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What changed in Atmus Filtration Technologies Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Atmus Filtration Technologies Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+282 added−386 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-14)

Top changes in Atmus Filtration Technologies Inc.'s 2024 10-K

282 paragraphs added · 386 removed · 236 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

57 edited+12 added−71 removed39 unchanged
Biggest changeDisher served in various leadership roles since joining Cummins in 2013, including as Operations Director and Managing Director for Cummins in the South Pacific region. Ms. Disher holds a bachelor’s degree in Commerce from the University of Western Sydney and a Master of Business Administration from the University of Melbourne . Jack Kienzler currently serves as Atmus’ Chief Financial Officer.
Biggest changeDisher holds a bachelor’s degree in Commerce from the University of Western Sydney and a Master of Business Administration from the University of Melbourne . Jack M. Kienzler currently serves as Atmus’ Senior Vice President, Chief Financial Officer and Chief Accounting Officer. Mr. Kienzler previously oversaw the financial activities of Cummins Filtration Inc. as its Chief Financial Officer. Mr.
Diversity and Inclusion Diversity and inclusion at all levels of Atmus are critical to its ability to innovate, win in the marketplace and create sustainable success. Having diverse and inclusive workplaces allows Atmus to attract and retain the best employees to deliver results for its shareholders.
Inclusion and Diversity Inclusion and diversity at all levels of Atmus are critical to its ability to innovate, win in the marketplace and create sustainable success. Having inclusive and diverse workplaces allows Atmus to attract and retain the best employees to deliver results for its shareholders.
In addition to building on its core technologies, Atmus is making investments in filtration and separation technologies required and used by electric powered vehicles, hydrogen production and other industrial systems . Atmus’ research and development programs are focused on product improvements, product extensions, innovations and cost reductions for its customers.
In addition to building on its core technologies, Atmus is making investments in filtration and separation technologies required and used by electric powered vehicles, hydrogen production and other industrial systems . Atmus’ research, development and engineering programs are focused on product improvements, product extensions, innovations and cost reductions for its customers.
StrataPore, NanoNet, NanoForce, and most recently, NanoNet Plus product families have enabled engines and equipment to meet continually changing emissions and performance requirements . Atmus’ technical team works closely with Atmus’ customers to develop and apply filtration technologies that help them improve their operations.
StrataPore, NanoNet, NanoForce, NanoNet Plus and most recently, NanoNet N3 product families have enabled engines and equipment to meet continually changing emissions and performance requirements . Atmus’ technical team works closely with Atmus’ customers to develop and apply filtration technologies that help them improve their operations.
Atmus is embracing these opportunities as Atmus simplifies its organizational structures and processes, further 12 Table of Contents empowers managers and employees to make decisions and generate positive results, increases employee communication and interaction with senior leadership and enhances a work environment that is inclusive, transparent, agile and team-oriented . Purpose and Core Values Atmus is a purpose-driven company.
Atmus 10 Table of Contents is embracing these opportunities as Atmus simplifies its organizational structures and processes, further empowers managers and employees to make decisions and generate positive results, increases employee communication and interaction with senior leadership and enhances a work environment that is inclusive, transparent, agile and team-oriented . Purpose and Core Values Atmus is a purpose-driven company.
Disher joined Cummins in 2013 and has over 20 years of experience in leadership positions, including international assignments in Australia, Asia, and the United States. Most recently, Stephanie J. Disher served as Vice President of Cummins Filtration where she has demonstrated a continued track record of strong business performance, innovation and operational excellence.
Disher joined Cummins in 2013 and has over 20 years of experience in leadership positions, including international assignments in Australia, Asia, and the United States. Most recently, Stephanie J. Disher served as Vice President, Cummins and President, Cummins Filtration where she has demonstrated a continued track record of strong business performance, innovation and operational excellence. Jack M.
Building on a long history that has emphasized diversity and inclusion, Atmus will continue to seek opportunities and invest in processes that attract, develop and retain diverse talent, globally. Atmus will measure outcomes and ensure that all employees can benefit from being a part of Atmus. This starts by assuring that the leadership of Atmus is diverse.
Building on a long history that has emphasized inclusion and diversity, Atmus will continue to seek opportunities and invest in processes that attract, develop and retain diverse talent, globally. Atmus will measure outcomes and ensure that all employees can benefit from being a part of Atmus. This starts by ensuring that the leadership of Atmus is diverse.
Atmus typically ships directly from its 11 distribution centers (as of December 31, 2023) worldwide to its channel partners, which provides direct connection and detailed understanding of Atmus’ customer and end-user base. Atmus’ comprehensive distribution and market coverage are vital to maintaining its broad reach, global presence and brand recognition .
Atmus typically ships directly from its 11 distribution centers (as of December 31, 2024) worldwide to its channel partners, which provides direct connection and detailed understanding of Atmus’ customer and end-user base. Atmus’ comprehensive distribution and market coverage are vital to maintaining its broad reach, global presence and brand recognition .
Throughout Atmus’ 65-year history, Atmus has always recognized that people are the strength of its business and drive its ability to effectively serve its customers and sustain its competitive position. Atmus believes that the composition of its workforce gives it advantages relating to cost and capability when compared to its peers.
Throughout Atmus’ more than 65-year history, Atmus has always recognized that people are the strength of its business and drive its ability to effectively serve its customers and sustain its competitive position. Atmus believes that the composition of its workforce gives it advantages relating to cost and capability when compared to its peers.
Atmus’ Fleetguard brand is further supported by a competitive warranty that gives Atmus’ customers and end-users high confidence in the performance and durability of its products . Partnering with leading OEMs Atmus has a strong history as a supplier to leading OEMs, including Cummins, Daimler, Deere, Doosan, Foton, Komatsu, Paccar/DAF, the Traton Group (Navistar/Scania/MAN), Stellantis and Volvo.
Atmus’ Fleetguard brand is further supported by a competitive warranty that gives Atmus’ customers and end-users high confidence in the performance and durability of its products . Partnering with leading OEMs Atmus has a strong history as a supplier to leading OEMs, including Cummins, Daimler, Deere, Doosan, Foton, Komatsu, Paccar/DAF, the Traton Group, Stellantis and Volvo.
Human Capital Resources As of December 31, 2023, Atmus employed approximately 4,500 persons worldwide. As of December 31, 2023, approximately 53% of Atmus’ employees worldwide were represented by various unions under collective bargaining agreements.
Human Capital Resources As of December 31, 2024, Atmus employed approximately 4,500 persons worldwide. As of December 31, 2024, approximately 53% of Atmus’ employees worldwide were represented by various unions under collective bargaining agreements.
Atmus sells both first-fit and aftermarket products to these customers and has been selling to each of them for at least 10 years. These customers in the aggregate accounted for approximately 67% of Atmus’ net sales in 2023 and have consistently accounted for more than 67% of Atmus’ net sales in each of the last five years.
Atmus sells both first-fit and aftermarket products to these customers and has been selling to each of them for at least 10 years. These customers in the aggregate accounted for approximately 68% of Atmus’ net sales in 2024 and have consistently accounted for more than 67% of Atmus’ net sales in each of the last five years.
Atmus’ Global Footprint Atmus serves end-users globally, with approximately 49% of its Net sales in 2023 from outside of the United States and Canada. Atmus believes that it, together with its joint ventures in China and India, has a leading position in its core markets, based on Net sales in 2023.
Atmus’ Global Footprint Atmus serves end-users globally, with approximately 48% of its Net sales in 2024 from outside of the United States and Canada. Atmus believes that it, together with its joint ventures in China and India, has a leading position in its core markets, based on Net sales in 2024.
Cummins is Atmus’ largest customer and accounted for approximately 17.4% of Atmus’ net sales in 2023. This relationship is defined by the first-fit supply agreement and the aftermarket supply agreement. These supply agreements will help give Atmus visibility and stability to its future sales within the terms of the agreements.
Cummins is Atmus’ largest customer and accounted for approximately 17.6% of Atmus’ net sales in 2024. This relationship is defined by the first-fit supply agreement and the aftermarket supply agreement. These supply agreements will help give Atmus visibility and stability to its future sales within the terms of the agreements.
Atmus estimates that approximately 19% of Atmus’ net sales in 2023 were generated through first-fit sales to original equipment manufacturers (“OEM”s), where Atmus’ products are installed as components for new vehicles and equipment, and approximately 81% were generated in the aftermarket, where Atmus’ products are installed as replacement or repair parts, leading to a strong recurring revenue base.
Atmus estimates that approximately 14% of Atmus’ net sales in 2024 were generated through first-fit sales to original equipment manufacturers (“OEM”s), where Atmus’ products are installed as components for new vehicles and equipment, and approximately 86% were generated in the aftermarket, where Atmus’ products are installed as replacement or repair parts, leading to a strong recurring revenue base.
Research and development expenditures include salaries, contractor fees, building costs, utilities, testing, technical IT, administrative expenses and allocation of corporate costs and are expensed when incurred. Research and development expenses were $42.3 million, $38.5 million, and $41.6 million for the years ended December 31, 2023, 2022 and 2021, respectively .
Research, development and engineering expenditures include salaries, contractor fees, building costs, utilities, testing, technical IT, administrative expenses and allocation of corporate costs and are expensed when incurred. Research, development and engineering expenses were $40.6 million, $42.5 million, and $38.6 million for the years ended December 31, 2024, 2023 and 2022, respectively .
Collectively, Atmus’ net sales from its next four top customers, other than Cummins, was approximately 39% of Atmus’ net sales in 2023, 39% in 2022 and 37% in 2021. Excluding Cummins, two other customers, PACCAR and the Traton Group, accounted for more than 10% of Atmus’ net sales in 2023.
Collectively, Atmus’ net sales from its next four top customers, other than Cummins, was approximately 40% of Atmus’ net sales in 2024 and approximately 39% in 2023 and 2022, respectively. Excluding Cummins, two other customers, PACCAR and the Traton Group, accounted for more than 10% of Atmus’ net sales in 2024.
Renee Swan currently serves as Atmus’ Chief People Officer. Ms. Swan previously served as Vice President of Human Resources for the communication systems segment of L3Harris Technologies, Inc. Ms. Swan has over two decades of experience in human resources disciplines, having spent time with Kennametal, Honeywell International, and Eaton Corporation in progressive human resources responsibilities. Ms.
Swan previously served as Vice President of Human Resources for the communication systems segment of L3Harris Technologies, Inc. Ms. Swan has over two decades of experience in human resources disciplines, having spent time with Kennametal, Honeywell International, and Eaton Corporation in progressive human resources responsibilities. Ms.
These filings are available on the SEC’s website at www.sec.gov . 16 Table of Contents MANAGEMENT OF ATMUS Executive Officers The following table sets forth information, as of February 14, 2024, regarding the individuals who serve as Atmus’ executive officers, followed by a biography of each executive officer. Name Age Position Stephanie J.
These filings are available on the SEC’s website at www.sec.gov . 12 Table of Contents MANAGEMENT OF ATMUS Executive Officers The following table sets forth information, as of February 21, 2025, regarding the individuals who serve as Atmus’ executive officers, followed by a biography of each executive officer. Name Age Positions Stephanie J.
Jack Kienzler joined Cummins in 2014 and has over 14 years of finance experience. He most recently served as the Executive Director of Investor Relations at Cummins, having formerly led the Corporate Development team. Renee Swan joined Atmus in August 2023 and has over 20 years of experience in human resources and talent management. Toni Y.
Kienzler joined Cummins in 2014 and has over 15 years of finance experience. He most recently served as the Executive Director of Investor Relations at Cummins, having formerly led the Corporate Development team. Renee M. Swan joined Atmus in August 2023 and has over 20 years of experience in human resources and talent management. Charles E.
Atmus’ team draws on a 65-year history focused on 7 Table of Contents filtration and media technologies. Atmus has a broad IP portfolio with over 1,275 worldwide active or pending patents and patent applications and over 600 worldwide trademark registrations and applications as of December 31, 2023 .
Atmus’ team draws on a more than 65-year history focused on filtration and media technologies. Atmus has a broad IP portfolio with over 1,200 worldwide active or 6 Table of Contents pending patents and patent applications and over 600 worldwide trademark registrations and applications as of December 31, 2024 .
Atmus’ current core markets are on-highway and off-highway, representing approximately 60% and 40% of Atmus’ net sales in 2023, respectively . 8 Table of Contents Atmus estimates that approximately 81% of Atmus’ net sales in 2023 were generated in the aftermarket .
Atmus’ current core markets are on-highway and off-highway, representing approximately 60% and 40% of Atmus’ net sales in 2024, respectively . Atmus estimates that approximately 86% of Atmus’ net sales in 2024 were generated in the aftermarket .
Atmus protects what’s important to its people, the planet, and its customers .
Atmus protects What is important to its people, the planet, and its customers .
Everywhere possible, individual performance is the primary path for Atmus’ employees to advance their earning potential. In addition, all employees also participate in annual variable compensation plans that encourage collaboration in the achievement of overall business results . Atmus’ benefit programs are aligned with Atmus’ values, target market competitiveness and offer flexibility to meet individual needs.
Everywhere possible, individual performance is the primary path for Atmus’ employees to advance their earning potential. In addition, all employees also participate in annual variable compensation plans that encourage collaboration in the achievement of overall business results . Atmus’ benefit programs are aligned with Atmus’ values, including health insurance, retirement plans and wellness programs.
Among these collective bargaining agreements, those for the employees in Mexico, Brazil and France are renewed annually after compensation negotiations, while the collective bargaining agreement for the Cookeville, Tennessee plant typically has a four- to five-year term.
Among these collective bargaining agreements, those for the employees in Mexico, Brazil and France are renewed annually after compensation negotiations, while the collective bargaining agreement for the Cookeville, Tennessee plant typically has a four- to five-year term. Collective bargaining for Brazil Annual Profit Sharing will take place on February 19, 2025.
Building on Atmus’ 65-year history, Atmus continues to grow and differentiate itself through its global footprint, comprehensive offering of premium products, technology leadership and multi-channel path to market. For the year ended December 31, 2023, Atmus generated $1,628.1 million in Net sales, $171.3 million in Net income and $302.3 million in Adjusted EBITDA.
Building on Atmus’ more than 65-year history, Atmus continues to grow and differentiate itself through its global footprint, comprehensive offering of premium products, technology leadership and multi-channel path to market. For the year ended December 31, 2024, Atmus generated $1,669.6 million in Net sales, $185.6 million in Net income and $329.5 million in Adjusted EBITDA.
Available Information The Company makes its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information, including amendments to those reports, available free of charge through its website at investors.atmus.com , as soon as reasonably practicable after it electronically files such material with, or furnishes such material to, the Securities and Exchange Commission (SEC).
For a description of risks related to the regulations that Atmus is subject to, please refer to the section entitled “ Risks Related to Government Regulation .” Available Information The Company makes its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information, including amendments to those reports, available free of charge through its website at investors.atmus.com , as soon as reasonably practicable after it electronically files such material with, or furnishes such material to, the Securities and Exchange Commission (SEC).
Atmus will continue to make investments to develop new technologies and improve its current products to meet increasing and changing emissions and engine performance requirements globally for diesel and hydrocarbon-powered equipment.
Research, Development and Engineering In 2024, Atmus continued to invest in future critical technologies and products. Atmus will continue to make investments to develop new technologies and improve its current products to meet increasing and changing emissions and engine performance requirements globally for diesel and hydrocarbon-powered equipment.
Most of the large global players serve both first-fit and aftermarket channels, while smaller, regional players tend to focus on the aftermarket. The filtration market offers a unique multi-channel path to market, and diversification across first-fit, OEM service and aftermarket. The recurring revenue model and mission-critical role of filters drive consistent demand across regions and end markets .
The filtration market offers a unique multi-channel path to market, and diversification across first-fit, OEM service and aftermarket. The recurring revenue model and mission-critical role of filters drive consistent demand across regions and end markets .
Atmus has a broad IP portfolio with over 1,275 worldwide active or pending patents and patent applications and over 600 worldwide trademark registrations and applications as of December 31, 2023, which were granted and registered over a period of years.
Atmus has a broad IP portfolio with over 1,200 worldwide active or pending patents and patent applications and over 650 worldwide trademark registrations and applications as of December 31, 2024, which were granted and registered over a period of years. Atmus’ leading brand house trademark is Fleetguard.
Atmus’ Premium Products Atmus offers a full spectrum of filtration solutions that enable lower emissions and provide superior asset protection. Atmus’ filtration products provide comprehensive and differentiated solutions, which allow its end-users to extend service intervals, reduce maintenance costs and increase uptime. Atmus’ products include fuel filters, lube filters, air filters, crankcase ventilation, hydraulic filters and coolants and other chemicals.
Atmus’ filtration products provide comprehensive and differentiated solutions, which allow its end-users to extend service intervals, reduce maintenance costs and increase uptime. Atmus’ products include fuel filters, lube filters, air filters, crankcase ventilation, hydraulic filters and coolants and other chemicals.
At this time, five out of Atmus’ 11 directors are female and four out of its 11 directors are ethnically diverse. In addition, 44% of Atmus’ executive team is female, including its Chief Executive Officer, and 22% is ethnically diverse.
At this time, three out of Atmus’ seven directors are female, including its Chief Executive Officer, and two out of its seven directors are ethnically diverse. In addition, 38% of Atmus’ executive team is female, including its Chief Executive Officer, and 13% is ethnically diverse.
Supply chain disruptions can impact Atmus’ business as well as its suppliers and customers, resulting in longer lead times in some areas of its business. Orders are typically issued as rolling releases with a specific lead time.
Atmus’ global team, located in different regions of the world, uses various approaches to identify and resolve threats to supply continuity . Supply chain disruptions can impact Atmus’ business as well as its suppliers and customers, resulting in longer lead times in some areas of its business. Orders are typically issued as rolling releases with a specific lead time.
Atmus’ Competitive Strengths Technology leadership and deep industry knowledge enable Atmus to deliver better customer solutions Atmus combines a culture of innovation with deep-seated experience in its industry to deliver superior filtration solutions for its customers.
Atmus’ broad range of products in each of its core markets enables one-stop shopping, which Atmus believes is a key competitive advantage. Atmus’ Competitive Strengths Technology leadership and deep industry knowledge enable Atmus to deliver better customer solutions Atmus combines a culture of innovation with deep-seated experience in its industry to deliver superior filtration solutions for its customers.
Prior to that role, Mr. Masters served in various leadership roles since joining Cummins in 2003, including as General Manager of Eaton Cummins Automated Transmission Technologies from 2018 to 2021 and as President of Cummins Western Canada from 2016 to 2018. Mr.
Masters served in various leadership roles since joining Cummins in 2003, including as General Manager of Eaton Cummins Automated Transmission Technologies from 2018 to 2021 and as President of Cummins Western Canada from 2016 to 2018. Mr. Masters holds a Bachelor of Commerce from the University of Alberta and a Master of Business Administration from Harvard Business School .
To drive these net sales, Atmus has developed a multi-channel path to global markets that ensures broad product availability and provides end-users with choice and flexibility in purchasing. Atmus distributes its products through a broad range of OEM dealers, independent distributors, and retail outlets, including truck stops .
To drive these net sales, Atmus has developed a multi-channel path to global markets that ensures broad product availability and provides end-users with choice and flexibility in purchasing.
Although these patents, trademarks and trade secrets are generally considered beneficial to Atmus’ operations, Atmus does not believe any patent, group of patents, trademark or trade secret is solely responsible for protecting its products . Research and Development In 2023, Atmus continued to invest in future critical technologies and products.
Atmus protects its innovations that arise from research and development through patent filings, as well as through trade secrets. Although these patents, trademarks and trade secrets are generally considered beneficial 9 Table of Contents to Atmus’ operations, Atmus does not believe any patent, group of patents, trademark or trade secret is solely responsible for protecting its products .
Mr. Kienzler previously oversaw the financial activities of Cummins Filtration Inc. as its Chief Financial Officer. Mr. Kienzler served in various leadership roles since joining Cummins in 2014. Mr. Kienzler holds a Bachelor of Science in Finance and Accounting from Indiana University and a Master of Business Administration from the Indiana University Kelley School of Business .
Kienzler served in various leadership roles since joining Cummins in 2014. Mr. Kienzler holds a Bachelor of Science in Finance and Accounting from Indiana University and a Master of Business Administration from the Indiana University Kelley School of Business . Renee M. Swan currently serves as Atmus’ Senior Vice President and Chief People Officer. Ms.
Employee Safety and Wellness 13 Table of Contents Atmus has a health, safety and environment commitment to protect what is important - its people, the planet and its customers. Every day, Atmus is committed to continually improve the health and safety of its work environment, taking action to achieve its goal that nobody gets hurt.
Every day, Atmus is committed to continually improve the health and safety of its work environment, taking action to achieve its goal that nobody gets hurt.
Hickey joined Cummins in 2012 and has over 24 years of experience as an intellectual property lawyer. Charles Masters joined Cummins in 2003 and has over 20 years of experience in global sales and operational leadership roles within Cummins. Atmus’ leadership team has the ability to develop and execute its strategic vision and aims to create long-term shareholder value.
Masters joined Cummins in 2003 and has over 20 years of experience in global sales and operational leadership roles within Cummins. Atmus’ leadership team has the ability to develop and execute its strategic vision and aims to create long-term shareholder value. Atmus benefits from its team’s industry knowledge and track record of successful product innovation and financial performance.
Swan has a Master of Professional Studies in Human Resource Management from Cornell University, a Master of Business Administration degree from Point Park University and a Bachelor's in Communications from the University of Pittsburgh . Charles Masters currently serves as Atmus’ Vice President, Engine Products and previously served as Executive Director of Global Sales and Marketing of Cummins Filtration Inc.
Swan has a Master of Professional Studies in Human Resource Management from Cornell University, a Master of Business Administration degree from Point Park University and a Bachelor's in Communications from the University of Pittsburgh . Charles E.
The collective bargaining agreement for Brazil is in place and active and the compensation negotiations for a new annual term on the collective bargaining agreements for Mexico and France were recently concluded. These collective bargaining agreements have terms that will expire between December 2024 and February 2025.
Annual term collective bargaining for Mexico and France were recently successfully completed. These collective bargaining agreements have terms that will expire between December 2025 and February 2026.
For example, the dealers of four of the largest North America on-highway OEMs carry a significant range of Atmus’ products at their dealerships . In addition, Cummins distributors, independent distributors and retailers enable Atmus to reach a broader end-user market and create additional points of sale or service.
In addition, Cummins distributors, independent distributors and retailers enable Atmus to reach a broader end-user market and create additional points of sale or service.
Customer Concentration Atmus has thousands of customers around the world and has developed long-standing business relationships with many of them. Cummins is Atmus’ largest customer, accounting for approximately 17% of Atmus’ net sales in 2023 and 19% in 2022 and 2021, respectively.
In 2024, material costs represented approximately 61% of Atmus’ cost of sales, compared to 57% of Atmus’ cost of sales in 2023 . Customer Concentration Atmus has thousands of customers around the world and has developed long-standing business relationships with many of them.
In connection with the Separation, Atmus entered into a first-fit supply agreement and an aftermarket supply agreement with Cummins for Atmus’ first-fit and aftermarket products.
Cummins is Atmus’ largest customer, accounting for approximately 17.6% of Atmus’ net sales in 2024, 17.4% in 2023 and 19.3% in 2022, respectively. In connection with the Separation, Atmus entered into a first-fit supply agreement and an aftermarket supply agreement with Cummins for Atmus’ first-fit and aftermarket products.
Key suppliers are 10 Table of Contents managed through long-term supply agreements that secure capacity, delivery, quality and ensure cost requirements are met over an extended period .
Key suppliers are managed through long-term supply agreements that secure capacity, delivery, quality and ensure cost requirements are met over an extended period . 8 Table of Contents Other important elements of Atmus’ sourcing strategy include : • selecting and managing suppliers to comply with its Supplier Code of Conduct ; and • assuring its suppliers comply with its prohibited and restricted materials policy.
Atmus increased the frequency of its formal and informal supplier engagement to address potentially impactful supply base constraints and enhanced collaboration to develop specific countermeasures to mitigate risks. Atmus’ global team, located in different regions of the world, uses various approaches to identify and resolve threats to supply continuity .
Atmus monitors supply chain disruptions and conducts structured supplier risk and resiliency assessments. Atmus increased the frequency of its formal and informal supplier engagement to address potentially impactful supply base constraints and enhanced collaboration to develop specific countermeasures to mitigate risks.
Seasonality While individual product lines may experience modest seasonal variation in production, there is no material effect on the demand for the majority of Atmus’ products on a quarterly basis . Competition Atmus is a leading global participant in the filtration engine products markets.
Also, individual product lines may experience modest seasonal variation in production, this does not, however, have material impact on demand on a quarterly basis. Competition Atmus is a leading global participant in the filtration engine products markets. Atmus’ products include fuel filters, lube filters, air filters, crankcase ventilation, hydraulic filters and coolants and other chemicals.
Atmus’ products include fuel filters, lube filters, air filters, crankcase ventilation, hydraulic filters and coolants and other chemicals. Key global participants in this market include MANN+HUMMEL, Donaldson, Parker and MAHLE. The rest of the market is highly fragmented and occupied by various specialized and regional players.
Key global participants in this market include MANN+HUMMEL, Donaldson, Parker and MAHLE. The rest of the market is highly fragmented and occupied by various specialized and regional players. Most of the large global players serve both first-fit and aftermarket channels, while smaller, regional players tend to focus on the aftermarket.
The dealers of the OEMs are typically the channel preferred by customers in many markets. Atmus’ close relationships with the OEMs and strong first-fit installed base position Atmus well with the OEM dealer network and large fleet customers.
Atmus’ close relationships with the OEMs and strong first-fit installed base position Atmus well with the OEM dealer network and large fleet customers. For example, the dealers of four of the largest North America on-highway OEMs carry a significant range of Atmus’ products at their dealerships .
Materials The principal materials that Atmus uses directly in manufacturing its products are steel, filter media and petrochemical-based products, including plastic, rubber and adhesives products. In 2023, material costs represented approximately 57% of Atmus’ cost of sales, compared to 61% of Atmus’ cost of sales in 2022 .
Materials The principal materials that Atmus uses directly in manufacturing its products are steel, filter media and petrochemical-based products, including plastic, rubber and adhesives products. Atmus expects these materials to be available from numerous sources in quantities sufficient to meet our requirements.
Atmus generates strong operating cash flow from operations with high cash flow conversion, delivering $564.6 million from 2021 through 2023 . Experienced leadership team with a proven track record of driving growth Atmus is led by an energized and experienced senior leadership team with extensive industry experience with Cummins and other leading industrial companies.
Experienced leadership team with a proven track record of driving growth Atmus is led by an energized and experienced senior leadership team with extensive industry experience with Cummins and other leading industrial companies. Atmus’ strategic vision and culture are directed by its executive leadership team under the leadership of its Chief Executive Officer and President, Stephanie J.
Atmus benefits from its team’s industry knowledge and track record of successful product innovation and financial performance. Additionally, members of Atmus’ senior leadership team have strong experience executing and integrating acquisitions and strategic partnerships to drive accelerated growth and improved profitability .
Additionally, members of Atmus’ senior leadership team have strong experience executing and integrating acquisitions and strategic partnerships to drive accelerated growth and improved profitability . Supply The performance of the end-to-end supply chain, extending through to Atmus’ suppliers, is foundational to its ability to meet customers’ expectations and support long-term growth.
The collective bargaining agreement for the Cookeville, Tennessee plant is expiring at the end of its four year term on February 29, 2024 and negotiations for its renewal started in January 2024 .
Contract negotiations at the Cookeville, Tennessee plant took place in February of 2024 resulting in a new four year contract that will expire at the end of its four year term on February 29, 2028.
Atmus maintains strong global customer relationships, supported by an established salesforce with work locations in 25 countries as of December 31, 2023. Also, as of December 31, 2023, Atmus operates through 11 distribution centers, 10 manufacturing facilities and five technical facilities plus 10 manufacturing facilities and two technical facilities operated by its joint ventures, giving Atmus presence on six continents.
Atmus maintains strong global customer relationships, supported by an established salesforce with work locations in over 25 countries as of December 31, 2024.
Atmus’ strategic vision and culture are directed by its executive leadership team under the leadership of its Chief Executive Officer, Stephanie J. Disher, its Chief Financial Officer, Jack Kienzler, its Chief People Officer, Renee Swan, its Chief Legal Officer, Toni Y. Hickey and its Vice President, Engine Products, Charles Masters. Stephanie J.
Disher, its Senior Vice President, Chief Financial Officer and Chief Accounting Officer, Jack M. Kienzler, its Senior Vice President and Chief People Officer, Renee M. Swan and its Senior Vice President and President, Power Solutions, Charles E. Masters. Stephanie J.
Disher 48 Chief Executive Officer Jack Kienzler 38 Chief Financial Officer Renee Swan 43 Chief People Officer Charles Masters 51 Vice President, Engine Products Toni Y. Hickey 50 Chief Legal Officer and Corporate Secretary Stephanie J. Disher currently serves as Atmus’ Chief Executive Officer. Ms. Disher previously served as Vice President of Cummins Filtration Inc. Prior to that role, Ms.
Disher 49 Chief Executive Officer and President Jack M. Kienzler 39 Senior Vice President, Chief Financial Officer and Chief Accounting Officer Renee M. Swan 44 Senior Vice President and Chief People Officer Charles E. Masters 52 Senior Vice President and President, Power Solutions Stephanie J. Disher currently serves as Atmus’ Chief Executive Officer and President. Ms.
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Atmus’ Business Strategy Grow share in first-fit in core markets Atmus’ organic first-fit growth opportunities are centered on four pillars: • Grow market share with leading OEMs : Atmus benefits from deep relationships with leading OEMs. Atmus’ technology innovations, global footprint and preferred brand position it well to grow along with the leading OEMs.
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Atmus’ Business Strategy The company has four pillars as part of its strategy to create value for customers and drive profitable growth. Below are each of the priorities and areas of focus related to each priority.
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As Atmus’ OEM partners continue to grow in share and through consolidation of their respective markets, Atmus will partner with them to grow.
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Grow share in first-fit in core markets • Grow market share with leading OEMs. • Support technology transitions with leading OEMs. • Enhanced product content per vehicle. • Accelerate new product development.
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This growth with OEMs in turn increases the installed base for its products, which drives recurring aftermarket revenue . • Support technology transitions with leading OEMs : Atmus plans to further build on its relationship with OEMs as they transition to alternate fuel technologies, such as hydrogen-powered internal combustion engines, battery electric vehicles and fuel cell electric vehicles.
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Accelerate profitable growth in the aftermarket • Expand Atmus’ product portfolio. • Use analytics to target and capture growth opportunities. 4 Table of Contents • Expand reach through multi-channel distribution. • Invest in product technology advantage to enhance value and protect revenue.
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Based on currently available technology and Atmus’ assessment of products being developed, Atmus believes that, although battery-electric vehicles may have lower levels of filtration content than internal combustion engine vehicles, other technologies such as hydrogen-powered internal combustion engines or fuel cell electric vehicles may have similar levels of filtration content as internal combustion engine vehicles.
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Transform Atmus’ supply chain • Drive services and availability . • Optimize network . • Transform cost structure . • Invest in capabilities for the future .
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Some of Atmus’ current developments in the zero emissions space include hydrogen water separators, air filtration products, 4 Table of Contents coolants and deionizing water filters. Atmus currently has a number of alternative fuel development programs underway with its existing customer base in the zero emissions space.
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Expand into Industrial Filtration Markets • Build sustainable growth by expanding and diversifying into the industrial filtration market. • Leverage global footprint and existing technical capabilities to open new opportunities for growth. • Develop capabilities, whether organically or through acquisitions or strategic partnerships, to enter new markets with long-term growth prospects.
Removed
Atmus is well positioned for the broader transition of technology through its existing relationships with customers . • Enhanced product content per vehicle : Atmus has a focus on offering system modules and highly integrated solutions as customers and end-users seek improved filtration performance and quality, which it believes will result in increased first-fit content per vehicle.
Added
Also, as of December 31, 2024, Atmus operates through 11 distribution centers, 10 manufacturing facilities and five technical facilities plus 10 manufacturing facilities and two technical facilities operated by its joint ventures, giving Atmus presence on six continents. 5 Table of Contents Atmus’ Premium Products Atmus offers a full spectrum of filtration solutions that enable lower emissions and provide superior asset protection.
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Atmus is also extending into smart filtration solutions, including embedded sensors, prediction algorithms and data analytics tools . • Accelerate new product development : Atmus is accelerating its new product development cycle by continued investment in advanced system level testing capabilities, leveraging in-house 3D printing capabilities, utilizing powerful simulation tools and applying machine learning tools throughout its product development cycle .
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Atmus distributes its products through a broad range of OEM dealers, independent distributors, and retail outlets, including truck stops . 7 Table of Contents The dealers of the OEMs are typically the channel preferred by customers in many markets.
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Accelerate profitable growth in the aftermarket Atmus estimates that aftermarket net sales represented approximately 81% of its total net sales in 2023, and has significant opportunity for further growth through these strategic initiatives : • Expand Atmus’ product portfolio : Offering a comprehensive product portfolio provides a ‘one-stop shop’ for Atmus’ customers.
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Seasonality Many of the Company’s end markets are generally stronger in the first half of the Company’s fiscal year. In addition, the second half of the fiscal year contains more holiday periods, which typically includes more customer closures.
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Atmus offers a wide range of products to ensure product coverage and continues to release new products on a yearly basis. Atmus has launched approximately 300 new products annually, on average, over the last three years.
Added
The U.S. medical benefits include a tiered cost-sharing structure based on salary.
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Atmus has a team dedicated to tracking new filter releases and strategically selecting the type and quantity of products to launch each year to ensure optimal product coverage.
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This is in place to make healthcare more affordable for lower income employees and helps to attract and retain talent across the organization. 11 Table of Contents Employee Safety and Wellness Atmus has a health, safety and environment commitment to protect what is important - its people, the planet and its customers.
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Recent product launch focus has trended towards more targeted and focused product releases . • Use analytics to target and capture growth opportunities : Atmus will continue to develop and enhance analytic tools, including using machine learning and artificial intelligence, to identify cross-sell or up-sell opportunities, and new or underserved customers, and precisely estimate the opportunity for additional sales of its Fleetguard-branded products.
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Disher previously served as Vice President, Cummins and President, Cummins Filtration. Prior to that role, Ms. Disher served in various leadership roles since joining Cummins in 2013, including as Operations Director and Managing Director for Cummins in the South Pacific region. Ms.
Removed
Atmus works directly with end-users or through its channel partners to define, track and measure opportunities and conversion rates . • Expand reach through multi-channel distribution : It is important that Atmus can reach end-users no matter where they are, or how they choose to purchase Atmus products.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Ownership of Atmus Common Stock 19 Table of Contents • Substantially all Atmus' assets being pledged as security for its term loan and revolving credit facility. • Fluctuations in the price of Atmus Common Stock; and • Applicable laws and regulations, provisions of Atmus' amended and restated certificate of incorporation and Atmus' bylaws and certain contractual rights granted to Cummins that may discourage takeover attempts and business combinations that stockholders might consider in their best interests.
Biggest changeRisks Related to Ownership of Atmus Common Stock • Fluctuations in the price of Atmus common stock. • Atmus’ stock repurchase program may be suspended or terminated at any time. 15 Table of Contents • No guarantee of the payment, timing or amount of any dividend. • Applicable laws and regulations, provisions of Atmus' amended and restated certificate of incorporation and Atmus' bylaws and certain contractual rights granted to Cummins that may discourage takeover attempts and business combinations that stockholders might consider in their best interests. • The designation of the Court of Chancery in the State of Delaware and the federal district courts for the District of Delaware as exclusive forums provision in Atmus’ amended and restated certificate of incorporation. • Atmus’ historical consolidated financial statements are not necessarily representative of the results that would have been achieved as a standalone company.
Our success is also dependent on retaining key customers, which requires us to successfully manage relationships and anticipate the needs of our customers in the channels in which we sell our products. Changes in the economic conditions could materially and adversely impact our business, financial condition, results of operations or cash flows.
Our success is also dependent on retaining key customers, which requires us to successfully manage relationships and anticipate the needs of our customers in the channels in which we sell our products. Changes in economic conditions could materially and adversely impact our business, financial condition, results of operations or cash flows.
In particular, we may be held liable for the actions that our joint venture partners take inside or outside of the United States, even though our partners may not be subject to these laws. Any such improper acts could damage our reputation, subject us to civil or criminal judgments, fines or penalties, and could otherwise disrupt our business.
In particular, we may be held liable for actions that our joint venture partners take inside or outside of the United States, even though our partners may not be subject to these laws. Any such improper acts could damage our reputation, subject us to civil or criminal judgments, fines or penalties, and could otherwise disrupt our business.
While our relationship with Cummins has been secured through our first-fit supply agreement and aftermarket supply agreement, both of which have an initial term of five years (except with respect to certain new products under the first-fit supply agreement, for which a five-year term commences from the date of the start of production), Cummins operates in both global off-highway and on-highway industries and is subject to the cyclicality of those industries.
While our relationship with Cummins has been secured through our first-fit supply agreement and aftermarket supply agreement, both of which have an initial term of five years from the date of our IPO (except with respect to certain new products under the first-fit supply agreement, for which a five-year term commences from the date of the start of production), Cummins operates in both global off-highway and on-highway industries and is subject to the cyclicality of those industries.
Risks Related to Legal and Regulatory Issues • Sales of counterfeit versions of products, as well as unauthorized sales of products. • Statutory and regulatory requirements that can significantly increase costs. • Changes in international, national and regional trade laws, regulations and policies affecting international trade. 18 Table of Contents • Unanticipated changes in Atmus' effective tax rate, the adoption of new tax legislation or exposure to additional income tax liabilities, as well as audits by tax authorities resulting in additional tax payments for prior periods. • Changes in tax law relating to multinational corporations. • Significant compliance costs and reputational and legal risks imposed by Atmus' global operations and the laws and regulations to which these are subject. • Effects of climate change may cause Atmus to incur increased costs. • Operations being subject to increasingly stringent environmental laws and regulations as well as to laws requiring cleanup of contaminated property.
Risks Related to Legal and Regulatory Issues • Sales of counterfeit versions of products, as well as unauthorized sales of products. • Statutory and regulatory requirements that can significantly increase costs. • Changes in international, national and regional trade laws, regulations and policies affecting international trade. • Unanticipated changes in Atmus' effective tax rate, the adoption of new tax legislation or exposure to additional income tax liabilities, as well as audits by tax authorities resulting in additional tax payments for prior periods. • Changes in tax law relating to multinational corporations. 14 Table of Contents • Significant compliance costs and reputational and legal risks imposed by Atmus' global operations and the laws and regulations to which these are subject. • Effects of climate change may cause Atmus to incur increased costs. • Operations being subject to increasingly stringent environmental laws and regulations as well as to laws requiring cleanup of contaminated property.
For example, if we do not accurately estimate the level of resources required to operate as a standalone company, we may need to acquire additional assets and resources, which could be costly, and in connection with the Separation, may also face difficulty in separating certain aspects of our business from Cummins, including incurring accounting, tax, legal and other professional services costs, recruiting and relocation costs associated with hiring or reassigning our personnel, costs related to establishing a new brand identity in the marketplace and costs to separate information systems and creating standalone administrative units in our business post-separation.
For example, if we do not accurately estimate the level of resources required to operate as a standalone company, we may need to acquire additional assets and resources, which could be costly, and in connection with the Separation, may also face difficulty in separating certain aspects of our business from Cummins, including incurring accounting, tax, legal and other professional services costs, recruiting and relocation costs associated with hiring or reassigning our personnel, costs related to establishing a new brand identity in the marketplace and costs to separate information systems and creating standalone administrative units or distribution centers in our business post-separation.
Despite our policies, procedures and compliance programs, our internal control and compliance systems may not be able to protect it from prohibited acts willfully committed by our employees, agents or business partners that would violate such applicable laws and regulations.
Despite our policies, procedures and compliance programs, our internal control and compliance systems may not be able to protect from prohibited acts willfully committed by our employees, agents or business partners that would violate such applicable laws and regulations.
You should carefully consider the following risk factors in addition to the other information included in this Annual Report on Form 10-K for the fiscal-year ended December 31, 2023, and should also carefully consider the matters addressed in the section herein entitled “Cautionary Statements and Risk Factor Summary.” We may face additional risks and uncertainties that are not presently known to us, or that we currently deem immaterial, which may also impair our business, financial condition, results of operation or cash flows.
You should carefully consider the following risk factors in addition to the other information included in this Annual Report on Form 10-K for the fiscal-year ended December 31, 2024, and should also carefully consider the matters addressed in the section herein entitled “Cautionary Statements and Risk Factor Summary.” We may face additional risks and uncertainties that are not presently known to us, or that we currently deem immaterial, which may also impair our business, financial condition, results of operation or cash flows.
Cummins or one of its affiliates performed various corporate functions that are provided on a centralized basis within Cummins, such as expenses for executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations that may be higher or lower than the comparable expenses we would have actually incurred, or will incur in the future, as a standalone company; • Significant increases have occurred in our cost structure as a result of the IPO, including costs related to public company reporting, investor relations and compliance with the Sarbanes-Oxley Act; 40 Table of Contents • Our historical consolidated financial statements reflect the direct and indirect costs for the services historically provided by Cummins.
Cummins or one of its affiliates performed various corporate functions that are provided on a centralized basis within Cummins, such as expenses for executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations that may be higher or lower than the comparable expenses we would have actually incurred, or will incur in the future, as a standalone company; • Significant increases have occurred in our cost structure as a result of the IPO, including costs related to public company reporting, investor relations and compliance with the Sarbanes-Oxley Act; • Our historical consolidated financial statements reflect the direct and indirect costs for the services historically provided by Cummins.
For example, during periodic collective bargaining in 2020, the United Auto Workers union representing manufacturing employees at the Cookeville, Tennessee site conducted a strike for six weeks after failing to accept modified terms and conditions offered by the company. Any of these consequences may have an adverse effect on us or may limit our flexibility in dealing with our workforce.
For example, during periodic collective bargaining in 2020, the United Auto Workers union representing manufacturing employees at the Cookeville, Tennessee site conducted a strike for six weeks after failing to accept modified terms and conditions offered. Any of these consequences may have an adverse effect on us or may limit our flexibility in dealing with our workforce.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, to the extent permitted by law, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) shall be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of us to us or our shareholders, (iii) any action arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, to the extent permitted by law, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) shall be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of us to us or our shareholders, (iii) any action arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our bylaws or (iv) any action asserting a claim governed by the internal affairs 33 Table of Contents doctrine.
If any of these, or other, difficulties are encountered, expected benefits of such cost savings may not otherwise be realized, which could adversely impact our business, financial condition, results of operations or cash flows. We may be adversely impacted by work stoppages and other labor matters. As of December 31, 2023, we employed approximately 4,500 persons worldwide.
If any of these, or other, difficulties are encountered, expected benefits of such cost savings may not otherwise be realized, which could adversely impact our business, financial condition, results of operations or cash flows. We may be adversely impacted by work stoppages and other labor matters. As of December 31, 2024, we employed approximately 4,500 persons worldwide.
As of December 31, 2023, approximately 53% of our employees worldwide were represented by various unions under collective bargaining agreements. Among these collective bargaining agreements, those for the employees in Mexico, Brazil and France are renewed annually after compensation negotiations, while the collective bargaining agreement for the Cookeville, Tennessee plant typically has a four- to five-year term.
As of December 31, 2024, approximately 53% of our employees worldwide were represented by various unions under collective bargaining agreements. Among these collective bargaining agreements, those for the employees in Mexico, Brazil and France are renewed annually after compensation negotiations, while the collective bargaining agreement for the Cookeville, Tennessee plant typically has a four- to five-year term.
Any such loss or failure could have material adverse effects on our business, financial condition, results of operations or cash flows. In particular, our continued success will depend in part on our ability to retain the talents and dedication of key employees. As of December 31, 2023, we employed approximately 350 total technical employees.
Any such loss or failure could have material adverse effects on our business, financial condition, results of operations or cash flows. In particular, our continued success will depend in part on our ability to retain the talents and dedication of key employees. As of December 31, 2024, we employed approximately 350 total technical employees.
Factors that may cause the market price of our Common Stock to fluctuate, some of which may be beyond our control, include: • Our quarterly or annual earnings, or those of other companies in our industry; • actual or anticipated fluctuations in our operating results; 37 Table of Contents • changes in earnings estimated by securities analysts or our ability to meet those estimates; • the operating and stock price performance of other comparable companies; • changes to the regulatory and legal environment in which we operate; • overall market fluctuations and domestic and worldwide economic conditions; and • other factors described in these “ Risk Factors ” and elsewhere in this Annual Report on Form 10-K.
Factors that may cause the market price of our common stock to fluctuate, some of which may be beyond our control, include: • our quarterly or annual earnings, or those of other companies in our industry; • actual or anticipated fluctuations in our operating results; • changes in earnings estimated by securities analysts or our ability to meet those estimates; • the operating and stock price performance of other comparable companies; • changes to the regulatory and legal environment in which we operate; • overall market fluctuations and domestic and worldwide economic conditions; and • other factors described in these “ Risk Factors ” and elsewhere in this Annual Report on Form 10-K.
Additionally, we may be subject to tax audits. These audits can involve complex issues, which may require an extended period of time to resolve and can be highly judgmental. Tax authorities may disagree with certain tax reporting positions taken by us and, as a result, assess additional taxes against us.
Additionally, we have been subject to tax audits. These audits can involve complex issues, which may require an extended period of time to resolve and can be highly judgmental. Tax authorities may disagree with certain tax reporting positions taken by us and, as a result, assess additional taxes against us.
Efforts to withdraw from, or substantially modify such agreements or arrangements, in addition to the implementation of more restrictive trade policies, such as more detailed inspections, higher tariffs (including, but not limited to, additional tariffs on the import of steel or aluminum and imposition of new or retaliatory tariffs against certain countries, including based on developments in U.S.-China, U.S.-Russia and EU-Russia relations), import or export licensing requirements, and exchange controls or new barriers to entry, could limit our ability to capitalize on current and future growth opportunities in international markets, impair our ability to ship media from our plant in South Korea directly to 27 Table of Contents our joint venture partners, impair our ability to expand the business by offering new technologies, products, and services, and could adversely impact our production costs, customer and end-user demand and our relationships with customers and suppliers.
Efforts to withdraw from, or substantially modify such agreements or arrangements, in addition to the implementation of more restrictive trade policies, such as more detailed inspections, higher tariffs (including, but not limited to, additional tariffs on the import of steel or aluminum and imposition of new or retaliatory tariffs against certain countries, including based on developments in U.S.-China, U.S.-Mexico, U.S.-Canada, U.S.-Russia and EU-Russia relations), import or export licensing requirements, and exchange controls or new barriers to entry, could limit our ability to capitalize on current and future growth opportunities in international markets, impair our ability to ship media from our plant in South Korea directly to our joint venture partners, impair our ability to expand the business by offering new technologies, products, and services, and could adversely impact our production costs, customer and end-user demand and our relationships with customers and suppliers.
There are also a number of other risks inherent to acquisitions, including the potential loss of key customers and suppliers of the acquired businesses or adverse effects on relationships with existing customers and suppliers; the inability to identify all issues or potential liabilities during diligence; difficulties or delays in integrating and assimilating the acquired operations and products or in realizing projected efficiencies, growth prospects, cost savings and synergies; the 22 Table of Contents loss of key employees; the potential increase in exposure to more onerous or costly legal and regulatory requirements and the diversion of management’s time and attention away from other business matters, which may prevent us from realizing the anticipated return on our investment.
There are also a number of other risks inherent to acquisitions, including the potential loss of key customers and suppliers of the acquired businesses or adverse effects on relationships with existing customers and suppliers; the inability to identify all issues or potential liabilities during due diligence; difficulties or delays in integrating and assimilating the acquired operations and products or in realizing projected efficiencies, growth prospects, cost savings and synergies; the loss of key employees; the potential increase in exposure to more onerous or costly legal and regulatory requirements and the diversion of management’s time and attention away from other business matters, which may prevent us from realizing the anticipated return on our investment.
In particular, changing U.S. and European export controls and sanctions on China, as well as other restrictions affecting transactions involving China and Chinese parties and Russia and Russian parties, could affect our ability to collect receivables, provide aftermarket and warranty support for our products, sell products, and otherwise impact our reputation and business, any of which could have a material adverse effect on our business, financial condition, results of operations or cash flows.
In particular, changing U.S. and European export controls and sanctions on China, as well as other restrictions affecting transactions involving China and Chinese parties and Russia and Russian parties, could affect our 23 Table of Contents ability to collect receivables, provide aftermarket and warranty support for our products, sell products, and otherwise impact our reputation and business, any of which could have a material adverse effect on our business, financial condition, results of operations or cash flows.
We have recorded goodwill as a result of prior acquisitions, and an economic downturn could cause these balances to become impaired, requiring write-downs that would reduce our operating income. Goodwill amounted to approximately $84.7 million as of December 31, 2023.
We have recorded goodwill as a result of prior acquisitions, and an economic downturn could cause these balances to become impaired, requiring write-downs that would reduce our operating income. Goodwill amounted to approximately $84.7 million as of December 31, 2024.
For example, proposed SEC rules to enhance disclosures regarding the effects of climate change could increase our reporting and compliance costs, and in October 2023, the California Governor signed the Climate-Related Financial Risk and the Climate Corporate Data Accountability Act into law, which impose significant and mandatory climate-related reporting requirements for large companies doing business in the state.
For example, proposed SEC rules to enhance disclosures regarding the effects of climate change could increase our reporting and compliance costs, and in October 2023, the California Governor signed the Climate-Related Financial Risk and the Climate Corporate Data Accountability Act into law, which impose significant and mandatory climate-related reporting requirements for large 25 Table of Contents companies doing business in the state.
Sales to Cummins joint ventures and to distributors with which Cummins has a relationship also account for a portion of our net sales. A portion of our net sales is dependent upon customer acceptance of, and demand for, Cummins’ engines or generators that use our filters.
Sales to Cummins joint ventures and to distributors that Cummins has a relationship also account for a portion of our net sales. A portion of our net sales is dependent upon customer acceptance of, and demand for, Cummins’ engines or generators that use our filters.
Due to the inherent uncertainties of any litigation, commercial disputes or other legal or regulatory proceedings, we cannot accurately predict their ultimate outcome, including the outcome of 29 Table of Contents any related appeals. An unfavorable outcome could materially adversely impact our business, financial condition, results of operations or cash flows. Furthermore, as required by U.S.
Due to the inherent uncertainties of any litigation, commercial disputes or other legal or regulatory proceedings, we cannot accurately predict their ultimate outcome, including the outcome of any related appeals. An unfavorable outcome could materially adversely impact our business, financial condition, results of operations or cash flows. Furthermore, as required by U.S.
At the end of the transitional periods specified in these agreements, we will need to perform these functions itself or hire third parties to perform these functions on its behalf, and these costs may exceed the comparable expenses we have incurred in the past; • Our working capital requirements and capital expenditures have historically been satisfied as part of Cummins’ corporate-wide cash management and centralized funding programs, and Atmus’ cost of debt and other capital may differ from the historical amounts reflected in Atmus’ historical consolidated financial statements; • Our cost of debt and capital structure will be different from that reflected in our historical consolidated financial statements; and • The IPO and the Separation may have a material effect on our customers and other business relationships, including supplier relationships, and may result in the loss of preferred pricing available by virtue of our reduced relationship with Cummins.
At the end of the transitional periods specified in these agreements, we will need to perform these functions ourselves or hire third parties to perform these functions on our behalf, and these costs may exceed the comparable expenses we have incurred in the past; • Our working capital requirements and capital expenditures have historically been satisfied as part of Cummins’ corporate-wide cash management and centralized funding programs, and Atmus’ cost of debt and other capital may differ from the historical amounts reflected in Atmus’ historical consolidated financial statements; 34 Table of Contents • Our cost of debt and capital structure will be different from that reflected in our historical consolidated financial statements; and • The IPO and the Separation may have a material effect on our customers and other business relationships, including supplier relationships, and may result in the loss of preferred pricing available by virtue of our reduced relationship with Cummins.
Concerns regarding the effects of emissions of GHG on the climate have driven (and will likely continue to drive) international, national, regional and local 21 Table of Contents legislative and regulatory responses, including those imposing more stringent emissions standards, requiring higher fuel efficiency and/or banning sales of gas-powered vehicles in the future.
Concerns regarding the effects of emissions of GHG on the climate have driven (and will likely continue to drive) international, national, regional and local legislative and regulatory responses, including those imposing more stringent emissions standards, requiring higher fuel efficiency and/or banning sales of gas-powered vehicles in the future.
In addition, the global nature of our business increases the risk that our intellectual property may be subject to infringement, theft or other unauthorized use or disclosure by others. Our ability to protect and enforce intellectual property rights, including through litigation or other legal proceedings, also varies across jurisdictions.
In addition, the global nature of our business increases the risk that our 21 Table of Contents intellectual property may be subject to infringement, theft or other unauthorized use or disclosure by others. Our ability to protect and enforce intellectual property rights, including through litigation or other legal proceedings, also varies across jurisdictions.
The following discussion should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our financial statements and notes to the financial statements included herein. 17 Table of Contents Summary of Risk Factors The following summarizes the risks facing our business, all of which are more fully described below.
The following discussion should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our financial statements and notes to the financial statements included herein. Summary of Risk Factors The following summarizes the risks facing our business, all of which are more fully described below.
The use of our filtration products as a standard first-fit component creates a steady demand for that product in the aftermarket, as end-users often return to the OEM for aftermarket service for multiple years and may continue to prefer our products as replacement or repair parts.
The use of our filtration products as 16 Table of Contents a standard first-fit component creates a steady demand for that product in the aftermarket, as end-users often return to the OEM for aftermarket service for multiple years and may continue to prefer our products as replacement or repair parts.
In addition, we provide opportunities for remote working to our employees, which may pose additional information technology risks. The impact of a significant information technology event on either our information technology environment or our products could negatively affect the performance of our products, our reputation, and competitive position.
In addition, we provide opportunities for remote working to our employees, which may pose additional information 26 Table of Contents technology risks. The impact of a significant information technology event on either our information technology environment or our products could negatively affect the performance of our products, our reputation, and competitive position.
We may become subject to additional evolving regulations related to the cleanup of contaminated property. Risks Related to Cybersecurity and Information Technology Infrastructure 30 Table of Contents Our information technology environment and our products are exposed to potential security or data breaches or other disruptions, which may adversely impact our operations.
We may become subject to additional evolving regulations related to the cleanup of contaminated property. Risks Related to Cybersecurity and Information Technology Infrastructure Our information technology environment and our products are exposed to potential security or data breaches or other disruptions, which may adversely impact our operations.
Although those inflationary pressures began to abate towards the end of 2023, we are still subject to the risk of material and commodity cost increases and there can be no assurances that such cost increases do not return in 2024 and beyond.
Although those inflationary pressures began to abate towards the end of 2023 and stabilize by the end of 2024, we are still subject to the risk of material and commodity cost increases and there can be no assurances that such cost increases do not return in 2025 and beyond.
As of December 31, 2023, 45% of our technical employees were employed outside the United States, in India, China and France, many of whom we consider key employees. If enough key employees terminate their employment or become ill or otherwise cannot work, our business activities may be adversely affected and our management team’s attention may be diverted.
As of December 31, 2024, 47% of our technical employees were employed outside the United States, in India, China and France, many of whom we consider key employees. If enough key employees terminate their employment or become ill or otherwise cannot work, our business activities may be adversely affected and our management team’s attention may be diverted.
However, there can be no assurance that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that Cummins’ ability to satisfy its indemnification obligation will not be impaired in the future.
However, there can be no assurance that the indemnity will be sufficient to insure us against the full amount of such 29 Table of Contents liabilities, or that Cummins’ ability to satisfy its indemnification obligation will not be impaired in the future.
Our business establishes prices with our customers in accordance with contractual timeframes; however, the timing of material and commodity market price increases may prevent us from passing these additional costs on to our customers through timely pricing actions, which may lead to an adverse impact on our profit margins.
Our products are exposed to variability in material and commodity costs. Our business establishes prices with our customers in accordance with contractual timeframes; however, the timing of material and commodity market price increases may prevent us from passing these additional costs on to our customers through timely pricing actions, which may lead to an adverse impact on our profit margins.
If our information technology systems were to fail or be breached, this could materially adversely affect our reputation and our ability to perform critical business functions, and sensitive and confidential data could be compromised. 31 Table of Contents Risks Related to Finance and Financial Market Conditions We are subject to foreign currency exchange rate and other related risks.
If our information technology systems were to fail or be breached, this could materially adversely affect our reputation and our ability to perform critical business functions, and sensitive and confidential data could be compromised. Risks Related to Finance and Financial Market Conditions We are subject to foreign currency exchange rate and other related risks.
Bribery Act (the “Bribery Act”) and export controls and economic sanctions programs, including those administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”), relating to our business and our employees.
Bribery Act (the “Bribery Act”) and export controls and economic sanctions programs, including those administered by the U.S. Treasury Department’s Office of 24 Table of Contents Foreign Assets Control (“OFAC”), relating to our business and our employees.
The loss of such net sales to any of such significant customers would have a material and adverse effect on our business, financial condition, results of operations and cash flows. Cummins is our largest customer. For the year ended December 31, 2023, net sales to Cummins accounted for approximately 17.4% of our net sales.
The loss of such net sales to any of such significant customers would have a material and adverse effect on our business, financial condition, results of operations and cash flows. Cummins is our largest customer. For the year ended December 31, 2024, net sales to Cummins accounted for approximately 17.6% of our net sales.
For example, 41% of our net sales in 2023 were denominated in a currency other than the U.S. dollar. Additionally, the appreciation of the U.S. dollar against foreign currencies has had and could continue to have a negative impact on our consolidated results of operations due to translation impacts.
For example, 39% of our net sales in 2024 were denominated in a currency other than the U.S. dollar. Additionally, the appreciation of the U.S. dollar against foreign currencies has had and could continue to have a negative impact on our consolidated results of operations due to translation impacts.
Due to the complexity of our manufacturing operations, we may be unable to timely respond to fluctuations in demand, which could adversely impact our business, financial condition, results of operations or cash flows.
Due to the 20 Table of Contents complexity of our manufacturing operations, we may be unable to timely respond to fluctuations in demand, which could adversely impact our business, financial condition, results of operations or cash flows.
Among the economic factors which may have such an effect are: public health crises such as pandemics and epidemics, currency exchange rates, difficulties entering new markets, tariffs and governmental trade and monetary policies, and general economic conditions such as inflation, deflation, interest rates and credit availability.
Among the economic factors which may have such an effect are: public health crises such as pandemics and epidemics, currency exchange rates, difficulties entering new markets, tariffs and governmental trade and 28 Table of Contents monetary policies, and general economic conditions such as inflation, deflation, interest rates and credit availability.
As required under current accounting rules, we assess goodwill for impairment at least annually and whenever changes in circumstances indicate that the carrying amount may not be recoverable from estimated future cash flows. As of December 31, 2023, management has deemed there is no impairment of our recorded goodwill.
As required under current accounting rules, we assess goodwill for impairment at least annually and whenever changes in circumstances 27 Table of Contents indicate that the carrying amount may not be recoverable from estimated future cash flows. As of December 31, 2024, management has deemed there is no impairment of our recorded goodwill.
We may not be able to maintain our current top OEM relationships in the future or may not become the preferred supplier for additional OEMs. In addition, our channel partners’ and end-users’ preferences for 20 Table of Contents replacement or repair filtration products may change in the future.
We may not be able to maintain our current top OEM relationships in the future or may not become the preferred supplier for additional OEMs. In addition, our channel partners’ and end-users’ preferences for replacement or repair filtration products may change in the future.
We are actively evaluating potential strategic acquisitions or investment opportunities and consider divestitures of non-strategic business lines and the filtration business has historically pursued and undertaken certain of those opportunities.
We are actively evaluating potential strategic acquisitions or investment opportunities and consider divestitures of non-strategic business lines, and the filtration business has historically pursued and undertaken 18 Table of Contents certain of those opportunities.
If illegal sales of counterfeit products result in adverse product liability or negative consumer experiences, we may be associated with negative publicity resulting from such incidents.
If illegal sales 22 Table of Contents of counterfeit products result in adverse product liability or negative consumer experiences, we may be associated with negative publicity resulting from such incidents.
In some cases, our ability to protect or enforce our intellectual property rights by 25 Table of Contents legal recourse or otherwise may be limited, particularly in countries where laws or enforcement practices are less protective than those in the United States.
In some cases, our ability to protect or enforce our intellectual property rights by legal recourse or otherwise may be limited, particularly in countries where laws or enforcement practices are less protective than those in the United States.
Although a significant percentage of our net income is derived from these unconsolidated entities (which were approximately 19.6% for the year ended December 31, 2023, approximately 16.4% for the year ended December 31, 2022 and 19.0% for the year ended December 31, 2021, of which approximately 12.6%, approximately 10.0% and approximately 9.6% were from FFPL for the year ended December 31, 2023, 2022 and 2021, respectively), we do not unilaterally control their management or their operations, which puts a substantial portion of our net income and cash flow through dividend payments at risk from the actions or inactions of these entities.
Although a significant percentage of our net income is derived from these unconsolidated entities (which were approximately 18.5% for the year ended December 31, 2024, approximately 19.6% for the year ended December 31, 2023 and 16.4% for the year ended December 31, 2022, of which approximately 11.7%, approximately 12.6% and approximately 10.0% were from FFPL for the year ended December 31, 2024, 2023 and 2022, respectively), we do not unilaterally control their management or their operations, which puts a substantial portion of our net income and cash flow through dividend payments at risk from the actions or inactions of these entities.
Our products are subject to statutory and regulatory requirements that can significantly increase our costs and could have a material adverse impact on our business, financial condition, results of operations or cash flows. Our products are subject to many laws and regulations in the jurisdictions in which we operate.
Our products are subject to statutory and regulatory requirements that can significantly increase our costs and could have a material adverse impact on our business, financial condition, results of operations or cash flows. Our products are subject to many laws and regulations in the jurisdictions in which we operate. We routinely incur costs to comply with these laws and regulations.
While we have not experienced significant global surges or declines in demand, for much of 2022, overall demand exceeded our ability to fully meet such demand, resulting in an elevated level of backlog. For 2023, the level of backlog that accumulated during 2022 reduced and stabilized.
While we have not experienced significant global surges or declines in demand, for much of 2022, overall demand exceeded our ability to fully meet such demand, resulting in an elevated level of backlog. During 2023 and 2024, the level of backlog reduced and stabilized from peak level.
In the event that we do not receive 36 Table of Contents distributions from these entities, we may be unable to make required principal and interest payments on our indebtedness.
In the event that we do not receive distributions from these entities, we may be unable to make required principal and interest payments on our indebtedness.
While we expect to obtain cyber insurance coverage, our cyber insurance policies may not cover, or may cover only a portion of, any potential claims related to such events or may not be adequate to indemnify us for all or any portion of liabilities that may be imposed or defense costs incurred.
Our cyber insurance policies may not cover, or may cover only a portion of, any potential claims related to such events or may not be adequate to indemnify us for all or any portion of liabilities that may be imposed or defense costs incurred.
We, or Cummins, may fail to perform under various transaction agreements that were executed as part of the IPO or we may fail to have necessary systems and services in place when certain of the transaction agreements expire.
Risks Related to our Relationship with Cummins We, or Cummins, may fail to perform under various transaction agreements that were executed as part of the IPO or we may fail to have necessary systems and services in place when certain of the transaction agreements expire.
Risks Related to Our Business Operations • Significant customer concentration among Cummins, PACCAR, and the Traton Group. • The loss of a top OEM relationship, or changes in the preferences of Atmus' aftermarket end-users. • Deriving significant earnings from investees that Atmus does not directly control. • Significant competition in the markets Atmus serves. • Evolving customer needs and developing technologies. • Reliance on Atmus’ executive leadership and other key personnel. • Strategic transactions, such as acquisitions, divestitures, and joint ventures. • Management of productivity improvements. • Work stoppages and other labor matters. • Variability in material and commodity costs. • Raw material, transportation and labor price increases and supply shortages. • Complexity of supply chain and manufacturing. • Atmus’ customers operating in cyclical industries and the current economic conditions in these industries. • Exposure to potential claims related to warranties and claims for support outside of standard warranty obligations. • Products being subject to recall for performance or safety-related issues. • Inability or failure to adequately protect and enforce Atmus’ intellectual property rights and the cost of protecting or enforcing Atmus' intellectual property rights. • Ineffective internal control over financial reporting. • Unexpected events, including natural disasters.
The order of presentation is not necessarily indicative of the level of risk that each factor poses to us. 13 Table of Contents Risks Related to Our Business Operations • Significant customer concentration among Cummins, PACCAR, and the Traton Group. • The loss of a top OEM relationship or changes in the preferences of Atmus' aftermarket end-users. • Deriving significant earnings from investees that Atmus does not directly control. • Significant competition in the markets Atmus serves. • Evolving customer needs and developing technologies. • Reliance on Atmus’ executive leadership and other key personnel. • Strategic transactions, such as acquisitions, divestitures, and joint ventures. • Management of productivity improvements. • Work stoppages and other labor matters. • Variability in material and commodity costs. • Raw material, transportation and labor price increases and supply shortages. • Complexity of supply chain and manufacturing. • Atmus’ customers operating in cyclical industries and the current economic conditions in these industries. • Exposure to potential claims related to warranties and claims for support outside of standard warranty obligations. • Products being subject to recall for performance or safety-related issues. • Inability or failure to adequately protect and enforce Atmus’ intellectual property rights and the cost of protecting or enforcing Atmus' intellectual property rights. • Unexpected events, including natural disasters. • Difficulty operating as a standalone company.
Risks Related to Macroeconomic and Geopolitical Conditions Political, economic and social uncertainty in geographies where we have significant operations or large offerings of our products could significantly change the dynamics of our competition, customer and end-user base and product offerings and impact our growth opportunities globally.
Political, economic and social uncertainty in geographies where we have significant operations or large offerings of our products could significantly change the dynamics of our competition, customer and end-user base and product offerings and impact our growth opportunities globally.
There is risk of data loss in the process of transferring information technology. As a result of our reliance on information technology systems, the cost of such information technology integration and transfer and any such loss of key data could have an adverse effect on our business, financial condition, results of operations or cash flows.
As a result of our reliance on information technology systems, the cost of such information technology integration and transfer and any such loss of key data could have an adverse effect on our business, financial condition, results of operations or cash flows.
These provisions provide for: • a classified board of directors, with our board of directors divided into three classes and with each class serving a staggered three-year term; • advance notice requirements regarding how our shareholders may present proposals or nominate directors for election at shareholder meetings (except for Cummins’ designation of persons for nomination by the board of directors); • the right of our board of directors to issue one or more series of preferred stock with such powers, rights and preferences as the board of directors shall determine; • after Cummins no longer owns a majority of the outstanding shares of our Common Stock, the inability of shareholders to call special meetings of shareholders and the requirement that all shareholder action be taken at a meeting rather than by written consent; 38 Table of Contents • after Cummins no longer owns a majority of the outstanding shares of our Common Stock, our directors may be removed only for cause and only by a 75% shareholder vote; and • a 75% shareholder vote requirement to amend the section of our amended and restated certificate of incorporation and bylaws related to (i) our board of directors, including related to our classified board of directors and the removal of directors only for cause; (ii) our shareholders, including related to the inability of shareholders to call special meetings of shareholders and the inability of shareholders to act by written consent; and (iii) the ability of our board of directors and our shareholders to amend or repeal our bylaws.
These provisions provide for: • a classified board of directors, with our board of directors divided into three classes and with each class serving a staggered three-year term; • advance notice requirements regarding how our shareholders may present proposals or nominate directors for election at shareholder meetings; • the right of our board of directors to issue one or more series of preferred stock with such powers, rights and preferences as the board of directors shall determine; • the inability of shareholders to call special meetings of shareholders and the requirement that all shareholder action be taken at a meeting rather than by written consent; • our directors may be removed only for cause and only by a 75% shareholder vote; and • a 75% shareholder vote requirement to amend the section of our amended and restated certificate of incorporation and bylaws related to (i) our board of directors, including related to our classified board of directors and the removal of directors only for cause; (ii) our shareholders, including related to the inability of shareholders to call special meetings of shareholders and the inability of shareholders to act by written consent; and (iii) the ability of our board of directors and our shareholders to amend or repeal our bylaws.
We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations.
We may not be able to affect any such alternative measures on 30 Table of Contents commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations.
For the year ended December 31, 2023, we recognized $33.6 million of equity, royalty and interest income from investees, compared to $28.0 million for the year ended December 31, 2022 and $32.4 million for the year ended December 31, 2021. Of these amounts, $21.5 million, $17.1 million and $16.4 million, respectively, were from our joint venture in India — FFPL.
For the year ended December 31, 2024, we recognized $34.3 million of equity, royalty and interest income from investees, compared to $33.6 million for the year ended December 31, 2023 and $28.0 million for the year ended December 31, 2022. Of these amounts, $21.8 million, $21.5 million and $17.1 million, respectively, were from our joint venture in India — FFPL.
Any significant product recalls could have material adverse effects on our business, financial condition, results of operations and cash flows. Additionally, any significant returns or warranty claims, as well as the timing of such returns or claims, could result in significant additional costs to us and could adversely affect our business, financial condition, results of operations or cash flows.
Additionally, any significant returns or warranty claims, as well as the timing of such returns or claims, could result in significant additional costs to us and could adversely affect our business, financial condition, results of operations or cash flows.
Changes in laws, regulations and government policies on foreign trade and investment can affect the demand for our products and services, causing customers and end-users to shift preferences toward domestically manufactured or branded products and impact the competitive position of our products or prevent us from being able to sell products in certain countries.
Changes in laws, regulations and government policies on foreign trade and investment, including as a result of the recent change in U.S. presidential administration, can affect the demand for our products and services, causing customers and end-users to shift preferences toward domestically manufactured or branded products and impact the competitive position of our products or prevent us from being able to sell products in certain countries.
The loss of, or any substantial reduction in sales to, Cummins would have a material adverse effect on our business, financial condition, results of operations and cash flows. For the year ended December 31, 2023, net sales to PACCAR and the Traton Group accounted for approximately 15.6% and 11.8%, respectively, of our net sales.
The loss of, or any substantial reduction in sales to, Cummins would have a material adverse effect on our business, financial condition, results of operations and cash flows. For the year ended December 31, 2024, net sales to PACCAR and the Traton Group accounted for approximately 16.5% and 12.2%, respectively, of our net sales.
In addition, we have historically received certain informal support from Cummins, including customer relationship management, marketing, communications, technical support, market intelligence and market data, which may not be addressed in our transition services agreement. The level of this informal support may be eliminated following the Separation.
In addition, we have historically received certain informal support from Cummins, including customer relationship management, marketing, communications, technical support, market intelligence and market data, which may not be addressed in our transition services agreement. The level of this informal support may be eliminated following the Separation. In particular, our day-to-day business operations rely on our information technology systems.
We operate our business on a global basis and changes in international, national and regional trade laws, regulations, and policies affecting and/or restricting international trade, including sanctions resulting from Russia’s military operation in Ukraine, could adversely impact the demand for our products and our competitive position.
We operate our business on a global basis and changes in international, national and regional trade laws, regulations, and policies affecting and/or restricting international trade could adversely impact the demand for our products and our competitive position.
We have substantial indebtedness, consisting of the term loan and the revolving credit facility, and may incur substantial additional debt from time to time, which may impact our ability to service all our indebtedness and react to changes in our industry and limit our ability to seek further financing on favorable terms.
We have substantial indebtedness and may incur substantial additional debt from time to time, which may impact our ability to service all our indebtedness and react to changes in our industry and limit our ability to seek further financing on favorable terms.
Our common stock has a limited trading history and there may be wide fluctuations in the market value of our common stock as a result of many factors.
There may be wide fluctuations in the market value of our common stock as a result of many factors.
In addition, many of our customers and suppliers have unionized work forces. Work stoppages or slowdowns experienced by us, our customers or suppliers could result in slowdowns or closures that would have a material adverse effect on our business, financial condition, results of operations or cash flows. Our products are exposed to variability in material and commodity costs.
In addition, many of our customers and suppliers have unionized work forces. Work stoppages or slowdowns experienced by us, our 19 Table of Contents customers or suppliers could result in slowdowns or closures that would have a material adverse effect on our business, financial condition, results of operations or cash flows.
Risks Related to Macroeconomic and Geopolitical Conditions • Political, economic, and social uncertainty in geographies where Atmus has significant operations or large offerings of products. • Uncertain worldwide and regional market and economic conditions.
Risks Related to Macroeconomic and Geopolitical Conditions • Increased tariffs or the imposition of other barriers to international trade. • Political, economic, and social uncertainty in geographies where Atmus has significant operations or large offerings of products. • Uncertain worldwide and regional market and economic conditions.
Evolving customer needs and developing technologies may threaten our existing business and growth. The ongoing energy transition away from fossil fuels and the increased adoption of electrified powertrains in some market segments could result in lower demand for current diesel or natural gas engines and components and, over time, reduce the demand for related parts and service revenues.
The ongoing energy transition away from fossil fuels and the increased adoption of electrified powertrains in some market segments could result in lower demand for current diesel or natural gas engines and components and, over time, reduce the demand for related parts and service revenues.
We may have received better terms from unaffiliated third parties than the terms we received in our agreements with Cummins. 35 Table of Contents The agreements we entered with Cummins in connection with the separation, including the separation agreement, transition services agreement, employee matters agreement, tax matters agreement, intellectual property license agreement, first-fit supply agreement, aftermarket supply agreement, transitional trademark license agreement and the registration rights agreement, were prepared in the context of our separation from Cummins while we were still a wholly-owned subsidiary of Cummins.
The agreements we entered with Cummins in connection with the separation, including the separation agreement, transition services agreement, employee matters agreement, tax matters agreement, intellectual property license agreement, first-fit supply agreement, aftermarket supply agreement, transitional trademark license agreement and the registration rights agreement, were prepared in the context of our separation from Cummins while we were still a wholly-owned subsidiary of Cummins.
Risks Related to Our Business Operations We have significant customer concentration, with Cummins, PACCAR and the Traton Group respectively accounting for approximately 17.4%, 15.6% and 11.8% of our net sales for the year ended December 31, 2023.
Risks Related to Our Business Operations We have significant customer concentration, with Cummins, PACCAR and the Traton Group respectively accounting for approximately 17.6% , 16.5% and 12.2% of our net sales for the year ended December 31, 2024.
Applicable laws, provisions of our amended and restated certificate of incorporation and bylaws and certain contractual provisions under the separation agreement that may delay, deter, prevent or render more difficult a takeover attempt that our shareholders might consider in their best interests.
Applicable laws and regulations, provisions of our amended and restated certificate of incorporation and bylaws and certain contractual rights granted to Cummins may discourage takeover attempts and business combinations that shareholders might consider in their best interests. 32 Table of Contents Applicable laws, provisions of our amended and restated certificate of incorporation and bylaws and certain contractual provisions under the separation agreement that may delay, deter, prevent or render more difficult a takeover attempt that our shareholders might consider in their best interests.
Violations of these laws may result in severe criminal or civil sanctions, could disrupt our business and result in an adverse effect on our reputation, business, financial condition, results of operations or cash flows.
The activities of these entities may not comply with U.S. laws or business practices or our Code of Business Conduct. Violations of these laws may result in severe criminal or civil sanctions, could disrupt our business and result in an adverse effect on our reputation, business, financial condition, results of operations or cash flows.
Our business is subject to the political, economic and other risks that are inherent in operating in numerous countries, including: • public health crises, including the spread of a contagious disease, such as COVID-19 and other catastrophic events; • the difficulty of enforcing agreements and collecting receivables through foreign legal systems; • trade protection measures and import or export licensing requirements; • the imposition of taxes on foreign income and tax rates in certain foreign countries that exceed those in the U.S.; • the imposition of tariffs, exchange controls, sanctions or other restrictions; • difficulty in staffing and managing widespread operations and the application of foreign labor regulations; • required compliance with a variety of foreign laws and regulations; and • changes in general economic and political conditions, including changes in relationship with the U.S., in countries where we operate, particularly in China, India and other emerging markets. 32 Table of Contents As we continue to operate and grow our business globally, our success will depend, in part, on our ability to anticipate and effectively manage these and other related risks.
Our business is subject to the political, economic and other risks that are inherent in operating in numerous countries, including: • public health crises, including the spread of a contagious disease, such as COVID-19 and other catastrophic events; • the difficulty of enforcing agreements and collecting receivables through foreign legal systems; • the imposition of taxes on foreign income and tax rates in certain foreign countries that exceed those in the U.S.; • difficulty in staffing and managing widespread operations and the application of foreign labor regulations; • required compliance with a variety of foreign laws and regulations; and • changes in general economic and political conditions, including changes in relationship with the U.S. in countries where we operate, particularly in Mexico, Canada, China, India and other emerging markets.
This summary should be read in conjunction with the risk factors below and should not be relied upon as an exhaustive summary of the material risks facing our business. The order of presentation is not necessarily indicative of the level of risk that each factor poses to us.
This summary should be read in conjunction with the risk factors below and should not be relied upon as an exhaustive summary of the material risks facing our business.
In particular, our day-to-day business operations rely on our information technology systems. A significant portion of the communications among our personnel, customers and suppliers take place on our information 34 Table of Contents technology platforms. We expect the separation of information technology systems from Cummins to be complex, time-consuming and costly.
A significant portion of the communications among our personnel, customers and suppliers take place on our information technology platforms. We expect the separation of information technology systems from Cummins to be complex, time-consuming and costly. There is risk of data loss in the process of transferring information technology.
Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations or cash flows.
Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations or cash flows. Unexpected events, including natural disasters, may increase our cost of doing business or disrupt our operations.
In addition, if the lenders exercise their right to sell the assets pledged under our secured credit facilities, such sales may be completed at distressed sale prices, thereby diminishing or potentially eliminating the amount of cash available to us after repayment of the amounts outstanding under such facilities.
In addition, if the lenders exercise their right to sell the assets pledged under our secured credit facilities, such sales may be completed at distressed sale prices, thereby diminishing or potentially eliminating the amount of cash available to us after repayment of the amounts outstanding under such facilities. 31 Table of Contents Risks Related to Ownership of our Common Stock The price of our common stock may fluctuate substantially, and you could lose all or part of your investment in our common stock as a result.
Due to the international scope of our operations, we are subject to a complex system of commercial regulations around the world. Recent years have seen an increase in the development and enforcement of laws regarding trade compliance, as well as new regulatory requirements regarding privacy and data protection, such as the European Union General Data Protection Regulation.
Recent years have seen an increase in the development and enforcement of laws regarding trade compliance, as well as new regulatory requirements regarding privacy and data protection, such as the European Union General Data Protection Regulation.
There can be no assurance that the consequences of these and other factors relating to our multinational operations will not have a material adverse effect upon our business, financial condition, results of operations or cash flows.
There can be no assurance that the consequences of these and other factors relating to our multinational operations will not have a material adverse effect upon our business, financial condition, results of operations or cash flows. Risks arising from uncertainty in worldwide and regional market and economic conditions may harm our business and make it difficult to project long-term performance.
Product recall costs are incurred when we decide, either voluntarily or involuntarily, to recall a product through a formal campaign to solicit the return of specific products due to known or suspected performance or safety issues.
Product recall costs are incurred when we decide, either voluntarily or involuntarily, to recall a product through a formal campaign to solicit the return of specific products due to known or suspected performance or safety issues. Any significant product recalls could have material adverse effects on our business, financial condition, results of operations and cash flows.
Our business, financial condition, results of operations or cash flows could be materially adversely affected if we have difficulty operating as a standalone company.
For example, we established our own standalone warehouse in Belgium in November 2024, and we have not yet realized normal operating levels. Our business, financial condition, results of operations or cash flows could be materially adversely affected if we have difficulty operating as a standalone company.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Chief Financial Officer, Chief Technical Officer, Chief Legal Officer, VP of Vice President of Strategy and Director of Internal Audit & Enterprise Risk Management each have relevant educational and industry experience, including managing risks at our Company and at similar companies, including risks arising from cybersecurity threats.
Biggest changeEach of the other members of the Information Security Council have relevant educational and industry experience, including managing risks at our Company and at similar companies. 36 Table of Contents
The Board is actively involved in our risk management practices, including oversight of our overall enterprise risk management (“ERM”) framework, in which cybersecurity risk management is reviewed by the board at least on an annual basis.
The Board is actively involved in our risk management practices, including oversight of our overall enterprise risk management (“ERM”) framework, in which cybersecurity risk management is reviewed by the Board on at least an annual basis.
Additionally, we maintain a comprehensive incident response plan (the “Incident Response Plan”), which establishes a comprehensive, effective and repeatable process for identifying, escalating and responding to cybersecurity incidents.
Additionally, we maintain an incident response plan (the “Incident Response Plan”), which establishes a comprehensive, effective, and repeatable process for identifying, escalating and responding to cybersecurity incidents.
We have protocols by which certain cybersecurity incidents that meet established reporting thresholds are escalated internally and, where appropriate, reported to the Audit Committee or the Board in a timely manner. Our Global Cybersecurity Operations function is a global team led by our Director of Global Cybersecurity, who reports to our CIO.
We have protocols by which certain cybersecurity incidents that meet established reporting thresholds are escalated internally and, where appropriate, reported to the Audit Committee or the Board in a timely manner. Our Global Cybersecurity Operations function is a global team led by our Executive Director of Cybersecurity and Infrastructure, who reports to our CIO.
In turn, our CIO reports to our Chief Executive Officer. The Information Security Council provides additional oversight for assessing and managing cybersecurity risk. Our Director of Global Cybersecurity has over 15 years of cybersecurity and information technology experience, including as Director of Cybersecurity for various institutions.
In turn, our CIO reports to our Chief Executive Officer. The Information Security Council provides additional oversight for assessing and managing cybersecurity risk. Our Executive Director of Cybersecurity and Infrastructure has over 15 years of cybersecurity and information technology experience, including as Director of Cybersecurity for various institutions.
Our Director of Global Cybersecurity shares information regarding such risks with our management’s senior level information security council (the “Information Security Council”), which consists of our CIO, Chief Financial Officer, Chief Technical Officer, Chief Legal Officer & Corporate Secretary, Vice President of Strategy and Director of Internal Audit & Enterprise Risk Management, and which supports the Audit Committee’s oversight of cybersecurity risk, including by providing regular reports on various cybersecurity matters.
Our Executive Director of Cybersecurity and Infrastructure shares information regarding such risks with our management’s senior level information security council (the “Information Security Council”), which consists of our CIO, Senior Vice President and Chief Financial Officer, Vice President and Chief Technical Officer, Senior Vice President and Chief Legal Officer & Corporate Secretary (currently vacant), Vice President of Strategy and Director of Internal Audit & Enterprise Risk Management, and which supports the Audit Committee’s oversight of cybersecurity risk, including by providing regular reports on various cybersecurity matters.
All service providers are required to enter into contracts containing security and data processing terms no less stringent than those employed by us in safeguarding our own data. Any third-party service providers with access to confidential or sensitive data are subject to ongoing oversight activities, including assessments and audits, throughout the lifetime of the engagement.
All contracts with such third-party service providers are required to contain security and data processing terms no less stringent than those employed by us in safeguarding our own data. Any third-party service providers with access to confidential or sensitive data are subject to ongoing oversight activities, including assessments and audits, throughout the lifetime of the engagement.
Our Director of Global Cybersecurity has a Bachelor of Science in Information Science and Technology and a master’s degree in information sciences, cybersecurity and information assurance, and he has a Certified Information Systems Security Professional certification, a GIAC Information Security Professional certification and a CompTIA Network+ ce certification.
Our Executive Director of Cybersecurity and Infrastructure has a Bachelor of Science in Information Science and Technology and a master’s degree in information sciences, cybersecurity, and information assurance, and he has a Certified Information Systems Security Professional certification, a GIAC Information Security Professional certification and a CompTIA Network+ ce certification.
Our CIO has over 25 years of cybersecurity and information technology experience, including serving in the information technology function at Cummins Inc., where she served as the information technology leader in Cummins Filtration Inc., and as a programmer, analyst and information technology architect. Our CIO holds an undergraduate degree in business administration with emphasis in management information systems.
Our CIO has over 25 years of information technology experience, including serving in the information technology function at Cummins Inc., where she served as the information technology leader for Cummins Filtration Inc. Our CIO holds an undergraduate degree in business administration with emphasis in management information systems.
Cybersecurity risks are assessed, identified and managed by our Director of Global Cybersecurity, with direct supervision by our Chief Information Officer (“CIO”) and with the assistance of our internal audit and legal teams.
Cybersecurity risks are assessed, identified, and managed by our Executive Director of Cybersecurity and Infrastructure, with direct supervision by our Vice President and Chief Information Officer (“CIO”) and with the assistance of our internal audit and legal teams.
The Audit Committee is responsible for overseeing our risk exposure to information security, cybersecurity and data protection, as well as the steps management has taken to monitor and control such exposures, and regularly provides reports to the Board on cybersecurity risk management.
The Audit Committee is responsible for overseeing our risk exposure to information security, cybersecurity, and data protection, as well as the steps management has taken to monitor and control such exposures, and regularly provides reports to the Board on cybersecurity risk management. The Audit Committee Charter explicitly sets forth the Audit Committee’s responsibility for such oversight.
Our Information Security Council also report to the Board at least annually on data protection and current internal and external developments in cybersecurity, as part of the Board’s enterprise risk management review, and the Board receives reports of Audit Committee discussions regarding its oversight of cybersecurity risk.
Our Executive Director of Cybersecurity and Infrastructure and our CIO also report to the Board at least annually and to Audit Committee at least quarterly on current internal and external developments in cybersecurity, as part of the Board’s enterprise risk management review, and the Board receives reports of Audit Committee discussions regarding its oversight of cybersecurity risk.
The results of such assessments drive changes and enhancements to governance, policies, procedures, technologies and partner decisions to continuously monitor and improve our cybersecurity risk management. The Information Security Council practiced the procedures of the Incident Response Plan through a tabletop exercise facilitated by external consultants in October 2023, and a similar exercise is planned for the Board during 2024.
The results of such assessments drive changes and enhancements to 35 Table of Contents governance, policies, procedures, technologies, and partner decisions to continuously monitor and improve our cybersecurity risk management. The Information Security Council practices the procedures of the Incident Response Plan through tabletop exercises facilitated by external consultants.
The Audit Committee Charter was amended in October 2023 to explicitly set forth the Audit Committee’s responsibility for 42 Table of Contents such oversight. The Audit Committee receives regular presentations and reports from our Director of Global Cybersecurity and our CIO on cybersecurity risks and prompt and timely information regarding any cybersecurity incident that meets established reporting thresholds.
The Audit Committee receives regular presentations and reports from our Executive Director of Cybersecurity and Infrastructure and our CIO on cybersecurity risks and prompt and timely information regarding any cybersecurity incident that meets established reporting thresholds.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur headquarters and principal facilities are as follows: 43 Table of Contents Facility Type U.S. Facilities Facilities Outside the U.S. Headquarters Tennessee : Nashville (30,500 square feet), leased. Manufacturing Wisconsin : Neillsville (166,000 square feet), owned. Australia : Kilsyth (129,000 square feet), leased. Brazil : São Paulo (76,000 square feet), leased. China : Shanghai (109,000 square feet), leased.
Biggest changeWe consider our properties to be suitable for their present purposes, well-maintained and in good operating condition. Our headquarters and principal facilities are as follows: Facility Type U.S. Facilities Facilities Outside the U.S. Headquarters Tennessee : Nashville (30,500 square feet), leased. Manufacturing Wisconsin : Neillsville (166,000 square feet), owned. Australia : Kilsyth (129,000 square feet), leased.
India: Pune (20,500 square feet), leased. Manufacturing and technology Tennessee: Cookeville (385,000 square feet), leased. France: Quimper (98,000 square feet), owned.
Technology Wisconsin : Stoughton (59,000 square feet), leased. China : Wuhan (23,000 square feet), leased. India: Pune (20,500 square feet), leased. Manufacturing and technology Tennessee: Cookeville (385,000 square feet), leased. France: Quimper (98,000 square feet), owned.
Mexico : San Luis Potosi (472,000 square feet), leased. South Africa : Johannesburg (30,200 square feet), leased. South Korea : Mado (95,000 square feet), leased (under development); Suwon (64,000 square feet), owned. Facility Type U.S. Facilities Facilities Outside the U.S. Technology Wisconsin : Stoughton (59,000 square feet), leased. China : Wuhan (23,000 square feet), leased.
Brazil : São Paulo (76,000 square feet), leased. China : Shanghai (109,000 square feet), leased. Mexico : San Luis Potosi (472,000 square feet), leased. South Africa : Johannesburg (30,200 square feet), leased. South Korea : Mado (95,000 square feet), leased; Suwon (64,000 square feet), owned. Facility Type U.S. Facilities Facilities Outside the U.S.
Removed
Item 2. Properties Our corporate headquarters are located in Nashville, Tennessee. We also have 11 distribution centers (as of December 31, 2023), four of which are currently shared with Cummins while we transition to standalone sites. We also have global administrative, engineering and research facilities around the world, including in the United States, China and India.
Added
Item 2. Properties Atmus maintains strong global customer relationships, supported by an established salesforce with work locations in over 25 countries as of December 31, 2024.
Removed
Our manufacturing and distribution activities are located throughout the world and we consider our properties to be suitable for their present purposes, well-maintained and in good operating condition. In 2023, we moved each of our technical facilities in Wuhan, China and Pune, India to new locations with expanded square footage and opened a new manufacturing facility in Mado, South Korea.
Added
Also, as of December 31, 2024, Atmus operates through 11 distribution centers, 10 manufacturing facilities and five technical facilities plus 10 manufacturing facilities and two technical facilities operated by its joint ventures, giving Atmus presence on six continents. Our corporate headquarters are located in Nashville, Tennessee.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+3 added−4 removed1 unchanged
Biggest changeThis does not include the number of persons whose stock is in nominee or “street” name accounts through brokers. We have not yet determined whether or the extent to which we will pay any dividends on our common stock.
Biggest changeThis does not include the number of persons whose stock is in nominee or “street” name accounts through brokers. We did not sell any equity securities during 2024 in offerings that were not registered under the Securities Act.
The cumulative total return reflects market prices at the end of each quarter post May 26, 2023. Item 6. Reserved Reserved.
The cumulative total return reflects market prices at the end of each quarter post May 26, 2023. Item 6. Reserved Reserved. 38 Table of Contents
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is traded on the New York Stock Exchange under the symbol “ATMU.” As of February 9, 2024, there were 2 registered shareholders of common stock.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is traded on the New York Stock Exchange under the symbol “ATMU.” As of January 31, 2025, there were 9 registered shareholders of common stock.
Removed
The declaration, amount and payment of any future dividends will be at the discretion of our board of directors in accordance with applicable law.
Added
Our stock repurchase activity for each of the three months in the quarter ended December 31, 2024 was: Issuer Purchases of Equity Securities Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs October 1-31, 2024 — $ — — $ 140.0 November 1-30, 2024 230,052 43.49 230,052 130.0 December 1-31, 2024 — — — 130.0 For the Quarter Ended December 31, 2024 230,052 $ 43.49 230,052 On July 17, 2024, our Board of Directors authorized a $150 million share repurchase program.
Removed
Our board of directors may take into account general economic and business conditions, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries to us, and such other factors as our board of directors may deem relevant.
Added
The program does not have an expiration date and may be suspended or discontinued at any time. Since the inception of the program, we repurchased approximately $20.0 million of common stock pursuant to this authorization and as of December 31, 2024, we had approximately $130.0 million of share repurchase authorization remaining.
Removed
Our ability to pay dividends will depend on our ongoing ability to generate cash from operations and on our access to the capital markets. We cannot guarantee that we will pay a dividend in the future or continue to pay dividends if we commence paying dividends.
Added
See related information in Note 16, Share Repurchase Program . While not considered repurchases of shares, the Company does at times withhold shares that would otherwise be issued under stock-based awards to pay the related taxes for grants of stock-based awards that vested.
Removed
We did not sell any equity securities during 2023 in offerings that were not registered under the Securities Act. We did not purchase any shares of our common stock during the three months ended December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

59 edited+16 added−15 removed54 unchanged
Biggest changeResults of Operations Operating results were as follows (in millions, except per share amounts): Years Ended December 31, Favorable (Unfavorable) 2023 vs. 2022 Favorable (Unfavorable) 2022 vs. 2021 2023 2022 2021 Amount % Amount % (in millions) NET SALES $ 1,628.1 $ 1,562.1 $ 1,438.8 $ 66.0 4.2 % $ 123.3 8.6 % Cost of sales 1,195.4 1,202.9 1,089.5 7.5 0.6 % (113.4) (10.4) % GROSS MARGIN 432.7 359.2 349.3 73.5 20.5 % 9.9 2.8 % OPERATING EXPENSES AND INCOME Selling, general and administrative expenses 174.7 139.7 126.2 (35.0) (25.1) % (13.5) (10.7) % Research, development and engineering expenses 42.5 38.6 42.0 (3.9) (10.1) % 3.4 8.1 % Equity, royalty and interest income from investees 33.6 28.0 32.4 5.6 20.0 % (4.4) (13.6) % Other operating expense, net 0.7 5.0 — 4.3 86.0 % (5.0) — % OPERATING INCOME 248.4 203.9 213.5 44.5 21.8 % (9.6) (4.5) % Interest expense 25.8 0.7 0.8 (25.1) (3585.7) % 0.1 12.5 % Other income, net 3.8 8.8 3.9 (5.0) (56.8) % 4.9 125.6 % INCOME BEFORE INCOME TAXES 226.4 212.0 216.6 14.4 6.8 % (4.6) (2.1) % Income tax expense 55.1 41.6 46.5 (13.5) (32.5) % 4.9 10.5 % NET INCOME $ 171.3 $ 170.4 $ 170.1 $ 0.9 0.5 % $ 0.3 0.2 % PER SHARE DATA: Basic earnings per share $ 2.06 $ 2.05 $ 2.04 $ 0.01 0.5 % $ 0.01 0.5 % Diluted earnings per share $ 2.05 $ 2.05 $ 2.04 $ — — % $ 0.01 0.5 % Years Ended December 31, Favorable (Unfavorable) 2023 vs. 2022 Favorable (Unfavorable) 2022 vs. 2021 Percent of Net sales 2023 2022 2021 Percentage Points Percentage Points Gross margin 26.6% 23.0% 24.3% 3.6% (1.3)% Selling, general and administrative expenses 10.7% 8.9% 8.8% (1.8)% (0.1)% Research, development and engineering expenses 2.6% 2.5% 2.9% (0.1)% 0.4% 2023 vs. 2022 50 Table of Contents Net Sales Net sales were $1,628.1 million (which included related party sales of $390.8 million) for the year ended December 31, 2023, an increase of $66.0 million compared to $1,562.1 million (which included related party sales of $344.9 million) for the year ended December 31, 2022.
Biggest changeAdditionally, the actual timing of when we incur these incremental expenses may be different, perhaps significantly, from our current estimates for a number of reasons, including, among others, unforeseen events that may cause delays or interruptions in our plans or our service providers’ ability to provide their services. 43 Table of Contents Results of Operations Operating results were as follows (in millions, except per share amounts): Years Ended December 31, Favorable (Unfavorable) 2024 vs. 2023 Favorable (Unfavorable) 2023 vs. 2022 2024 2023 2022 Amount % Amount % (in millions) NET SALES $ 1,669.6 $ 1,628.1 $ 1,562.1 $ 41.5 2.5 % $ 66.0 4.2 % Cost of sales 1,207.5 1,195.4 1,202.9 (12.1) (1.0) % 7.5 0.6 % GROSS MARGIN 462.1 432.7 359.2 29.4 6.8 % 73.5 20.5 % OPERATING EXPENSES AND INCOME Selling, general and administrative expenses 187.6 174.7 139.7 (12.9) (7.4) % (35.0) (25.1) % Research, development and engineering expenses 40.6 42.5 38.6 1.9 4.5 % (3.9) (10.1) % Equity, royalty and interest income from investees 34.3 33.6 28.0 0.7 2.1 % 5.6 20.0 % Other operating expense, net 2.0 0.7 5.0 (1.3) (185.7) % 4.3 86.0 % OPERATING INCOME 266.2 248.4 203.9 17.8 7.2 % 44.5 21.8 % Interest expense 40.6 25.8 0.7 (14.8) (57.4) % (25.1) (3585.7) % Other income, net 9.2 3.8 8.8 5.4 142.1 % (5.0) (56.8) % INCOME BEFORE INCOME TAXES 234.8 226.4 212.0 8.4 3.7 % 14.4 6.8 % Income tax expense 49.2 55.1 41.6 5.9 10.7 % (13.5) (32.5) % NET INCOME $ 185.6 $ 171.3 $ 170.4 $ 14.3 8.3 % $ 0.9 0.5 % PER SHARE DATA: Basic earnings per share $ 2.23 $ 2.06 $ 2.05 $ 0.17 8.3 % $ 0.01 0.5 % Diluted earnings per share $ 2.22 $ 2.05 $ 2.05 $ 0.17 8.3 % $ — — % Years Ended December 31, Favorable (Unfavorable) 2024 vs. 2023 Favorable (Unfavorable) 2023 vs. 2022 Percent of Net sales 2024 2023 2022 Percentage Points Percentage Points Gross margin 27.7 % 26.6 % 23.0 % 1.1% 3.6% Selling, general and administrative expenses 11.2 % 10.7 % 8.9 % (0.5)% (1.8)% Research, development and engineering expenses 2.4 % 2.6 % 2.5 % 0.2% (0.1)% 2024 vs. 2023 Net Sales Net sales were $1,669.6 million for the year ended December 31, 2024, an increase of $41.5 million compared to $1,628.1 million for the year ended December 31, 2023.
The increase in Gross margin was mainly due to approximately $102.0 million of favorable pricing as described above and approximately $41.0 million of favorable freight and commodities costs, partially offset by $32.1 million of unfavorable manufacturing and other costs, $11.9 million due to lower volumes, $11.1 million of increased variable compensation costs, $9.2 million of one-time separation costs, and $5.2 million of unfavorable currency impacts.
The increase in Gross margin was mainly due to favorable pricing as described above (approximately $102.0 million) and approximately $41.0 million of favorable freight and commodities costs, partially offset by $32.1 million of unfavorable manufacturing and other costs, $11.9 million due to lower volumes, $11.1 million of increased variable compensation costs, $9.2 million of one-time separation costs, and $5.2 million of unfavorable currency impacts.
Selling, General and Administrative Expenses Selling, general and administrative expenses were $174.7 million for the year ended December 31, 2023, an increase of $35.0 million compared to $139.7 million for the year ended December 31, 2022.
Selling, General and Administrative Expenses Selling, general and administrative expenses were $174.7 million for the year ended December 31, 2023, an increase of $35.0 million compared to $139.7 million for 2022.
Financing Cash Flow Net cash provided by financing activities for the year ended December 31, 2023 consisted primarily of long-term debt proceeds from our borrowings of $650 million under our Credit Agreement, partially offset by net transfers of $579.5 million to Cummins as part of the Separation and $50.0 million in payments made on our revolving credit facility.
Net cash provided by financing activities for the year ended December 31, 2023 consisted primarily of long-term debt proceeds from our borrowings of $650 million under our Credit Agreement, partially offset by net transfers of $579.5 million to Cummins as part of the Separation and $50.0 million in payments made on our revolving credit facility.
On September 30, 2022, and as amended on February 15, 2023, Atmus entered into a $1.0 billion credit agreement (“Credit Agreement”) with Cummins and a syndicate of banks, providing for a $600 million term loan facility (the “term loan”) and a $400 million revolving credit facility (the “revolving credit facility”), in anticipation of the Separation.
On September 30, 2022, and as amended on February 15, 2023, Atmus entered into a $1.0 billion credit agreement (“Credit Agreement”) with a syndicate of banks, providing for a $600 million term loan facility (the “term loan”) and a $400 million revolving credit facility (the “revolving credit facility”), in anticipation of the Separation.
Some of the limitations are: • such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; • such measures do not reflect changes in, or cash requirements for, our working capital needs; 55 Table of Contents • such measures do not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and • other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures.
Some of the limitations are: • such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; • such measures do not reflect changes in, or cash requirements for, our working capital needs; 50 Table of Contents • such measures do not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and • other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures.
Additionally, we believe these metrics are widely used by investors, securities analysts, ratings agencies and others in our industry in evaluating performance. • “Adjusted EBITDA” is defined as EBITDA after adding back certain one-time expenses, reflected in Cost of sales and Selling, general and administrative expenses, including costs associated with becoming a standalone public company and “Adjusted EBITDA margin” is defined as Adjusted EBITDA as a percent of Net sales.
Additionally, we believe these metrics are widely used by investors, securities analysts, ratings agencies and others in our industry in evaluating performance. • “Adjusted EBITDA” is defined as EBITDA after adding back certain one-time expenses, reflected in Cost of sales and Selling, general and administrative expenses, associated with becoming a standalone public company and one-time restructuring costs and “Adjusted EBITDA margin” is defined as Adjusted EBITDA as a percent of Net sales.
GAAP financial measure) after adding back certain one-time expenses, reflected in Cost of sales and Selling, general and administrative expenses, including costs associated with becoming a standalone public company less the related tax impact of the same one-time expenses.
GAAP financial measure) after adding back certain one-time expenses, reflected in Cost of sales and Selling, general and administrative expenses, associated with becoming a standalone public company and one-time restructuring costs less the related tax impact of the same one-time expenses.
Adjustments to rebate accruals are made as actual usage becomes known in order to properly estimate the amounts necessary to generate consumer demand based on market conditions as of the balance sheet date. For product returns, some aftermarket customers are permitted to return small amounts of parts and filters each year.
Adjustments to rebate accruals are made as actual usage becomes known in order to properly estimate the amounts necessary to generate consumer demand based on market conditions as of the balance sheet date. 52 Table of Contents For product returns, some aftermarket customers are permitted to return small amounts of parts and filters each year.
We have the ability to access the capital markets following the IPO, and we continue to generate substantial cash from operating activities and believe that our operating cash flow and other sources of liquidity will be sufficient to 53 Table of Contents allow us to manage our business and give us flexibility to meet our short- and long-term financial commitments.
We have the ability to access the capital markets following the IPO, and we continue to generate substantial cash from operating activities and believe that our operating cash flow and other sources of liquidity will be sufficient to allow us to manage our business and give us flexibility to meet our short- and long-term financial commitments.
Our management team continues to monitor and evaluate all of these factors and the related impacts on our business and operations and we are diligently working to minimize any supply chain impacts to our business and to our customers .
Our management team continues to monitor and evaluate all of these factors and the related impacts of our business and operations, and we are diligently working to continue to minimize any supply chain impacts to our business and to our customers.
Future tax benefits of net operating loss and credit carryforwards are also recognized as deferred tax assets. We evaluate the 57 Table of Contents recoverability of our deferred tax assets each quarter by assessing the likelihood of future profitability and available tax planning strategies that could be implemented to realize our net deferred tax assets.
Future tax benefits of net operating loss and credit carryforwards are also recognized as deferred tax assets. We evaluate the recoverability of our deferred tax assets each quarter by assessing the likelihood of future profitability and available tax planning strategies that could be implemented to realize our net deferred tax assets.
We believe Adjusted EBITDA and Adjusted EBITDA margin are useful measures of our operating performance as it allows investors and debt holders to compare our performance on a consistent basis without regard to one-time costs attributable to our becoming a standalone public company. • “Adjusted earnings per share” is defined as diluted earnings per share (the most comparable U.S.
We believe Adjusted EBITDA and Adjusted EBITDA margin are useful measures of our operating performance as they allow investors and debt holders to compare our performance on a consistent basis without regard to one-time costs attributable to our becoming a standalone public company. • “Adjusted earnings per share” is defined as diluted earnings per share (the most comparable U.S.
The following is the discussion and analysis of changes in the financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 and the year ended December 31, 2022 compared to the year ended December 31, 2021.
The following is the discussion and analysis of changes in the financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 and the year ended December 31, 2023 compared to the year ended December 31, 2022.
The increase was primarily due to the interest on our borrowings under the Credit Agreement in 2023. 51 Table of Contents Other Income, Net Other income, net was $3.8 million for the year ended December 31, 2023, a decrease of $5.0 million compared to $8.8 million for the year ended December 31, 2022.
The increase was primarily due to the interest on our borrowings under the Credit Agreement in 2023. Other Income, Net Other income, net was $3.8 million for the year ended December 31, 2023, a decrease of $5.0 million compared to $8.8 million for the year ended December 31, 2022.
We believe that cash from operations and the facilities under our Credit Agreement will continue to provide sufficient liquidity for our working capital needs, planned capital expenditures and future payments of our contractual, tax and benefit plan obligations in both the short and long term.
We believe that cash from operations and the facilities under our Credit Agreement will continue to provide sufficient liquidity for our working capital needs, planned capital expenditures and future payments of our contractual, tax and benefit plan obligations and payments for share repurchases and quarterly dividends in both the short and long term.
We believe Adjusted earnings per share provides improved comparability of underlying operating results. • “Free cash flow” is defined as cash flows provided by (used for) operating activities less capital expenditures and “Adjusted free cash flow” is defined as Free cash flow after adding back certain one-time capital expenditures including costs associated with becoming a standalone public company.
We believe Adjusted earnings per share provides improved comparability of underlying operating results. • “Free cash flow” is defined as cash flows provided by (used for) operating activities less capital expenditures and “Adjusted free cash flow” is defined as Free cash flow after adding back certain one-time capital expenditures and other separation related costs associated with becoming a standalone public company and one-time restructuring costs.
During the year ended December 31, 2023, lower working capital requirements resulted in a cash inflow of $11.3 million compared to a cash outflow of $14.8 million for the year ended December 31, 2022, mainly due to higher other accrued expenses, higher trade accounts payable, lower trade and related party receivables and lower inventories, partially offset by lower related party payables.
During the year ended December 31, 2023, lower working capital requirements resulting in a cash inflow of $11.3 million compared to a cash outflow of $14.8 million for the year ended December 31, 2022, mainly due to higher other accrued expenses, higher trade accounts 48 Table of Contents payable, lower trade and related party receivables and lower inventories, partially offset by lower related party payables.
Our most significant ongoing short-term cash requirements relate primarily to funding operations (including expenditures for raw materials, labor, manufacturing and distribution, trade and promotions, advertising and marketing, tax liabilities, benefit plan obligations and lease expenses) as well as periodic expenditures for anticipated capital investments, interest payments on our long-term debt and supporting any future acquisitions.
Our most significant ongoing short-term cash requirements relate primarily to funding operations (including expenditures for raw materials, labor, manufacturing and distribution, trade and promotions, advertising and marketing, tax liabilities, benefit plan obligations and lease expenses) as well as periodic expenditures for anticipated capital investments, shareholder returns (such as dividend payments and share repurchases), interest payments on our long-term debt and supporting any future acquisitions.
We estimate that approximately 81% of our net sales in 2023 were generated in the aftermarket, where our products are installed as replacement or repair parts, leading to a strong recurring revenue base.
We estimate that approximately 86% of our net sales in 2024 were generated in the aftermarket, where our products are installed as replacement or repair parts, leading to a strong recurring revenue base.
We estimate that approximately 19% of our net sales in 2023 were generated through first-fit sales to OEMs, where our products are installed as components for new vehicles and equipment.
We estimate that approximately 14% of our net sales in 2024 were generated through first-fit sales to OEMs, where our products are installed as components for new vehicles and equipment.
At December 31, 2023 , we recorded net deferred tax assets of $12.8 million. The assets included $5.6 million for the value of net operating loss and credit carryforwards. A valuation allow ance of $3.7 million was recorded to reduce the tax assets to the net value management believed was more likely than not to be realized.
At December 31, 2024 , we recorded net deferred tax assets of $16.9 million. The assets included $8.6 million for the value of net operating loss and credit carryforwards. A valuation allow ance of $8.5 million was recorded to reduce the tax assets to the net value management believed was more likely than not to be realized.
A reconciliation of Net income to EBITDA and Adjusted EBITDA is shown in the table below: For the Years Ended December 31, 2023 2022 2021 (in millions) NET INCOME $ 171.3 $ 170.4 $ 170.1 Plus: Interest expense 25.8 0.7 0.8 Income tax expense 55.1 41.6 46.5 Depreciation and amortization 21.5 21.6 21.6 EBITDA (non-GAAP) $ 273.7 $ 234.3 $ 239.0 Plus: One-time separation costs (a) $ 28.6 $ 9.0 $ — Adjusted EBITDA (non-GAAP) $ 302.3 $ 243.3 $ 239.0 Net sales $ 1,628.1 $ 1,562.1 $ 1,438.8 Net income margin 10.5 % 10.9 % 11.8 % EBITDA margin (non-GAAP) 16.8 % 15.0 % 16.6 % Adjusted EBITDA margin (non-GAAP) 18.6 % 15.6 % 16.6 % (a) Primarily comprised of one-time expenses related to information technology, warehousing and human resources separation costs.
A reconciliation of Net income to EBITDA and Adjusted EBITDA is shown in the table below: For the Years Ended December 31, 2024 2023 2022 (in millions) NET INCOME $ 185.6 $ 171.3 $ 170.4 Plus: Interest expense 40.6 25.8 0.7 Income tax expense 49.2 55.1 41.6 Depreciation and amortization 24.8 21.5 21.6 EBITDA (non-GAAP) $ 300.2 $ 273.7 $ 234.3 Plus: One-time restructuring costs $ 4.1 $ — $ — One-time separation costs (a) 25.2 28.6 9.0 Adjusted EBITDA (non-GAAP) $ 329.5 $ 302.3 $ 243.3 Net sales $ 1,669.6 $ 1,628.1 $ 1,562.1 Net income margin 11.1 % 10.5 % 10.9 % EBITDA margin (non-GAAP) 18.0 % 16.8 % 15.0 % Adjusted EBITDA margin (non-GAAP) 19.7 % 18.6 % 15.6 % (a) Primarily comprised of one-time expenses related to Information Technology, warehousing, manufacturing and Human Resources separation costs.
Our capital expenditures were $45.8 million (of which approximately $9.2 million related to one-time separation costs), $37.5 million and $33.4 million for the years ended December 31, 2023, December 31, 2022,and December 31, 2021, respectively, corresponding to approximately 2.8%, 2.4% and 2.3% of Net sales in 2023, 2022 and 2021, respectively.
Our capital expenditures were $48.6 million (of which approximately $15.0 million related to one-time separation costs), $45.8 million (of which approximately $9.2 million related to one-time separation costs) and $37.5 million for the years ended December 31, 2024, December 31, 2023,and December 31, 2022, respectively, corresponding to approximately 2.9%, 2.8% and 2.4% of Net sales in 2024, 2023 and 2022, respectively.
A reconciliation of Diluted earnings per share to Adjusted earnings per share is shown in the table below: For the Years Ended December 31, 2023 2022 2021 (per share) Diluted earnings per share $ 2.05 $ 2.05 $ 2.04 Plus: One-time separation costs (a) $ 0.34 $ 0.11 $ — Less: Tax impact of one-time separation costs (a) $ 0.08 $ 0.02 $ — Adjusted earnings per share (non-GAAP) $ 2.31 $ 2.13 $ 2.04 (a) Primarily comprised of one-time expenses related to information technology, warehousing and human resources separation costs and the related tax impact of those expenses.
A reconciliation of Diluted earnings per share to Adjusted earnings per share is shown in the table below: For the Years Ended December 31, 2024 2023 2022 (per share) Diluted earnings per share $ 2.22 $ 2.05 $ 2.05 Plus: One-time restructuring costs (a) $ 0.05 $ — $ — One-time separation costs (a) 0.30 0.34 0.11 Less: Tax impact of one-time restructuring costs (a) $ 0.01 $ — $ — Tax impact of one-time separation costs (a) 0.06 0.08 0.02 Adjusted earnings per share (non-GAAP) $ 2.50 $ 2.31 $ 2.13 51 Table of Contents (a) Primarily comprised of one-time expenses related to Information Technology, warehousing, manufacturing, restructuring and Human Resources separation costs and the related tax impact of those expenses.
As of the closing of the IPO, Cummins owned, and continues to own, approximately 80.5% of the outstanding shares of our common stock.
As of the closing of the IPO, Cummins owned approximately 80.5% of the outstanding shares of our common stock.
Risks and uncertainties include, but are not limited to: • Significant customer concentration among Cummins, PACCAR, and the Traton Group; • The loss of a top OEM relationship, or changes in the preferences of Atmus' aftermarket end-users; • Atmus deriving significant earnings from investees that Atmus does not directly control; • Significant competition in the markets Atmus serves; • Evolving customer needs and developing technologies; • Reliance on Atmus’ executive leadership and other key personnel; • Strategic transactions, such as acquisitions, divestitures, and joint ventures; • Management of productivity improvements; • Work stoppages and other labor matters; • Variability in material and commodity costs; • Raw material, transportation and labor price increases and supply shortages; • Complexity of supply chain and manufacturing; • Atmus’ customers operating in cyclical industries and the current economic conditions in these industries; • Exposure to potential claims related to warranties and claims for support outside of standard warranty obligations; 46 Table of Contents • Products being subject to recall for performance or safety-related issues; • Inability or failure to adequately protect and enforce Atmus’ intellectual property rights and the cost of protecting or enforcing Atmus' intellectual property rights; • Ineffective internal control over financial reporting; • Unexpected events, including natural disasters; • Sales of counterfeit versions of products, as well as unauthorized sales of products; • Statutory and regulatory requirements that can significantly increase costs; • Changes in international, national and regional trade laws, regulations and policies affecting international trade; • Unanticipated changes in Atmus' effective tax rate, the adoption of new tax legislation or exposure to additional income tax liabilities, as well as audits by tax authorities resulting in additional tax payments for prior periods; • Changes in tax law relating to multinational corporations; • Significant compliance costs and reputational and legal risks imposed by Atmus' global operations and the laws and regulations to which these are subject; • Effects of climate change may cause Atmus to incur increased costs; • Operations being subject to increasingly stringent environmental laws and regulations as well as to laws requiring cleanup of contaminated property; • Potential system or data security breaches or other disruptions; • Dependence on information technology infrastructure and assets that are increasing in complexity; • Foreign currency exchange rate; • Potential economic downturns that could cause the balances of recorded goodwill to decrease; • Political, economic, and social uncertainty in geographies where Atmus has significant operations or large offerings of products; • Uncertain worldwide and regional market and economic conditions; • The loss of Cummins’ reputation, economies of scale, capital base and other resources as a result of the Separation from Cummins; • Potential failure of performance by Atmus or Cummins under transaction agreements executed as part of the Separation; • Actual or potential conflicts of interests for certain of Atmus' executive officers and directors because of their equity interests in Cummins; • Limited liability to Atmus from Cummins and its directors for breach of fiduciary duty; • Potential indemnification liabilities to Cummins pursuant to the separation agreement; • Changes in capital and credit markets; • Substantial indebtedness consisting of Atmus’ term loan and revolving credit facility, which may impact Atmus' ability to service all its indebtedness and react to changes in the industry; and • Substantially all Atmus' assets being pledged as security for its term loan and revolving credit facility. 47 Table of Contents Additional information about these future factors and the material factors or assumptions underlying such forward-looking statements may be found under the section entitled Risk Factors in this Annual Report on Form 10-K.
Risks and uncertainties include, but are not limited to: • Significant customer concentration among Cummins, PACCAR, and the Traton Group; • The loss of a top OEM relationship or changes in the preferences of Atmus' aftermarket end-users; • Deriving significant earnings from investees that Atmus does not directly control; • Significant competition in the markets Atmus serves; • Evolving customer needs and developing technologies; • Reliance on Atmus’ executive leadership and other key personnel; • Strategic transactions, such as acquisitions, divestitures, and joint ventures; • Management of productivity improvements; • Work stoppages and other labor matters; • Variability in material and commodity costs; • Raw material, transportation and labor price increases and supply shortages; • Complexity of supply chain and manufacturing; 39 Table of Contents • Atmus’ customers operating in cyclical industries and the current economic conditions in these industries; • Exposure to potential claims related to warranties and claims for support outside of standard warranty obligations; • Products being subject to recall for performance or safety-related issues; • Inability or failure to adequately protect and enforce Atmus’ intellectual property rights and the cost of protecting or enforcing Atmus' intellectual property rights; • Unexpected events, including natural disasters; • Difficulty operating as a standalone company; • Sales of counterfeit versions of products, as well as unauthorized sales of products; • Statutory and regulatory requirements that can significantly increase costs; • Changes in international, national and regional trade laws, regulations and policies affecting international trade; • Unanticipated changes in Atmus' effective tax rate, the adoption of new tax legislation or exposure to additional income tax liabilities, as well as audits by tax authorities resulting in additional tax payments for prior periods; • Changes in tax law relating to multinational corporations; • Significant compliance costs and reputational and legal risks imposed by Atmus' global operations and the laws and regulations to which these are subject; • Effects of climate change may cause Atmus to incur increased costs; • Operations being subject to increasingly stringent environmental laws and regulations as well as to laws requiring cleanup of contaminated property; • Potential system or data security breaches or other disruptions; • Dependence on information technology infrastructure and assets that are increasing in complexity; • Foreign currency exchange rate; • Potential economic downturns that could cause the balances of recorded goodwill to decrease; • Increased tariffs or the imposition of other barriers to international trade; • Political, economic, and social uncertainty in geographies where Atmus has significant operations or large offerings of products; • Uncertain worldwide and regional market and economic conditions; • Potential failure of performance by Atmus or Cummins under transaction agreements executed as part of the Separation; • Potential indemnification liabilities to Cummins pursuant to the separation agreement; • Potential indemnification from Cummins may be insufficient to insure Atmus against the full amount of such liabilities; • Terms from unaffiliated third parties may have been better than what Atmus received in agreements with Cummins; 40 Table of Contents • Changes in capital and credit markets; • Substantial indebtedness consisting of Atmus’ term loan and revolving credit facility, which may impact Atmus' ability to service all its indebtedness and react to changes in the industry; and • Substantially all Atmus' assets pledged as security for its term loan and revolving credit facility.
See Note 3, Summary of Significant Accounting Policies , in the notes accompanying Atmus’ financial statements included elsewhere herein for a summary of Atmus’ significant accounting policies, and discussion of recent accounting pronouncements.
Actual results could differ from those estimates and assumptions. See Note 3, Summary of Significant Accounting Policies , in the notes accompanying Atmus’ financial statements included elsewhere herein for a summary of Atmus’ significant accounting policies, and discussion of recent accounting pronouncements.
Our effective tax rate differs from the U.S. statutory rate primarily due to differences in rates applicable to foreign subsidiaries, withholding taxes and state income taxes. 2022 vs. 2021 Net Sales Net sales were $1,562.1 million (which included related party sales of $344.9 million) for 2022, an increase of $123.3 million compared to $1,438.8 million (which included related party sales of $328.6 million) for 2021.
Our effective tax rate differs from the U.S. statutory rate primarily due to differences in rates applicable to foreign subsidiaries, withholding taxes and state income taxes. 2023 vs. 2022 Net Sales Net sales were $1,628.1 million (which included related party sales of $390.8 million) for the year ended December 31, 2023, an increase of $66.0 million compared to $1,562.1 million (which included related party sales of $344.9 million) for the year ended December 31, 2022.
Commodity prices, labor, inflation and foreign currency exchange rates We continue to experience generally high inflation, though it has moderated in the second half of 2023. Direct material cost pressures, driven largely by steel, resin and other petrochemical products, have stabilized, but we continue to see impacts from labor and energy.
Commodity prices, labor, inflation and foreign currency exchange rates We have seen inflationary impacts largely subside in the second half of 2024. Direct material cost pressures, driven largely by steel, resin and other petrochemical products, have stabilized, but we continue to see impacts from labor.
Our cash flow activity is noted below: For the Years Ended December 31, 2023 2022 2021 (in millions) Net cash provided by operating activities 189.0 165.7 209.9 Net cash used in investing activities (45.8) (37.5) (33.4) Net cash provided by (used in) financing activities 24.8 (128.2) (176.5) Operating Cash Flow Net cash provided by operating activities was $189.0 million for the year ended December 31, 2023, an increase of $23.3 million compared to Net cash provided by operating activities of $165.7 million for the year ended December 31, 2022.
Our cash flow activity is noted below: For the Years Ended December 31, 2024 2023 2022 (in millions) Net cash provided by operating activities $ 105.4 $ 189.0 $ 165.7 Net cash used in investing activities (48.6) (45.8) (37.5) Net cash (used in) provided by financing activities (35.8) 24.8 (128.2) Operating Cash Flow Net cash provided by operating activities was $105.4 million for the year ended December 31, 2024, a decrease of $83.6 million compared to Net cash provided by operating activities of $189.0 million for the year ended December 31, 2023.
Non-GAAP Measures We use non-GAAP financial information and believe it is useful to investors as it provides additional information to facilitate comparisons of historical operating results, identify trends in our underlying operating results and provide additional insight and transparency on how we evaluate our business.
Refer to Note 12, Debt and Borrowing Arrangements , to the Consolidated Financial Statements for more information on our debt and debt covenants. 49 Table of Contents Non-GAAP Measures We use non-GAAP financial information and believe it is useful to investors as it provides additional information to facilitate comparisons of historical operating results, identify trends in our underlying operating results and provide additional insight and transparency on how we evaluate our business.
Interest Expense Interest expense was $25.8 million for the year ended December 31, 2023, an increase of $25.1 million compared to $0.7 million for the year ended December 31, 2022.
Interest Expense Interest expense was $40.6 million for the year ended December 31, 2024, an increase of $14.8 million compared to $25.8 million for the year ended December 31, 2023.
This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described under the heading “Risk Factors.” Actual results may differ materially from those contained in any forward-looking statements.
The discussion should be read in conjunction with Atmus’ consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described under the heading “Risk Factors.” Actual results may differ materially from those contained in any forward-looking statements.
The decrease was primarily due to prior year asset write-offs related to a discontinued program and the establishment of reserves against accounts receivable from Russian customers in 2022 that did not recur.
The decrease was primarily due to prior year asset write-offs related to a discontinued program and the establishment of reserves against accounts receivable from Russian customers in 2022 that did not recur. 46 Table of Contents Interest Expense Interest expense was $25.8 million for the year ended December 31, 2023, an increase of $25.1 million compared to $0.7 million for the year ended December 31, 2022.
GAAP. The preparation of our financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates and assumptions.
Critical Accounting Policies and Estimates We prepare our Consolidated Financial Statements in conformity with U.S. GAAP. The preparation of our financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented.
During the year ended December 31, 2023, we incurred approximately $28.6 million of expenses, including $10.8 million within Cost of sales and $17.3 million within Selling, general and administrative expenses in connection with becoming a standalone public company.
During the year ended December 31, 2024, we incurred approximately $25.2 million related to one-time separation costs including $14.5 million within Selling, general and administrative expenses and $10.7 million within Cost of sales. We expect to incur one-time expenses of approximately $5 million to $10 million in 2025 in connection with becoming a standalone public company.
The Consolidated Financial Statements have been prepared in conformity with U.S. GAAP. Refer to Note 2, Basis of Presentation , to the Consolidated Financial Statements included elsewhere in this report for additional information. Factors Affecting Our Performance Our financial performance depends, in large part, on varying conditions in the markets we serve.
For the period subsequent to our IPO on May 26, 2023, as a standalone public company, we present our financial statements on a consolidated basis. The Consolidated Financial Statements have been prepared in conformity with U.S. GAAP. Factors Affecting Our Performance Our financial performance depends, in large part, on varying conditions in the markets we serve.
As a result, we had capacity under our revolving credit facility of $400 million as of December 31, 2023 .
As of December 31, 2024 , we have outstanding borrowings of $592.5 million on the term loan and zero on the revolving credit facility. As a result, we had capacity under our revolving credit facility of $400 million as of December 31, 2024 .
The tax impact of one-time separation costs for the years ended December 31, 2023 , 2022 and 2021 were $6.9 million, $1.8 million and zero, respectively. 56 Table of Contents A reconciliation of Net cash provided by operating activities to Free cash flow and Adjusted free cash flow is shown in the table below: For the Years Ended December 31, 2023 2022 2021 (in millions) Cash provided by operating activities $ 189.0 $ 165.7 $ 209.9 Less: Capital expenditures $ 45.8 $ 37.5 $ 33.4 Free cash flow (non-GAAP) $ 143.2 $ 128.2 $ 176.5 Plus: One-time separation capital expenditures $ 9.2 $ 0.5 $ — Adjusted free cash flow (non-GAAP) $ 152.4 $ 128.7 $ 176.5 Critical Accounting Policies and Estimates We prepare our Consolidated Financial Statements in conformity with U.S.
A reconciliation of Net cash provided by operating activities to Free cash flow and Adjusted free cash flow is shown in the table below: For the Years Ended December 31, 2024 2023 2022 (in millions) Cash provided by operating activities $ 105.4 $ 189.0 $ 165.7 Less: Capital expenditures $ 48.6 $ 45.8 $ 37.5 Free cash flow (non-GAAP) $ 56.8 $ 143.2 $ 128.2 Plus: One-time restructuring costs $ 4.1 $ — $ — One-time separation capital expenditures 15.0 9.2 0.5 Other one-time separation related (a) 38.6 — — Adjusted free cash flow (non-GAAP) $ 114.5 $ 152.4 $ 128.7 (a) Primarily comprised of one-time working capital inefficiencies associated with the move from intercompany settlement terms with Cummins to standalone practices.
Although we did see a slightly favorable impact on our results of operations in the second half of 2023, there can be no assurances that the overall negative impact will not continue in 2024. Standalone costs We have incurred, and expect to continue to incur, additional costs associated with becoming a standalone public company.
There can be no assurances as to the impact of foreign currency exchange rates on our results in 2025. 42 Table of Contents Standalone costs We have incurred, and expect to continue to incur, additional costs associated with becoming a standalone public company.
The historical combined financial statements reflect our historical financial position, results of operations and cash flows, in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). 48 Table of Contents For the period subsequent to May 26, 2023, as a standalone public company, we present our financial statements on a consolidated basis.
The historical combined financial statements reflect our historical financial position, results of operations and cash flows, in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). Refer to Note 2, Basis of Presentation , to the Consolidated Financial Statements included elsewhere in this report for additional information.
Research, development and engineering expenses as a percentage of Net sales was 2.5% for 2022, a decrease of 0.4 percentage points compared to 2.9% for 2021.
Research, development and engineering expenses as a percentage of Net sales were 2.4% for the year ended December 31, 2024, a decrease of 0.2 percentage points compared to 2.6% for the year ended December 31, 2023. The decrease in Research, development and engineering expenses as a percentage of Net sales was mainly due to the items noted above.
These expenses and capital expenditures primarily relate to the establishment of functions previously co-mingled with Cummins, such as information technologies, distribution centers and human resources. Theses expenses and capital expenditures are 49 Table of Contents expected to be substantially complete by the end of 2024 but some expenses and capital expenditures may potentially be incurred in 2025.
In addition, we expect to incur capital expenditures in connection with the Separation of approximately $5 million to $10 million in 2025. These expenses and capital expenditures primarily relate to the establishment of functions previously co-mingled with Cummins, such as information technologies, distribution centers, manufacturing and human resources.
Dividends are typically paid in the second through the fourth quarters and are included in Net cash provided by operating activities. Investing Cash Flow Net cash used in investing activities for each fiscal year presented was primarily used for capital expenditures.
Dividends received from our unconsolidated equity investees were $25.5 million and $19.8 million for the years ended December 31, 2024 and December 31, 2023, respectively. Dividends are included in Net cash provided by operating activities. Investing Cash Flow Net cash used in investing activities for each fiscal year presented was primarily used for capital expenditures.
Selling, general and administrative expenses as a percentage of Net sales was 8.9% for 2022, an increase of 0.1 percentage points compared to 8.8% in 2021. The increase in Selling, general and administrative expenses as a percentage of Net sales is primarily driven by the costs related to separation being higher compared to the increase in Net sales.
The increase in Selling, general and administrative expenses as a percentage of Net sales was primarily driven by the items noted above increasing at a higher rate in relation to the increase in Net sales.
Additionally, the appreciation of the U.S. dollar against foreign currencies has had and could continue to have a negative impact on our consolidated results of operations due to translation impacts.
During 2024, our Selling, general and administrative expenses increased as a result of increased people-related and consulting expenses. Additionally, the appreciation of the U.S. dollar against foreign currencies has had an unfavorable impact on our consolidated results of operations in 2024.
Other Income, Net Other income, net was $8.8 million for 2022, an increase of $4.9 million compared to $3.9 million for 2021. The increase in Other income, net was primarily due to an increase in the non-service benefit of our defined benefit pension plans as compared to 2021.
Other Income, Net Other income, net was $9.2 million for the year ended December 31, 2024, an increase of $5.4 million compared to $3.8 million for the year ended December 31, 2023. The increase in Other income, net was primarily due to higher interest income, as a result of higher cash balances.
Selling, General and Administrative Expenses Selling, general and administrative expenses were $139.7 million for 2022, an increase of $13.5 million compared to $126.2 million for 2021, primarily due to increased costs related to the Separation, partially offset by lower variable compensation.
Selling, General and Administrative Expenses Selling, general and administrative expenses were $187.6 million for the year ended December 31, 2024, an increase of $12.9 million compared to $174.7 million for the year ended December 31, 2023. The increase was primarily driven by increased people-related and consulting expenses, including one-time restructuring costs, partially offset by lower one-time separation costs.
Liquidity and Capital Resources Our facilities under the Credit Agreement provide for $1.0 billion in total availability, which includes the $600 million term loan and the $400 million revolving credit facility. As of December 31, 2023 , we have borrowed $600 million on the term loan and zero on the revolving credit facility.
Our effective tax rate differs from the U.S. statutory rate primarily due to differences in rates applicable to foreign subsidiaries, withholding taxes and state income taxes. 47 Table of Contents Liquidity and Capital Resources Our facilities under the Credit Agreement provide for $1.0 billion in total capacity, which includes a $600 million term loan and a $400 million revolving credit facility.
While overall supply chain conditions have substantially improved from a year ago, they continue to affect inventory and backlog levels throughout our supply chain.
Global supply chain While overall supply chain conditions continue to affect inventory and backlog levels, they have largely stabilized with minimal disruptions now being experienced and backorders largely recovered.
Income Tax Expense Our effective tax rate for 2022 was 19.6%, a decrease of 1.9 percentage points compared to 21.5% for 2021. The year ended December 31, 2022 contained unfavorable discrete tax items of $5.4 million, primarily due to $5.2 million of unfavorable changes in tax reserves.
Our effective tax rate for the year ended December 31, 2024 was 21.0% , a decrease of 3.3 percentage points compared to 24.3% for the year ended December 31, 2023.
The increase in Gross margin was mainly due to favorable pricing as described above (approximately $115.9 million) and higher sales volumes, largely offset by increased material costs (approximately $71.6 million), increased supply chain and freight costs (approximately $33.4 million) and the unfavorable impact of changes in foreign exchange rates on cost of sales (approximately $15.0 million).
The increase in Gross margin was mainly due to approximately $26.3 million of favorable pricing impacts as described above, higher volumes of approximately $7.8 million, favorable variable compensation of $7.2 million and favorable materials costs of $7.0 million, partially offset by higher manufacturing and other costs of $9.0 million, higher logistics costs of $5.8 million, unfavorable currency impacts of $2.7 million and higher one-time restructuring costs of $1.4 million.
For more information regarding our lease obligations, see Note 9, Leases , to the Consolidated Financial Statements , which provides a summary of our future minimum lease payments. Debt Our total debt outstanding was $600 million at December 31, 2023. We had no debt outstanding at either December 31, 2022 or December 31, 2021.
The final determination was made on an IRS Form 1099-DIV issued in early 2025. Contractual Obligations Our commitments consist of lease obligations for real estate and equipment. For more information regarding our lease obligations, see Note 9, Leases , to the Consolidated Financial Statements , which provides a summary of our future minimum lease payments.
Net cash provided by operating activities was $165.7 million in 2022, a decrease of $44.2 million compared to $209.9 million in 2021. The overall decrease was driven primarily by higher working capital requirements of $41.9 million and an increase in deferred taxes of $10.0 million, partially offset by favorable changes in other assets and pension liabilities of $9.4 million.
The decrease was driven primarily by higher working capital requirements of $117.1 million, partially offset by higher net income, higher equity income from investees and a favorable change in other liabilities.
Other Operating (Income) Expense, Net Other operating (income) expense, net was $5.0 million for 2022, an increase of $5.0 million compared to zero for 2021. The increase was primarily due to asset write-offs, partially offset by gains on asset sales.
Other Operating Expense, Net Other operating expense, net was $2.0 million for the year ended December 31, 2024, an increase of $1.3 million compared to $0.7 million for the year ended December 31, 2023. The increase in Other operating expense, net was primarily due to inventory write-offs related to warehouse transitions made during the year.
Research, Development and Engineering Expenses Research, development and engineering expenses were $38.6 million for 2022, a decrease of $3.4 million compared to $42.0 million in 2021, primarily due to lower corporate allocations of $7.4 million in 2022 compared to $8.9 million in 2021.
Research, Development and Engineering Expenses Research, development and engineering expenses were $40.6 million for the year ended December 31, 2024, a decrease of $1.9 million compared to $42.5 million for the year ended December 31, 2023. The decrease was primarily due to standalone costs being favorable to previously allocated expenses under Cummins and lower variable compensation costs.
Net cash used in financing activities for the years ended December 31, 2022 and December 31, 2021 consisted entirely of transfers to Cummins. Contractual Obligations Our commitments consist of lease obligations for real estate and equipment.
Net cash used in financing activities for the year ended December 31, 2022 consisted entirely of transfers to Cummins. Dividends We paid dividends of $8.3 million in 2024 and none in 2023 and 2022. The current quarterly dividend rate is $0.05 per share of common stock.
Equity, Royalty and Interest Income From Investees Equity, royalty and interest income from investees were $28.0 million, a decrease of $4.4 million compared to $32.4 million for 2021, primarily due to lower earnings from our joint venture in China as a result of the COVID-19 response and declining economic conditions, as well as reduced demand in China.
Equity, Royalty and Interest Income from Investees Equity, royalty and interest income from investees was $34.3 million for the year ended December 31, 2024, an increase of $0.7 million compared to $33.6 million for the year ended December 31, 2023. The increase was primarily due to higher earnings of $0.5 million from our joint ventures in India and China.
Removed
The discussion should be read in 45 Table of Contents conjunction with Atmus’ consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.
Added
Additional information about these future factors and the material factors or assumptions underlying such forward-looking statements may be found under the section entitled Risk Factors in this Annual Report on Form 10-K.
Removed
Market demand Aftermarket demand softened over the second half of 2023 while first-fit demand remained resilient. We have continued to increase prices as a result of significant increases in our cost base, which has contributed to higher net sales in the year ended December 31, 2023.
Added
On February 14, 2024, Cummins announced an exchange offer whereby Cummins shareholders could exchange all or a portion of Cummins common stock for shares of Atmus common stock owned by Cummins. 41 Table of Contents The divestiture of Atmus shares by Cummins was completed on March 18, 2024 and resulted in the full separation of Atmus and divestitures of Cummins’ entire ownership and voting interest in Atmus (“Full Separation”).
Removed
In 2024, we expect first-fit demand to soften across many of our key markets whereas the aftermarket is expected to recover, particularly in the second half of 2024. Supply chain constraints We continue to experience supply chain disruptions, incremental costs and related challenges that unfavorably affect customer demand, its ability to meet customer demand and its production.
Added
Market demand Aftermarket demand remained depressed in 2024 reflecting soft market conditions and first-fit demand softened across many of our key markets during the second half of 2024. It is uncertain when a recovery can be expected.
Removed
Collectively, we realized lower material and freight costs which have driven a decrease in Cost of sales in 2023 and more than offset increases in other costs. To further mitigate these pressures, we instituted pricing actions throughout 2023.
Added
The increase in Net sales was mainly due to $26.3 million of favorable pricing impacts and higher volumes of $22.3 million, partially offset by the unfavorable impacts of currency of $7.1 million.
Removed
During 2023, our Selling, general and administrative expenses increased as a result of costs related to the Separation, inefficiencies due to delays in the execution of our IPO and increased variable compensation costs.
Added
Gross Margin Gross margin was $462.1 million f or the year ended December 31, 2024, an increase of $29.4 million compared to $432.7 million for the year ended December 31, 2023.
Removed
We expect to incur additional expenses of approximately $5 million to $15 million in 2024 in connection with becoming a standalone public company. In addition, we expect to incur capital expenditures in connection with the Separation of approximately $10 million to $20 million in 2024.
Added
Gross margin as a percentage of Net sales was 27.7% , an increase of 1.1 percentage points 44 Table of Contents compared to 26.6% . The increase in Gross margin as a percentage of Net sales was primarily due to the items noted above.
Removed
Additionally, the actual timing of when we incur these incremental expenses may be different, perhaps significantly, from our current estimates for a number of reasons, including, among others, unforeseen events that may cause delays or interruptions in our plans or our service providers’ ability to provide their services.
Added
Selling, general and administrative expenses as a percentage of Net sales were 11.2% for the year ended December 31, 2024 , an increase of 0.5 percentage points compared to 10.7% for the year ended December 31, 2023 .
Removed
Of the total net sales increase of $123.3 million, consisting of $107.0 million in increased external sales and $16.3 million in increased related party sales, approximately $115.9 million was due to increased pricing for OEM and aftermarket products across all major regions we serve due to higher inflationary costs.
Added
The increase in Interest expense was primarily due to the timing of borrowings under the Credit Agreement which began with our IPO in May 2023 compared to 2024 where we have had outstanding borrowings for the duration of the year.
Removed
The unfavorable impacts of foreign currency movements (approximately $37.8 million) were more than offset by increased volume. Gross Margin Gross margin was $359.2 million for 2022, an increase of $9.9 million compared to $349.3 million for 2021.
Added
The decrease in the effective tax rate was driven by a favorable change in the mix of earnings among tax jurisdictions and discrete tax items 45 Table of Contents related to US and foreign tax return filings.
Removed
Gross margin as a percentage of Net sales was approximately 23.0% for 2022, a decrease of 1.3 percentage points compared to 24.3% for 2021.
Added
Income Tax Expense In connection with the Separation, the Company entered into a Tax Matters Agreement with Cummins that, among other things, formalized our agreement related to the responsibility for historical tax positions for the period prior to the IPO for jurisdictions where our business was included in the consolidated or combined tax returns of Cummins.
Removed
The decrease in Gross margin as a percentage of Net sales was primarily due to the high inflationary costs impacting material costs and increased freight costs due to supply chain constraints, which increased at a faster rate than the increase in Net sales.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed9 unchanged
Biggest changeAny change in the value of the contracts, real or hypothetical, would be significantly offset by an inverse change in the value of the underlying hedged items. Interest Rate Risk Our interest rate risk relates primarily to our $600 million term loan facility and our five-year $400 million revolving credit facility.
Biggest changeAny change in the value of the contracts, real or hypothetical, would be significantly offset by an inverse change in the value of the underlying hedged items. 53 Table of Contents Interest Rate Risk Our interest rate risk relates primarily to our $600 million term loan facility and our five-year $400 million revolving credit facility.
The potential gain or loss in the fair value of our outstanding foreign currency contracts, assuming a hypothetical 10% fluctuation in the currencies of such contracts, would not have a material impact on the consolidated financial statements for the years ended December 31, 2023 , 2022 and 2021.
The potential gain or loss in the fair value of our outstanding foreign currency contracts, assuming a hypothetical 10% fluctuation in the currencies of such contracts, would not have a material impact on the consolidated financial statements for the years ended December 31, 2024 , 2023 and 2022.
Based on our outstanding borrowings at December 31, 2023 , a 0.125% change in SOFR would have a $0.8 million annual impact on interest expense. Refer to Note 12, Debt and Borrowing Arrangements, to the Consolidated Financial Statements for further information. 58 Table of Contents
Based on our outstanding borrowings at December 31, 2024 , a 0.125% change in SOFR would have a $0.7 million annual impact on interest expense. Refer to Note 12, Debt and Borrowing Arrangements, to the Consolidated Financial Statements for further information. 54 Table of Contents

Other ATMU 10-K year-over-year comparisons