# Atmus Filtration Technologies Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Atmus Filtration Technologies Inc.](/companies/atmu.md) (CIK 1921963)
- Form: 10-Q
- Filed: 2024-11-08
- Accepted by EDGAR: Nov 8, 2024, 12:33 ET
- Period: 2024-09-30
- Accession: 0001921963-24-000118
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1921963/000192196324000118/atmu-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1921963/000192196324000118/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $403.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $1.26bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $292.4m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $907.9m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $111.3m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | $355.0m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-07-01 to 2024-09-30 | $9.7m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-01-01 to 2024-09-30 | $30.2m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $46.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $138.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $63.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | $211.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $10.4m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $31.4m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $9.9m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $38.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $43.8m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $145.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.52 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $1.74 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.53 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $1.75 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 83,600,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 83,600,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $85.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $38.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2024-01-01 to 2024-09-30 | $10.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-09-30 | $196.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $778.8m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $1.22bn | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $368.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $996.9m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $577.5m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-30 | $18.8m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-09-30 | $221.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 1,455 characters.

### Recent Sales of Unregistered Securities

None.

### Repurchase of Equity by the Company

Our stock repurchase activity for each of the three months in the quarter ended September 30, 2024 was:

| Period | Issuer Purchases of Equity Securities Total Number of Shares Purchased(1) | Average Price Paid per Share(1) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs(2) |
| --- | ---: | ---: | ---: | ---: |
| July 1-31, 2024 | — | $— | — | $150.0 |
| August 1-31, 2024 | 307,591 | 32.53 | 307,591 | 140.0 |
| September 1-30, 2024 | — | — | — | 140.0 |
| For the Quarter Ended September 30,2024 | 307,591 | $32.53 | 307,591 |  |

On July 17, 2024, our Board of Directors authorized a $150 million share repurchase program. 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 $10.0 million of Common stock pursuant to this authorization and as of September 30, 2024, we had approximately $140.0 million of share repurchase authorization remaining. See related information in Note 12, *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.

## Market risk

As filed, 3,138 characters.

### Foreign Currency Exchange Risk

As a result of our international business presence, we are exposed to foreign currency exchange rate risks. We transact business in foreign currencies and, as a result, our income and financial condition are exposed to movements in foreign currency exchange rates. This risk is closely monitored and managed through the use of financial derivative instruments. Financial derivatives are used by Atmus expressly for hedging purposes and under no circumstances are they used for speculative purposes. Substantially all of Atmus’ derivative contracts are subject to master netting arrangements, which provide the option to settle certain contracts on a net basis when they settle on the same day with the same currency. In addition, these arrangements provide for a net settlement of all contracts with a given counterparty in the event that the arrangement is terminated due to the occurrence of default or a termination event.

To minimize the income volatility resulting from the remeasurement of net monetary assets and liabilities denominated in a currency other than the functional currency, Atmus enters into foreign currency forward contracts, which are considered economic hedges and are not designated as hedges for accounting purposes. The objective is to offset the gain or loss from remeasurement with the gain or loss from the fair market valuation of the forward contract.

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 unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2024 and September 30, 2023. The sensitivity analysis of the effects of changes in foreign currency exchange rates assumes the notional value to remain constant for the next 12 months. The analysis ignores the impact of foreign exchange movements on our competitive position and potential changes in sales levels. Any 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. Borrowings under these facilities would bear interest at varying rates, depending on the type of loan and, in some cases, the rates of designated benchmarks and the applicable election made by us. Generally, U.S. dollar-denominated loans would bear interest at an adjusted term SOFR (which includes a 0.10 percent credit spread adjustment to SOFR) for the applicable interest period plus a rate ranging from 1.125 percent to 1.75 percent depending on our net leverage ratio. Based on our outstanding borrowings at September 30, 2024, a 0.125% change in SOFR would have a $0.7 million annual impact on interest expense. Refer to Note 9, *Debt and Borrowing Arrangements,* to the Condensed Consolidated Financial Statements included in this report for further information.

## Controls and procedures

As filed, 2,462 characters.

### Evaluation of Disclosure Controls and Procedures

The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(b) under the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2024. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of September 30, 2024.

### Changes in Internal Control over Financial Reporting

The Company is in the process of implementing a broad, multi-year, technology transformation project to modernize enterprise resource planning, middleware and legacy systems to achieve better process efficiencies across customer service, merchandising, sourcing, payroll and accounting through the use of various solutions. During the quarter ended September 30, 2024, the Company implemented a new enterprise resource planning system for core business processes supporting financial information and reporting. There have been no material additional implementations during the quarter ended September 30, 2024. As the Company’s technology transformation project continues, the Company continues to emphasize the maintenance of effective internal controls and assessment of the design and operating effectiveness of key control activities throughout development and deployment of each phase and will evaluate as additional phases are deployed.

There was no other change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the three months ended September 30, 2024 that materially affected, or is reasonably likely to materially affect, Atmus’ internal control over financial reporting.

## Risk factors

As filed, 7,491 characters.

There were no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, except as set forth below:

***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.***

The separation agreement and other agreements entered into in connection with the IPO determined the allocation of assets and liabilities between Cummins and us following the IPO for those respective areas and include certain indemnifications related to liabilities and obligations. The transition services agreement provides for the performance of certain services by Cummins and us for the benefit of the other for a period of time after the IPO. We will rely on Cummins to satisfy Cummins’ performance and payment obligations under these agreements. If Cummins is unable to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties or losses. If we do not have in place our own systems and services, or if we do not have agreements with other providers of these services once certain transaction agreements expire, we may not be able to operate our businesses effectively and our business, financial condition, results of operations or cash flows could be materially adversely affected. We are in the process of creating our own, or engaging third parties to provide, systems and services to replace many of the systems and services that Cummins currently provides to us. However, we may not be successful in implementing these systems and services or in transitioning data from Cummins’ systems to us. 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.

Further, as part of the Separation, we implemented interim operational arrangements in certain markets due to regulatory requirements, the need to obtain consents from local governmental authorities, and other business reasons. For example, in Mexico, we previously operated as part of Cummins maquiladora, as we worked to stand-up our own maquiladora, which was completed during the third quarter of 2024. A maquiladora requires numerous governmental approvals and consents. If we fail to obtain any of these approvals or consents, or if such approvals or consents are delayed beyond the date agreed to with Cummins as part of the Separation, our business, financial condition, results of operations and cash flows would be adversely affected.

We also have established or expanded our own tax, treasury, internal audit, investor relations, corporate governance and listed company compliance and other corporate functions. We have been incurring and expect to continue incurring one-time costs to replicate, or outsource from other providers, these corporate functions to replace the corporate services that Cummins historically provided us prior to the IPO. Any failure or significant downtime in our own financial, administrative or other support systems or in the Cummins financial, administrative or other support systems during the transitional period during which Cummins provides us with support could negatively impact our results of operations or prevent us from paying our suppliers and employees, executing business combinations and foreign currency transactions or performing administrative or other services on a timely basis, which could have an adverse effect on our business, financial condition, results of operations or cash flows.

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 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. 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.

In addition, our historical consolidated financial statements include the attribution of certain assets and liabilities that historically have been held at the Cummins corporate level but which are specifically identifiable or attributable to the businesses transferred to us in connection with the Separation. The value of the assets and liabilities we assumed in connection with the Separation could ultimately be materially different than such attributions, which could have a material adverse effect on our business, financial condition, results of operations or cash flows.

***Our stock repurchase program could affect the price of our common stock and may be suspended or terminated at any time, which may result in a decrease in the trading price of our common stock.***

Our repurchase program does not have an expiration date and we are not obligated to repurchase a specified number or dollar value of shares. Further, our stock repurchase program may be suspended, delayed or discontinued at any time, which could cause the market price of our common stock to decline. Repurchases pursuant to our stock repurchase program could affect our stock price and the existence of our stock repurchase program could also cause our stock price to be higher than it would be in the absence of such a program. See Item 2, *Unregistered Sales of Equity Securities and Use of Proceeds - Repurchase of Equity* in this Form 10-Q. There can be no assurance that any stock repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchased shares of common stock.

***We cannot guarantee the payment of dividends on our common stock, or the timing or amount of any such dividends.***

We have no obligation to continue paying a quarterly cash dividend to holders of our common stock, and our dividend policy may change at any time without notice to our stockholders. The payment of any dividends in the future to our stockholders, and the timing and amount thereof, will fall within the discretion of our Board of Directors. Our Board of Directors’ decisions regarding the payment of dividends will depend on many factors, such as our financial condition, earnings, capital requirements, debt service obligations, restrictive covenants in the agreements governing our indebtedness, general economic business conditions, industry practice, legal requirements and other factors that our Board of Directors may deem relevant. Our ability to pay dividends will depend on our ongoing ability to generate cash from operations and on our access to the capital markets. See *Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Dividends* in this Form 10-Q. We cannot assure you that we will pay our anticipated dividend in the same amount or frequency, or at all, in the future.

Filed Nov 8, 2024.
Source: SEC EDGAR, the filing index for accession 0001921963-24-000118. Last ingested by Listed: Nov 6, 2026, 14:05 ET. No prices; not investment advice.