferences and increasingly stringent global regulatory requirements in certain jurisdictions related to the impacts of climate change. In past years, electric vehicle use has increased, with some cities limiting access to, and a number of countries and jurisdictions implementing regulations that require a reduction or phase-out of sales of, certain commercial and light combustion-powered vehicles, accelerating toward 2030 and beyond. While growth rates of growth of electric vehicle adoption and production have slowed in recent years compared to earlier expectations due to several factors, in particularparticularly lower than anticipated consumer acceptance,acceptance and infrastructure challenges, the regulatory landscape remains challenging. In the event thatIf reductions or phase outs are ultimately requiredrequired, that would have an impact on production at OEMs and, in turn, sales of our products. The ongoing energy transition away from fossil fuels in certain jurisdictions and the adoption of electrified powertrains in some markets (notably the passenger car segment, and to some degree in the light and medium duty commercial vehicle segments) has resulted, and could continue to result, in lower demand for certain of our products. We will continue to consider these trends and related shifts in the industry,global transportation and other industries in which we operate, including in the context of our product line, growth and innovation and development strategies.

Through our products and solutions, we are focused on enhancing fuel efficiency and driving growth through our ability to capitalize on other trends,strategies for lower carbon mobility, such as the adoptiontransition ofto alternative fuels (e.g., hydrogen, ammonia, ethanol, methanol, compressed natural gasgas, bio-fuels and other zero- orand lower-carbon fuel types) for combustion-powered vehicles, industrial machinery and other applications. Given the early stages of development of some of these new products and solutions,solutions and the infrastructure challenges that accompany certain alternative fuel adoption, there can be no guarantee of the future market acceptance, regulatory acceptance and investment returns with respect to our planned products. The ongoing energy transition away from fossil fuels and the adoption of electrified powertrains in some market segments, notably the passenger car market segment, has resulted, and could continue to result, in lower demand for certain of our products. If we do not continue to develop or acquire new and compelling products that gain acceptance with OEMs, if we do not expand our offerings of combustion-agnostic products and solutions, if the market adoption for electric vehicles (particularly commercial vehicles) grows faster than expected, or if authorities implement additional or more stringent limits or phase-outs for combustion-powered vehicles on a broad basis, our business, financial condition and results of operations could be adversely impacted.solutions.

We compete globally with a number of manufacturers and distributors that produce and sell products and solutions that are similar to ours. Price, quality, speed of delivery, technological innovation, supply chain resilience, sourcing strategies (which could include the use of artificial intelligence and machine learning),strategies, engineering development, scope of product technology system solutions, and program launch support are primary elements of competition. Our competitors include a large number of independent domestic and international suppliers, primarily in the automotiveglobal transportation and industrial equipment sectors.industries. A number of our competitors are larger than us and have more diverse product portfolios, and some competitors have greater financial and other resources than we do. Our customers, faced with intense international competition, have continued to expand their global sourcing of components. As a result, we have experienced increased competition from suppliers in other parts of the worldworld, including suppliers that may enjoy economic advantages, such as lower labor costs, lower healthcare costs, lower tax rates and, in some cases, export or raw material subsidies. Increased competition could adversely affect our business, financial condition and results of operations. In addition, anythe global transportation industry is experiencing a period of ourtechnological competitorschange, mayincluding foresee the course of market development more accurately than we do, develop products that are superiorrelated to ouradvances offerings,in produceartificial similarintelligence products(AI) attechnologies. aWe costexpect thatAI, isincluding lowermachine thanlearning and neural network capabilities, to play an increasing role in our productiondesign, cost,manufacturing, or adapt more quickly than we do to new technologies or evolving customersourcing and regulatoryother requirements.activities, Aswhich awill result,generate both opportunities and risks for our products may not be able to compete successfully with our competitors’ products, and we may not be able to meet the growing demands of customers. These trends could adversely affect our business, financial condition and results of operations, including our sales and the profit margins on our products.business.

The failure to identify, consummate, effectively integrate or realize the expected benefits from acquisitionsacquisitions, partnerships or partnershipsother strategic investments could adversely affect our growth and our business, financial condition, and results of operations.

We periodically evaluate selective acquisitions, partnerships, and other strategic investments in connection with our growth strategy. The success of our growth strategy is dependent, in part, on our ability to identify suitable acquisition or partnership candidates, prevail against competing potential acquirers or partners and negotiate and consummate acquisitions or partnerships on terms attractive to us. It is also dependent on our ability to effectively integrate and realize the expected benefits from acquisitions or partnerships. On August 1, 2025, we completed our first acquisition as an independent publicly traded company, acquiring 100% of SEM, a prominent provider of advanced natural gas, hydrogen and other alternative fuel ignition systems, injector stators, and linear position sensors, and our integration efforts are ongoing.

To realize the anticipated benefits of acquisitions or partnerships, bothincluding companiesthe SEM acquisition, the combination must be successfully combined.successful. The combination of independent businesses is a complex, costly, and time-consuming process that requires significant management attention and resources. It is possible that the integration process could result in: the loss of key employees,employees; the disruption of our operations,operations; the inability to maintain or increase our competitive presence,presence; inconsistencies in standards, controls, procedures and policies,policies; difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from the acquisition,acquisition; the diversion of management’s attention to integration matters,matters; difficulties in the assimilation of operations, employees and corporate cultures,cultures; and/or the realization of unknown or inestimable liabilities relating to the acquired business or inaccurate assessment of undisclosed, contingentcontingent, or other liabilities or complexities. Any or all of these factors could adversely affect our ability to maintain relationships with customerscustomers, suppliers, and employees, or achieve the anticipated benefits of the acquisition on the timeline expected, and could have an adverse effect on the combined company. In addition, many of these factors are outside of our control, and any one of these factors could result in additional or unforeseen costs, decreases in the amount of expected revenues and additional diversion of management’s time and energy, which could adversely impact our business, financial conditioncondition, and results of operations.

We are under substantial pressure from OEMsour customers to reduce the prices of our products.

There is substantial and continuing pressure onfrom OEMsour customers to reduce costs,costs. including the costs of products we supply. OEMOur customers often expect annual price reductions in our business. To maintain our profit margins, we seek periodic price reductions from our suppliers in response to this expectation, to improve production processes to increase manufacturing efficiency, and to streamline product designs to reduce costs. In recent years, however, many of our suppliers have sought to increase prices in order to offset inflationary and other costs and surcharges.surcharges, including the impact of tariffs. Although we seek to recover inflationary and other costs and surchargessurcharges, including relating to tariffs, from our customers and have had some success in the past in recovering a portion of these costs and surcharges, our ability to pass through increased costs to our OEM customers iscan be limited (with any cost recovery oftensometimes less than 100% and on a delayed basis) and there can be no assurance that such recoveries will continue in the future. Our inability to reduce costs (in an amount equal to or less than) annual price reductions, increases in tariffs, increases in raw material costs, increases in employee wages and benefits and other inflationary headwinds could have an adverse effect on our business, financial condition and results of operations.

We use a variety of commodities (including aluminum, copper, nickel, plastic resins, steel, othercertain rawalloy materialselements, semiconductor chips, and energy) and materials purchased in various forms,forms such as(including castings, powder metal, forgings, stampings and bar stock,stock) in the production of our products. In recent years, prices for many of these commodities have increased. We have sought to alleviate the impact of increasing costs by including a material pass-through provision in our customer contracts wherever possible and by selectively hedging certain commodity exposures. Customers frequently challenge these contractual provisions and rarely pay the full cost of any increases in the cost of materials. The discontinuation or lessening of our ability to pass through or hedge increasing commodity costs could adversely affect our business, financial condition and results of operations.

Prices for commodities remain volatile, and since the beginning of 2021,2024, the Company has experienced price increases for energy and base metals (e.g.,such as steel, aluminum and copper) while slightly decreasing in 2024.. In addition, beginning insince 2023, many global economies, including the United States, have experienced elevated levels of inflation moreand generally,trade restrictions, which drovehas led to an increase in other input costs. We have pricing-related agreements with various customers, but these agreements do not enable us to recover 100 percent100% of our increased costs, and as a result, our operating margins havecould beenbe negatively impacted. While we will continue to negotiate the pass through and recovery of higher costs with our customers, perpetuation of this trend could adversely affect our business, financial condition and results of operations.

Changes in U.S. and foreign administrative policy, including increases in tariffs, changes to existing trade agreements and import or export licensing requirements and exchange controls, and any resulting changes in international trade relations, have in the past and may in the future adversely affect our business, financial condition and results of operations.

We manufacture, sell and service products globally and rely upon a global supply chain to deliver the raw materials, components, systems and parts that we need to manufacture and service our products. Changes in laws, regulations and government policies on foreign trade and investment can affect the demand for our products and services, cause customers to shift preferences towards domestically manufactured or branded products, and impact the competitive position of our products or prevent us from being able to sell or manufacture products in certain countries. Our business benefits from free trade agreements, such as the United States-Mexico-Canada Agreement. Efforts to withdraw from, or substantially modify, such agreements or arrangements, or actions taken in contravention of such agreements or arrangements, or the implementation of more restrictive trade policies, such as higher tariffs relevant to our operations (particularly in Mexico and China), import or export licensing requirements and exchange controls or new barriers to entry, could limitadversely impact our business. Such potential adverse impacts include: limiting our ability to capitalize on current and future growth opportunities in international markets,markets impairimpairing our ability to expand the business by offering new technologies, products and services,services; increases to our input and adversely impact our production costs,costs and decreases in customer demand,demand (particularly in the commercial vehicle (CV), light commercial vehicle (LCV), and light passenger vehicle (LPV) markets); and impairing our competitiveness and our relationships with customers and suppliers. Furthermore, there is uncertainty regarding the application, scope, duration, and timing for implementation of certain new trade restrictions (including export controls on rare earth metals and semiconductors) and increases in tariffs (including related offsets) announced in 2025 that are applicable to our business. There is also uncertainty regarding any additional tariffs or other measures that may be announced or implemented by the United States and other governments in the future, and the potential related market impacts. Such actions can be announced with little or no advance notice, and we may not be able to effectively mitigate all adverse impacts from such measures. Any of these consequences could have an adverse effect on our business, financial condition and results of operations.

We own important intellectual property, including patents, trademarks, copyrights, and trade secrets, and are involved in numerous licensing arrangements. Our intellectual property plays an important role in maintaining our competitive position in a number of the marketssegments that we serve. Our competitors may develop technologies that are similar or superior to our proprietary technologies or design alternatives to theour technologiespatented utilizingor thelicensed patentstechnologies. Additionally, our customers may seek ownership or exclusivity rights over intellectual property that arises in connection with products and solutions that we owndevelop orfor license.them. Further, as we expand our operations in jurisdictions where the enforcement of intellectual property rights is less robust, the risk of others duplicating our proprietary technologies or supplying counterfeit goods at lower prices under confusingly similar or identical trademarks, increases, despite the efforts we undertake to protect our intellectual property. Our inability to protectprotect, enforce or enforcefurther develop our intellectual property rights, or claims that we are infringing on the intellectual property rights of others, could adversely affect our competitive position, as well as our business, financial condition and results of operations.

WeOur couldexecution incur restructuring charges as we executeof restructuring and other actions in an effort to improve future profitability and competitiveness and tocompetitiveness, optimize our product portfolio,portfolio and operations and execute our strategy has caused us and could cause us in the future to incur restructuring charges, and we may not achieve the anticipated savings and benefits from these actions.

We have initiated, and we may continue to initiate, restructuring and other measures,actions includingthat thoseare designed to execute our strategy and enhance our business. Through these actions we may seek to improve the competitiveness of our business and sustain our margin profile, optimize our product portfolioportfolio, ortechnical globalcapability footprint,and operations, consolidate and take advantage of available capacity and resources, create an optimal legal entity structure, or reduce existing structural costs. During 2025, the Company implemented actions as part of a strategic effort to align its legacy infrastructure with current business needs and reduce costs in response to ongoing industry headwinds. We may not realize the anticipated annual savings from these actions, or future savings or benefits from past or future actionsactions, in full or in part or within the time periods anticipated. We are also subject to the risks of labor unrest, negative publicity and business disruption in connection with our actions. Failure to realize anticipated savings or benefits from our actions could have an adverse effect on our business, financial condition and results of operations.

Extraordinary events, including natural disasters or extreme weather events (including those that may result from the impacts of climate change), fires or similar catastrophic events, political disruptions, terrorist attacks, pandemics or other public health crises, such as the COVID-19 pandemic, and acts of war have in the past and may in the future disrupt our business or operations, impact our supply chain and access to necessary raw materials, or adversely affect the global economy generally, resulting in a loss of sales and customers and an increase in costs. Any of these disruptions or other extraordinary events outside of our control that impact our operations or the operations of our suppliers or customers could have a future adverse effect on our business, financial condition and results of operations. In addition, these types of events could negatively impact consumer spending or result in changes in the demand for certain of our products and solutions in the impacted regions or globally, which could have an adverse effect on our business, financial condition and results of operations.

Nearly all of our manufacturing facilities are outside the U.S.,United States, including other regions in the Americas, Europe,Europe and Asia. Consequently, our results wouldhave been and may continue to be adversely affected by changesfluctuations in trade,foreign monetarycurrency exchange rates and fiscalhigher policies,tariffs, and by other trade restrictions or prohibitions, import tariffs or other charges or taxes, fluctuationschanges in foreigntrade, currencymonetary exchangeand rates,fiscal policies, limitations on the repatriation of funds, changing economic conditions, higher labor costs, unreliable intellectual property protection and legal systems, insufficient infrastructures, social unrest, political and geopolitical instability and disputes, international terrorism, acts of war and other factors that may be discrete to a particular country or geography. Compliance with multiple and potentially conflicting laws and regulations of various countries is challenging, burdensome, and expensive.

The financial statements of foreign subsidiaries are translated to U.S. Dollars using the period-end exchange rate for assets and liabilities and an average exchange rate for each period for revenues, expenses and capital expenditures. The local currency is typically the functional currency for our foreign subsidiaries. While we did not experience significant adverse foreign currency impacts during 2024,2025, significant foreign currency fluctuations and the associated translation of those foreign currencies could adversely affect our business. Additionally, significant changes in currency exchange rates, particularly the Euro, Chinese Renminbi, British Pound, Brazilian Real and Indian Rupee could cause fluctuations in the reported results of our businesses’ operations that could negatively affect our business, financial condition and results of operations.

Because we are a U.S. holding company, one significant source of our funds is distributions from our non-U.S. subsidiaries. Certain countries in which we operate have adopted or could institute currency exchange controls that limit or prohibit our local subsidiaries’ ability to convert local currency into U.S. Dollars or to make payments outside the country. This could subject us to the risks of local currency devaluation and business disruption.disruption, which could negatively impact our business, financial condition and results of operations.

Our business in China is subject to aggressive competition and is sensitive to economic, political,geopolitical, social and market conditions.

Maintaining a strong position in the Chinese market is a key component of our global strategy. The vehicletransportation and otherindustrial equipment supply markets in China are highly competitive, with competition from many of the largest global manufacturers and numerous smaller domestic manufacturers. As the Chinese market evolves, many market participants have acted aggressively to increase or maintain their market share. Increased competition has contributed to pricing pressure, reduced margins and limited our ability to gain or hold market share. Our business in China is also sensitive to economic, political,geopolitical, social and market conditions that drive sales volumes in China. If we are unable to maintain our position in the Chinese market or if vehicle or industrial equipment sales in China decrease, our business, financial condition and results of operations could be adversely affected. In addition, there continues to be significant uncertainty aboutregarding the future relationshipsrelationship between the U.S.United States and China, including with respect to trade policies, treaties, government regulationsregulations, tariffs and tariffs.rare Anyearth-related controls and trade restrictions. While the impact of trade restrictions and tariffs implemented in 2025 has not had a material impact on our business, any increased trade barriers or restrictions on global trade, particularly trade with China, could adversely impact our competitiveness in the Chinese market and our business, financial condition and results of operations.

We have in the pastpast, and likely will in the futurefuture, derive a significant portion of our net sales from a relatively limited number of OEM customers. For the year ended December 31, 2024,2025, our top five customers accounted for approximately 40%37% of our net sales, with General Motors Company representing 17%.18%. The loss of, or a significant decrease in business from, one or more of these customers could have a materially adverse impact on our business, financial condition and results of operations. In addition, any consolidation among our top customers may further increase our customer concentration risk.

Because the vehicletransportation and industrial equipment industries rely heavily on just-in-time delivery of components during the assembly and manufacture of products, a work stoppage or production shutdown at one or more of our suppliers’ facilities, including as a result of a prolonged dispute with unionized employees at such facilities, could impact our ability to manufacture and assemble our products and solutions, or meet the needs of our customers, which could have significant adverse effects on our business, financial condition and results of operations. Similarly, if one or more of our customers were to experience a work stoppage or production shutdown, that customer would likely halt or limit purchases of our products, which could result in the shutdown of the related manufacturing facilities. Strikes against certain of our customers adversely impacted our results of operations during 2023, as automakers limited purchases of our products during the strikes due to the halt of their own production. Any future strikes that continue for a prolonged period could adversely affect our business, financial condition and results of operations.

In addition to our suppliers and customers, a work stoppage or production shutdown at one or more of our manufacturing and assembly facilities, including as a result of a prolonged dispute with the unionized employees at certain of our international facilities, could adversely affect our business, financial condition and results of operations.

Risks Related to Regulatory, Legal,Legal and Similar Matters

PHINIA is a leader in the development, design and manufacture of integrated components and systems that are designed to optimize performance, increaseenhance 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 industrialaerospace applicationsand 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 andor 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.

We expect improved earnings and cash generation in 2025 to be challenged2026, as we expect foreign currencycurrency, operational efficiencies, and share gains to more than offset a softening of the original equipment (OE) markets to outpace our ability to drive operational efficiencies and grow our Aftermarket sales.market. Continued economic and politicalgeopolitical uncertainty hasis causedexpected theto commercialcontinue vehicleto (CV)impact LV and lightCV vehiclevolumes. (LV) markets to soften. LV volumes inIn our key markets for 20252026, LV and CV volumes are expected to decline by mid-single digit percentages. CV volumes in our key markets are expected to rebound from 2024 levels in theand low-single digit percentages, however weighted to the latter part of the year.respectively. Assuming constant foreign exchange rates,rates and excluding sales from acquisitions, we expect flat to a modest increase in sales as strong growth in our Aftermarket segment is expected to offset the softened OE markets.sales. Additionally, we mayexpect to continue to be impacted by other macroeconomic challenges in 2025,2026, including but not limited to elevated inflation, supply chain constraints, market volatility, higher tariffs relevant to our operations (particularly in Mexico and China), government shutdowns, and changes in international trade relations.

TheDespite 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 enhancesupport its product leadership strategy.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, and adoption of additional product offerings enabling zero- and lower-carbon fuel solutions for combustion vehicles.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.

Net sales and Cost of sales

Net sales for the year ended December 31, 20242025 totaled $3,403$3,483 million, aan decreaseincrease of $97$80 million, or 3%,2.4%, from the year ended December 31, 2023.2024. 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 salessales, cost of sales, and gross profit for the year ended December 31, 20242025 was primarily driven by the following:impacts below.

Selling, general and administrative expensesexpense (SG&A)

Selling, general and administrative (SG&A) expenses for the year ended December 31, 20242025 werewas $442$445 million as compared to $413$442 million for the year ended December 31, 2023.2024. SG&A expenses as a percentage of net sales werewas 13.0% and 11.8%13% for the years ended December 31, 20242025 and 2023, respectively. The change in SG&A expenses was primarily attributable to:2024.

OtherRestructuring operating expense, netexpense was $55$17 million and $70$14 million for the yearsyear ended December 31, 20242025 and 2023,2024, respectively. OtherSee operatingNote expense,4, net“Restructuring”, wasfor comprisedfurther of the following:discussion.

Interest income was $16$14 million and $13$16 million in the years ended December 31, 20242025 and 2023,2024, respectively. The increasedecrease was primarily due to increaseddecreased cash and cash equivalents balances, as well as higherlower interest rates on cash and cash equivalents balances.

Other postretirementInterest expense was de$81 minimusmillion and $2$99 million in the years ended December 31, 20242025 and 2023,2024, respectively. The decrease in other postretirement expense for the year ended December 31, 2024 was primarily duerelated to higherthe interestloss on extinguishment as a result of the restructuring of the Company’s debt positions in 2024. See Note 14, “Notes Payable and inflationaryDebt”, costsfor infurther 2023.discussion.

AdjustedNet earnings per diluted share and adjusted net earnings per diluted share

We face a number of risks and uncertainties that could materially and adversely affect our business, financial condition or results of operations. A discussion of our risk factors can be found in Part I, Item 1A. Risk Factors in the Company’s Form 10-K filed on February 12, 2026. Readers should not interpret the disclosure of any risk factor to imply that the risk has not already materialized. During the three months ended MarchJune 31,30, 2026, there were no material changes to our previously disclosed risk factors.

On August 1, 2025, PHINIA completed the acquisition of Swedish Electromagnet Invest AB (SEM),SEM, a provider of advanced natural gas, hydrogen and other alternative fuel ignition systems, injector stators and linear position sensors, for $47$46 million, comprised of $15$14 million of cash consideration and $32 million cash used to extinguish debt assumed through the acquisition. See Note 2, “Acquisition”, for further discussion.

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.

We expect improved earnings and cash generation in 2026,2026 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 remaindecline flatby 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 second half 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 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 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.

Three Months Ended MarchJune 31,30, 2026 vs. Three Months Ended MarchJune 31,30, 2025

Net sales for the three months ended MarchJune 31,30, 2026 totaled $878$940 million, an increase of $82$50 million, or 10%,6%, compared to the three months ended MarchJune 31,30, 2025. Cost of sales and cost of sales as a percentage of net sales were $690$724 million and 79%,77%, respectively, during the three months ended MarchJune 31,30, 2026, compared to $624$693 million and 78%, respectively, during the three months ended MarchJune 31,30, 2025. The change in net sales, cost of sales, and gross profit for the three months ended MarchJune 31,30, 2026 was primarily driven by the impacts below.

SG&A for the three months ended MarchJune 31,30, 2026 was $115$128 million as compared to $107$112 million for the three months ended MarchJune 31,30, 2025. SG&A as a percentage of net sales was 14% for the three months ended June 30, 2026, compared to 13% for the three months ended MarchJune 31, 2026 and30, 2025. SG&A expenses increased period-over-period, primarily attributable to increased employee costs, including stock-based compensation.compensation, as well as foreign currency exchange impacts and professional fees.

Restructuring expense was $3$8 million and $5$2 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. See Note 4, “Restructuring”, for further discussion.

Other operating expense (income),income, net

Other operating expense (income),income, net was expensede of $1 millionminimis compared to income of $2$6 million for the three months ended MarchJune 31,30, 2026 and 2025. The change in other operating expense,income, net was primarily driven by ana increasedecrease in separation-related costs.benefits. Other operating expense (income),income, net was comprised of the following:

Equity in affiliates’ earnings, net of tax was $5 million and $4 million in each of the three months ended MarchJune 31,30, 2026 and 2025, respectively.2025. This line item is driven by the results of the Company’s unconsolidated joint venture.

Interest income was $2 million and $4 million in the three months ended MarchJune 31,30, 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 was $20 million and $19$21 million in the three months ended MarchJune 31,30, 2026 and 2025, respectively. See Note 13, “Notes Payable and Debt”, for further discussion.2025.

Provision for income taxes was $20$27 million for the three months ended MarchJune 31,30, 2026, resulting in an effective tax rate of 35%.40%. This is compared to $24$29 million, or 48%,39%, for the three months ended MarchJune 31,30, 2025. The effective tax raterates for the threerespective monthsperiods endedwere March 31, 2026 decreased as comparedcomparable to theone prior year as a result of an uncertain tax position recorded discretely in the three month period ended March 31, 2025 that did not recur in the three month period ended March 31, 2026.another.

For further details, see Note 7, “Income Taxes,” to the Condensed Consolidated Financial Statements for the three months ended MarchJune 31,30, 2026 and 2025.

The Company’s net earnings per diluted share was $0.96$1.05 and $0.63$1.14 for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The Company’s adjusted net earnings per diluted share was $1.29$1.53 and $0.94$1.27 for the three months ended MarchJune 31,30, 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.

Results by Reportable Segment for the three months ended MarchJune 31,30, 2026 and 2025

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 $24$28 million and $25 million for the three months ended MarchJune 31,30, 2026 and 2025.2025, 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 and increased performance-based incentive compensation.

The Fuel Systems segment’ssegment Segmentadjusted Adjusted Operatingoperating margin was 9.3%11.0% for the three months ended MarchJune 31,30, 2026, compared to 9.4%11.2% for the three months ended MarchJune 31,30, 2025. The Segment Adjusted Operating margin decrease was primarily due to unfavorable product mix in Europe and Asia, partially offset by costthe controltiming measuresof tariff recoveries and supplierthe savings.SEM acquisition.

The Aftermarket segment’ssegment Segmentadjusted Adjusted Operatingoperating margin was 17.0%17.1% for the three months ended MarchJune 31,30, 2026, comparedwhich was comparable to 16.7% for the three months ended MarchJune 31,30, 2025. The Segment Adjusted Operating margin increase was primarily due to cost control measures and tariff recoveries.

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 MarchJune 31,30, 2026, the Company had liquidity of $808$820 million, comprised of cash and cash equivalent balances of $328$370 million and availability on the Revolving Facility of $480$450 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 MarchJune 31,30, 2026 and December 31, 2025, the Company had $328$370 million and $359 million of cash and cash equivalents, respectively, of which $315$352 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 June 30, 2026, the Company had total debt of $1,019 million.