PHINIA INC.PHIN
PHINIA INC. Goodwill & Intangibles Disclosure
GOODWILL AND OTHER INTANGIBLES
The Company’s goodwill is tested for impairment annually in the fourth quarter for all reporting units, and more frequently if events or circumstances warrant such a review. The Company performed quantitative impairment testing during the fourth quarter of 2025. The estimated fair value was determined using a combined income and market approach. The market approach is based on market multiples (revenue and “EBITDA”, defined as earnings before interest, taxes, depreciation and amortization) and requires an estimate of appropriate multiples based on market data for comparable companies. The market valuation models and other financial ratios used by the Company require certain assumptions and estimates regarding the applicability of those models to the Company’s facts and circumstances.
The Company believes the assumptions and estimates used to determine the estimated fair value are reasonable. Different assumptions could materially affect the estimated fair value. The primary assumptions affecting the Company’s 2025 goodwill quantitative impairment review are as follows:
•Discount rates: The Company used weighted average cost of capital (WACC) as the discount rates for future cash flows. The WACC is intended to represent a rate of return that would be expected by a market participant.
•EBITDA margins: The Company used historical and expected EBITDA margins, which may vary based on the projections of the reporting unit being evaluated.
•Revenue growth rates: The Company used a global automotive market industry growth rate forecast adjusted to estimate its own market participation for product lines.
•Market multiples: The Company used appropriate multiples based on market data for comparable companies.
In addition to the above primary assumptions, the Company notes the following risks to volume and operating income assumptions that could have an impact on the discounted cash flow models:
•The automotive industry is cyclical, and the Company’s results of operations could be adversely affected by industry downturns.
•The automotive industry is evolving, and if the Company does not respond appropriately, its results of operations could be adversely affected.
•The Company is dependent on market segments that use its key products and could be affected by decreasing demand in those segments.
•The Company is subject to risks related to international operations.
The results of the impairment testing performed indicated that the estimated fair value of the Fuel Systems and Aftermarket reporting units exceeded their carrying values by considerable amounts. It was determined that the estimated fair value of each reporting unit exceeded its respective carrying value and as such, the Company’s goodwill was not considered impaired as of the fourth quarter of 2025.
Future changes in the judgments, assumptions and estimates from those used in acquisition-related valuations and goodwill impairment testing, including discount rates or future operating results and related cash flow projections, could result in significantly different estimates of the fair values in the future. An increase in discount rates, a reduction in projected cash flows or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect the Company’s financial statements in any given year.
A summary of the changes in the carrying amount of goodwill is presented in the following tables. The Company has determined that each of the reportable segments is also a reporting unit. Refer to Note 24, “Reportable Segments and Related Information” for more information.
| 2025 | 2024 | ||||||||||||||||||||||
| (in millions) | Fuel Systems | Aftermarket | Fuel Systems | Aftermarket | |||||||||||||||||||
| Gross goodwill balance, January 1 | $ | 60 | $ | 524 | $ | 61 | $ | 551 | |||||||||||||||
| Accumulated impairment losses, January 1 | — | (113) | — | (113) | |||||||||||||||||||
| Net goodwill balance, January 1 | $ | 60 | $ | 411 | $ | 61 | $ | 438 | |||||||||||||||
| Goodwill during the year: | |||||||||||||||||||||||
| Acquisition (see Note 2) | 4 | — | — | — | |||||||||||||||||||
| Translation adjustment and other | 7 | 27 | (1) | (27) | |||||||||||||||||||
| Net goodwill balance, December 31 | $ | 71 | $ | 438 | $ | 60 | $ | 411 | |||||||||||||||
The Company’s other intangible assets, primarily from acquisitions, consist of the following:
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||
| (in millions) | Estimated useful lives (years) | Gross carrying amount | Accumulated amortization | Net carrying amount | Gross carrying amount | Accumulated amortization | Net carrying amount | ||||||||||||||||||||||||||||||||||
| Amortized intangible assets: | |||||||||||||||||||||||||||||||||||||||||
| Patented and unpatented technology | 6 - 15 | $ | 164 | $ | 66 | $ | 98 | $ | 144 | $ | 51 | $ | 93 | ||||||||||||||||||||||||||||
| Customer relationships | 12 - 15 | 291 | 141 | 150 | 259 | 118 | 141 | ||||||||||||||||||||||||||||||||||
| Total amortized intangible assets | 455 | 207 | 248 | 403 | 169 | 234 | |||||||||||||||||||||||||||||||||||
| Unamortized trade names | 150 | — | 150 | 140 | — | 140 | |||||||||||||||||||||||||||||||||||
| Total other intangible assets | $ | 605 | $ | 207 | $ | 398 | $ | 543 | $ | 169 | $ | 374 | |||||||||||||||||||||||||||||
Amortization of other intangible assets was $30 million for the year ended December 31, 2025, and $28 million for each of the years ended 2024 and 2023. The Company utilizes the straight-line method of amortization recognized over the estimated useful lives of the assets. The estimated future annual amortization expense, primarily for acquired intangible assets, is $32 million for each of the years 2026 through 2029, $31 million for 2030 and $89 million thereafter.
A roll forward of the gross carrying amounts and related accumulated amortization of the Company’s other intangible assets is presented below:
| Gross carrying amounts | Accumulated amortization | ||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Beginning balance, January 1 | $ | 543 | $ | 562 | $ | 169 | $ | 145 | |||||||||||||||
| Amortization | — | — | 30 | 28 | |||||||||||||||||||
| Acquisition (see Note 2) | 27 | — | — | — | |||||||||||||||||||
| Translation adjustment | 35 | (19) | 8 | (4) | |||||||||||||||||||
| Ending balance, December 31 | $ | 605 | $ | 543 | $ | 207 | $ | 169 | |||||||||||||||
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.