What changed in this filing

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Item 1. Financial Statements

2024-05-03 compared with 2023-11-03 · 238 added, 358 removed, 463 unchanged (56% of the section changed)

5 unchanged sentences

dollars, except per share data)

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

For the Three Months Ended March 31,

NET SALES (a)

6 unchanged sentences

Equity, royalty and interest income from investees 10.4 8.4

Other operating (income) expense, net ( 0.2 ) — 0.1 3.6

Other operating expense, net 0.2 0.1

OPERATING INCOME 68.6 69.2

Interest expense 10.5 —

Other income, net 1.1 — 2.2 3.9

Other income (expense), net 0.2 ( 0.1 )

INCOME BEFORE INCOME TAXES 58.3 69.1

6 unchanged sentences

Diluted earnings per share $ 0.54 $ 0.63

(a) Includes sales to related parties of $ 86.9 million and $ 263.2 million for the three and nine months ended September 30, 2023, respectively, compared with $ 90.1 million and $ 260.1 million for the three and nine months ended September 30, 2022, respectively.

(a) Includes sales to related parties of $ 82.3 million for the three months ended March 31, 2024 compared with $ 89.1 million for the three months ended March 31, 2023.

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

3 unchanged sentences

(in millions of U.S.

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

For the Three Months Ended March 31,

NET INCOME $ 45.5 $ 52.7

Other comprehensive loss, net of tax

Change in pension and other postretirement defined benefit plans 0.8 — 0.8 —

Other comprehensive (loss) income, net of tax

Foreign currency translation adjustments ( 6.8 ) 0.9

Total other comprehensive loss, net of tax ( 6.1 ) ( 11.5 ) ( 8.2 ) ( 31.0 )

Total other comprehensive (loss) income, net of tax ( 6.8 ) 0.9

COMPREHENSIVE INCOME $ 38.7 $ 53.6

5 unchanged sentences

dollars, except share data)

September 30,

2024 December 31,

1 unchanged sentence

Accounts and notes receivable, net 262.2 246.8

Trade and other receivables 176.8 174.2

Related party receivables 61.0 61.8

Inventories 256.9 250.0

6 unchanged sentences

TOTAL ASSETS $ 1,104.2 $ 1,088.6

Accounts payable (principally trade) $ 153.1 $ 145.9

Related party payables 70.1 82.0

Accounts payable $ 236.5 $ 236.6

Accrued compensation, benefits and retirement costs 17.8 41.8

8 unchanged sentences

Commitments and contingencies (Note 10)

Common stock, $ 0.0001 par value ( 2,000,000,000 shares authorized

and 83,297,796 shares issued at September 30, 2023)

Net parent investment — 511.4

Common stock, $ 0.0001 par value ( 2,000,000,000 shares authorized and 83,355,930 shares issued and outstanding as of March 31, 2024)

Additional paid-in capital 52.1 49.7

8 unchanged sentences

(in millions of U.S.

For the Nine Months Ended

September 30,

For the Three Months Ended March 31,

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

7 unchanged sentences

Trade and other receivables ( 18.2 ) ( 4.6 )

Related party receivables ( 0.7 ) ( 3.8 )

Inventories ( 9.6 ) ( 9.7 )

Prepaid expenses and other current assets ( 3.2 ) ( 1.1 )

Accounts payable (principally trade) 7.1 23.5

Related party payables ( 10.9 ) 16.1

Accounts payable 0.3 3.9

Other accrued expenses ( 28.4 ) ( 1.5 )

1 unchanged sentence

Other, net ( 5.3 ) ( 2.3 )

Net cash provided by operating activities 147.3 87.9

Net cash (used in) provided by operating activities ( 8.2 ) 42.8

CASH USED IN INVESTING ACTIVITIES

2 unchanged sentences

CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

Long-term debt proceeds 650.0 —

Payments on long-term debt ( 50.0 ) —

Net transfers to Parent — ( 36.4 )

Other, net 1.4 —

Net cash provided by (used in) financing activities — ( 36.4 )

Net increase in cash and cash equivalents 138.8 —

Net decrease in cash and cash equivalents ( 18.8 ) —

Cash and cash equivalents at beginning of period 168.0 —

2 unchanged sentences

Non-cash investing and financing activities:

Non-cash settlements with Parent $ 29.4 $ —

Change in Capital expenditures $ — $ —

Non-cash Capital expenditures $ 2.6 $ 2.8

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

6 unchanged sentences

Comprehensive

Three Months Ended September 30, 2023

Balances at July 1, 2023 $ — $ — $ 44.6 $ 14.8 $ ( 57.9 ) $ 1.5

Net income — — — 37.6 — 37.6

Other comprehensive loss, net of tax — — — — ( 6.1 ) ( 6.1 )

Share-based awards — — 1.4 — — 1.4

Balances at September 30, 2023 $ — $ — $ 46.0 $ 52.4 $ ( 64.0 ) $ 34.4

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Balances at January 01, 2024 $ — $ — $ 49.7 $ 87.2 $ ( 56.2 ) $ 80.7

2 unchanged sentences

Share-based awards — — 2.4 — — 2.4

Net transfers (to) from Parent — ( 595.5 ) 44.6 — — ( 550.9 )

Balances at September 30, 2023 $ — $ — $ 46.0 $ 52.4 $ ( 64.0 ) $ 34.4

Three Months Ended September 30, 2022

Balances at July 1, 2022 $ — $ 530.0 $ — $ — $ ( 61.1 ) $ 468.9

Net income — 50.4 — — — 50.4

Other comprehensive loss, net of tax — — — — ( 11.5 ) ( 11.5 )

Net transfers to Parent — ( 42.3 ) — — — ( 42.3 )

Balances at September 30, 2022 $ — $ 538.1 $ — $ — $ ( 72.6 ) $ 465.5

Nine Months Ended September 30, 2022

Balances at March 31, 2024 $ — $ — $ 52.1 $ 132.7 $ ( 63.0 ) $ 121.8

Three Months Ended March 31, 2023

Balances at January 01, 2023 $ — $ 511.4 $ — $ — $ ( 55.8 ) $ 455.6

Net income — 52.7 — — — 52.7

Other comprehensive loss, net of tax — — — — ( 31.0 ) ( 31.0 )

Other comprehensive income, net of tax — — — — 0.9 0.9

Net transfers to Parent — ( 36.4 ) — — — ( 36.4 )

Balances at September 30, 2022 $ — $ 538.1 $ — $ — $ ( 72.6 ) $ 465.5

Balances at March 31, 2023 $ — $ 527.7 $ — $ — $ ( 54.9 ) $ 472.8

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

4 unchanged sentences

Atmus Filtration Technologies Inc.

(“Atmus” or the “Company”) develops, designs, manufactures and sells filters, coolant and chemical products.

Atmus offers products for first fit and aftermarket applications, including air filters, fuel filters, fuel water separators, lube filters, hydraulic filters, coolants, fuel additives and other filtration systems to original equipment manufacturers, dealers/distributors and end-users.

Atmus supports a wide customer base in a diverse range of markets, including on-highway and off-highway segments such as oil and gas, agriculture, mining, construction, power generation, marine and industrial markets.

The Company produces and sells globally recognized Fleetguard branded products in over 150 countries, including countries in North America, Europe, South America, Asia, Australia and Africa.

Fleetguard branded products are available through distribution centers worldwide.

(“Atmus” or the “Company”) is one of the global leaders of filtration products for on-highway commercial vehicles and off-highway agriculture, construction, mining and power generation vehicles and equipment.

Atmus designs and manufactures advanced filtration products, principally under the Fleetguard brand, that provide superior asset protection and enable lower emissions.

Atmus estimates that approximately 19 % of its net sales in 2023 were generated through first-fit sales to OEMs, where its products are installed as components for new vehicles and equipment.

Atmus estimate that approximately 81 % of its net sales in 2023 were generated in the aftermarket, where its products are installed as replacement or repair parts, leading to a strong recurring revenue base.

Building on its 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.

In April 2022, Cummins Inc.

1 unchanged sentence

In preparation for separation from Cummins, Atmus, as its predecessor in interest, was incorporated as a wholly-owned subsidiary of Cummins in Delaware on April 1, 2022 in connection with the planned Separation.

Prior to the completion of Atmus’s initial public offering (the “IPO”), Cummins completed, in all material respects, the transfer of the assets and liabilities of the Filtration Business to Atmus and its subsidiaries as detailed in the Separation Agreement Atmus entered into with Cummins.

Prior to the completion of Atmus’ initial public offering (the “IPO”), Cummins completed, in all material respects, the transfer of the assets and liabilities of the Filtration Business to Atmus and its subsidiaries as detailed in the separation agreement Atmus entered into with Cummins.

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.

1 unchanged sentence

The facilities covered by the Credit Agreement will mature on September 30, 2027.

Atmus’s Registration Statement on Form S-1, as amended, filed with the Securities and Exchange Commission (“Commission”) on May 16, 2023, was declared effective on May 25, 2023, and Atmus’s common shares began trading on the New York Stock Exchange under the symbol “ATMU” on May 26, 2023.

Atmus’ Registration Statement on Form S-1, as amended, filed with the Securities and Exchange Commission (“Commission”) on May 16, 2023, was declared effective on May 25, 2023, and Atmus’ common shares began trading on the New York Stock Exchange under the symbol “ATMU” on May 26, 2023.

On May 30, 2023, the IPO was completed through the sale on behalf of certain commercial paper holders of Cummins of 16,243,070 shares of common stock, including the underwriters’ full exercise of their 30-day option to purchase 2,118,661 shares to cover over-allotments.

2 unchanged sentences

Upon completion of the IPO, Atmus borrowed $ 650 million, consisting of proceeds of the term loan and amounts drawn under the revolving credit facility, and paid such amounts to Cummins in partial consideration for the Separation.

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.

The divestiture of Atmus shares by Cummins was completed on March 18, 2024 and resulted in the full separation of Atmus and divestiture of Cummins’ entire ownership and voting interest in Atmus (“Full-Separation”).

BASIS OF PRESENTATION

As Atmus became a publicly traded company upon the IPO, its financial statements are now presented on a consolidated basis.

In preparation for the IPO, the Company’s historical combined financial statements were prepared on a standalone basis, which reflected a combination of entities under common control that had been “carved out” of and derived from the historical consolidated financial statements and accounting records of Cummins.

In preparation for the IPO, the Company’s historical combined financial statements were prepared on a standalone basis, which reflected a combination of entities under common control that had been

“carved out” of and derived from the historical consolidated financial statements and accounting records of Cummins.

The unaudited financial statements for all periods presented, including the historical results of the Company prior to May 26, 2023, are now referred to as “Condensed Consolidated Financial Statements”, and have been prepared pursuant to the rules and regulations of the Commission for interim financial information .

1 unchanged sentence

GAAP”) have been omitted.

It is management’s opinion that these financial statements include all normal and recurring adjustments necessary for a fair statement of Atmus’s results of operations, financial position and cash flows.

It is management’s opinion that these financial statements include all normal and recurring adjustments necessary for a fair statement of Atmus’ results of operations, financial position and cash flows.

Results of operations for any interim period are not necessarily indicative of future or annual results.

interim statements should be read in conjunction with the audited financial statements and notes thereto included in Atmus’s final prospectus relating to the IPO, as filed with the Commission on May 26, 2023, pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, relating to the Company’s Registration Statement on Form S-1 (the “IPO Prospectus”) and with the restated financial statements for the three months ended March 31, 2023 and the revised financial statements for the years ended December 31, 2022, 2021 and 2020 as filed with the Commission on August 8, 2023 on Form 8-K.

These interim statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Periods Prior to the IPO

9 unchanged sentences

Actual costs that may have been incurred if the Filtration Business had been a standalone company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by the Filtration Business employees, and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology and infrastructure.

Historically, Atmus’s cash was transferred to Cummins on a daily basis.

Historically, Atmus’ cash was transferred to Cummins on a daily basis.

This arrangement was not reflective of the manner in which Atmus would have been able to finance its operations had it been a standalone business separate from Cummins during each of the periods presented.

2 unchanged sentences

For the Filtration Business, transactions with Cummins affiliates were included in the Condensed Consolidated Statements of Net Income and related balances were reflected as related party receivables and related party payables.

Other balances between the Filtration Business and Cummins were considered to be effectively settled in the Condensed Consolidated Financial Statements at the time the transactions were recorded.

Other balances between the Filtration Business and Cummins were considered to be

effectively settled in the Condensed Consolidated Financial Statements at the time the transactions were recorded.

As of the IPO Date

1 unchanged sentence

In the separation agreement, there were certain assets and liabilities identified in the schedules, including leases and unrecognized tax liabilities, which were retained by Cummins and were reflected as Net Parent Investment in the Company’s Condensed Consolidated Financial Statements, and those that were transferred to the Company, including additional pension assets, other compensation obligations and certain other assets and liabilities, which were transferred to the Company through Net Parent Investment in the Company’s Condensed Consolidated Financial Statements.

These various agreements comprehensively

provide a framework for our relationship with Cummins and govern various interim and ongoing relationships between us and Cummins post IPO.

These various agreements comprehensively provide a framework for our relationship with Cummins and govern various interim and ongoing relationships between us and Cummins post IPO.

As part of the Separation, Net Parent Investment was reclassified as Additional Paid-in Capital.

Periods Post IPO

Following the IPO, certain services continue to be provided by Cummins under the Transition Services Agreement (“TSA”).

Following the IPO, certain services continue to be provided by Cummins under the transition services agreement.

The Company incurred certain costs in its establishment as a standalone public company and expects to incur ongoing additional costs associated with operating as an independent, publicly traded company.

As a standalone entity, the Company will file tax returns on its own behalf, and tax balances and effective income tax rates may differ from the amounts reported in the historical periods.

Atmus currently files a consolidated Federal income tax return and returns in certain other jurisdictions with Cummins.

Following a full separation from Cummins, Atmus will file tax returns in those jurisdictions on its own behalf.

Post IPO, Retained earnings began to accumulate and the balance reflected on the Condensed Consolidated Balance Sheets reflects earnings for the period May 26, 2023 through September 30, 2023.

Post IPO, Atmus filed a consolidated Federal income tax return and returns in certain other jurisdictions with Cummins.

Post IPO, Retained earnings began to accumulate and the balance reflected on the Condensed Consolidated Balance Sheets reflects earnings for the period May 26, 2023 through March 31, 2024.

Periods Post Full Separation

Following Full Separation, Cummins will continue to provide certain services to Atmus under the transition services agreement.

The transition services agreement relates primarily to administrative services, which are generally to be provided through May 2025.

Atmus will continue to pay Cummins mutually agreed upon fees for these services.

Post Full Separation, Cummins is no longer considered a related party and activity post March 18, 2024, between Atmus and Cummins has been treated as arm’s-length transactions.

Atmus files tax returns in all jurisdictions on its own behalf post Full Separation.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 unchanged sentences

Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates.

In preparing these interim Condensed Consolidated Financial Statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation and uncertainty were the same as those applied to the Combined Financial Statements in the IPO Prospectus.

Russian Operations

On March 17, 2022, Cummins’ Board of Directors announced that Cummins would indefinitely suspend its operations in Russia due to the ongoing conflict in Ukraine.

As a result of the suspension of operations, Atmus evaluated the recoverability of assets in Russia and assessed other liabilities that may have been incurred.

Atmus has experienced, and expects to continue to experience, an inability to collect customer receivables from Russian customers.

Atmus also determined that it has some inventory items that were designated specifically for Russia that cannot be used elsewhere.

As a result of the suspension of Russian operations, the Company established a reserve of approximately $ 1.7 million for accounts receivable and $ 0.6 million of inventory was written off during 2022.

As of September 30, 2023 , the accounts receivable reserve for Atmus’s Russia operations was $ 1.5 million and no additional inventory was written off during the year.

The expense recognized in 2022 was recorded within Other operating (income) expense, net and Cost of sales in the Condensed Consolidated Statements of Net Income.

Recent Accounting Pronouncements Net Yet Adopted

Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (ASU) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit

or loss and assets that are currently required annually.

Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker (“CODM”).

The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments.

The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements.

We expect this ASU to only impact our disclosures with no impacts to our results of operations, cash flows and financial condition.

Income Taxes (Topic 740):

Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU No.

Income Taxes (Topic 740):

Improvements to Income Tax Disclosures that requires entities to disclose additional information about federal, state, and foreign income taxes primarily related to the income tax rate reconciliation and income taxes paid.

The new standard also eliminates certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities.

The guidance is effective for our fiscal year ending December 31, 2025, with early adoption permitted.

The guidance does not affect recognition or measurement in our consolidated financial statements.

We expect this ASU to only impact our disclosures with no impacts to our results of operations, cash flows and financial condition.

REVENUE FROM CONTRACTS WITH CUSTOMERS

1 unchanged sentence

Revenue by Geographic Area

The table below presents Atmus’s combined sales by geographic area.

The table below presents Atmus’ combined sales by geographic area.

Net sales attributed to geographic areas were based on the location of the customer.

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

For the Three Months Ended March 31,

(in millions)

3 unchanged sentences

Revenue by Product Category

The table below presents Atmus’s combined sales by product category:

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

The table below presents Atmus’ combined sales by product category:

For the Three Months Ended March 31,

(in millions)

6 unchanged sentences

Equity, royalty and interest income from investees, net of applicable taxes, was as follows:

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

For the Three Months Ended March 31,

(in millions)

Shanghai Fleetguard Filter Co.

Ltd $ 1.2 $ 2.1 $ 3.8 $ 3.9

Fleetguard Filters Pvt.

5.5 3.8 16.3 13.3

Shanghai Fleetguard Filter Co.

Filtrum Fibretechnologies Pvt.

Ltd — 0.1 0.2 0.2

Atmus share of net income 8.8 6.8

2 unchanged sentences

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.

Atmus’s effective tax rate for the three and nine month periods ended September 30, 2023, was 23.1 % and 23.8 %, respectively.

Atmus’s effective tax rate for the three and nine month periods ended September 30, 2022,

was 22.0 % and 21.3 %, respectively.

The increase in the effective tax rate was driven by a change in the mix of earnings among tax jurisdictions partially offset by a change in discrete tax items.

Atmus’ effective tax rate for the three months ended March 31, 2024 , was 22.0 % .

Atmus’ effective tax rate for the three months ended March 31, 2023 , was 23.7 % .

The decrease in the effective tax rate was driven by a change in the mix of earnings among tax jurisdictions and discrete tax items.

The Company’s 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.

The Organization for Economic Co-operation and Development (“OECD”) introduced Base Erosion and Profit Shifting (“BEPS”) Pillar 2 rules that impose a global minimum tax rate of 15%.

Numerous countries have enacted legislation that is effective on January 1, 2024.

We have evaluated the impact of this legislation based on Atmus’ current global landscape and do not believe it will have a material impact.

We will continue to update our analysis and monitor the ongoing legislation throughout the year.

Inventories are stated at the lower of cost or net realizable value.

Inventories included the following:

September 30,

2024 December 31,

5 unchanged sentences

Total inventories $ 256.9 $ 250.0

$ 243.0 $ 245.0

PRODUCT WARRANTY LIABILITY

A tabular reconciliation of the product warranty liability, including accrued product campaigns, was as follows:

For the Nine Months Ended

September 30,

For the Three Months Ended March 31,

(in millions)

3 unchanged sentences

Changes in estimates for pre-existing product warranties 0.3 ( 0.8 )

Foreign currency translation and other ( 0.2 ) ( 0.5 )

Balance, end of period $ 15.8 $ 16.4

Warranty liabilities included in Atmus’s Condensed Consolidated Balance Sheets were as follows:

September 30,

Warranty liabilities included in Atmus’ Condensed Consolidated Balance Sheets were as follows:

2024 December 31,

3 unchanged sentences

Total $ 15.8 $ 14.0

Fuel Heater Campaign Accrual

Quality issues were identified with a particular application of a fuel heater that primarily impacted one customer, resulting in a recall campaign.

A total of $ 24.2 million was accrued for this campaign during the years ended December 31, 2020 and 2019.

The remaining accrual balance at September 30, 2023 was $ 3.1 million all of which is included in current portion of accrued product warranty on Atmus’s Condensed Consolidated Balance Sheet.

DEBT AND BORROWING ARRANGEMENTS

Atmus entered into the Credit Agreement with Cummins and a syndicate of banks, providing for a "term loan” and a revolving credit facility, in anticipation of the Separation.

Borrowings under the Credit Agreement did

not become available under the Credit Agreement until the IPO occurred.

Borrowings under the Credit Agreement did not become available under the Credit Agreement until the IPO occurred.

The facilities covered by the Credit Agreement will mature on September 30, 2027.

2 unchanged sentences

Generally, U.S.

dollar-denominated loans bear interest at an adjusted term Secured Overnight Financing Rate (“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 Atmus’s net leverage ratio.

As of September 30, 2023, $ 600 million has been drawn on the term loan and no amount was drawn on the revolving credit facility.

dollar-denominated loans bear interest at an adjusted term Secured Overnight Financing Rate (“SOFR”) (which includes a 0.1 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 Atmus’ net leverage ratio.

As of March 31, 2024, $ 600 million has been drawn on the term loan and no amount was drawn on the revolving credit facility.

These amounts are included within Long-term debt and Current maturities of long-term debt on the Balance Sheet.

As of September 30, 2023, Atmus’s fair value of Long-term debt was approximately $ 600 million, which was derived from Level 2 input measures.

Our credit lines available as of September 30, 2023 and December 31, 2022 include:

As of September 30, 2023 As of December 31, 2022

As of March 31, 2024, Atmus’ fair value of Long-term debt was approximately $ 588 million, which was derived from Level 2 input measures.

Our credit lines available as of March 31, 2024 and December 31, 2023 include:

As of March 31, 2024 As of December 31, 2023

Facility Amount Borrowed Amount Facility Amount Borrowed Amount

5 unchanged sentences

September 30, 2027 (1)

400.0 — 400.0 —

(1) Atmus maintains a term loan facility and a revolving credit facility as part of the Credit Agreement.

The Credit Agreement includes financial covenants that Atmus maintain certain net leverage, secured net leverage and interest coverage ratios.

At September 30, 2023, Atmus complied with all financial covenants.

At March 31, 2024, Atmus was in compliance with all financial covenants under the Credit Agreement.

The Credit Agreement also contains customary representations, events of default and covenants, including restrictions on the level of borrowing.

5 unchanged sentences

The Company is subject to lawsuits and claims arising out of the ordinary course of its business.

While the Company cannot predict with certainty the outcome, costs recognized with respect to such actions were not material during the three months ended September 30, 2023.

The Company does not have any currently pending claims or litigation that the Company believes, individually or in the aggregate, will have a material adverse effect on its financial position, results of operations, liquidity or capital resources.

Atmus carries various forms of commercial, property and casualty, product liability and other forms of insurance;

Where Atmus has not entered into its own insurance policies, it will continue to be covered under Cummins’ insurance policies while Atmus continues to be majority owned by Cummins;

however, such insurance may not be applicable or adequate to cover the costs associated with a judgment against Atmus with respect to these lawsuits, claims and proceedings.

Atmus does not believe that these lawsuits are material individually or in the aggregate.

While the Company believes it has established adequate accruals for our expected future liability with respect to pending lawsuits, claims and proceedings, where the nature and extent of any such liability can be reasonably estimated based upon presently available information, there can be no assurance that the final resolution of any existing or future lawsuits, claims or proceedings will not have a material adverse effect on Atmus’s business, results of operations, financial condition or cash flows.

While the Company believes it has established adequate accruals for our expected future liability with respect to pending lawsuits, claims and proceedings, where the nature and extent of any such liability can be reasonably estimated based upon presently available information, there can be no assurance that the final resolution of any existing or future lawsuits, claims or proceedings will not have a material adverse effect on Atmus’ business, results of operations, financial condition or cash flows.

Indemnifications

Periodically, Atmus enters into various contractual arrangements where it agrees to indemnify a third-party against certain types of losses.

Periodically, Atmus enters various contractual arrangements where it agrees to indemnify a third-party against certain types of losses.

Atmus regularly evaluates the probability of having to incur costs associated with these indemnities and accrue for expected losses that are probable.

1 unchanged sentence

ACCUMULATED OTHER COMPREHENSIVE LOSS

Following are the changes in Accumulated other comprehensive income (loss) by component for the three and nine month periods ended September 30, 2023 and September 30, 2022:

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

Following are the changes in Accumulated other comprehensive (loss) income by component for the three months ended March 31, 2024 and March 31, 2023 :

For the Three Months Ended March 31,

(in millions)

2 unchanged sentences

Currency translation adjustments ( 6.8 ) 0.9

Other comprehensive loss, net ( 6.9 ) ( 11.5 ) ( 9.0 ) ( 31.0 )

Other comprehensive (loss) income, net ( 6.8 ) 0.9

Balance at end of period ( 62.9 ) ( 55.8 )

2 unchanged sentences

Change in pensions and other benefit plans — —

Tax (expense)/benefit — —

Other comprehensive income (loss), net — —

2 unchanged sentences

Balance at beginning of period $ ( 56.2 ) $ ( 55.8 )

Total other comprehensive loss, net ( 6.1 ) ( 11.5 ) ( 8.2 ) ( 31.0 )

Total other comprehensive (loss) income, net ( 6.8 ) 0.9

Balance at end of period $ ( 63.0 ) $ ( 54.9 )

5 unchanged sentences

In addition, the expenses reflected in the Condensed Consolidated Financial Statements may not be indicative of expenses that will be incurred in the future by Atmus.

The Company entered into the Separation Agreement and TSA with Cummins, among other transaction agreements, all of which will govern the parties relationship following the IPO.

The Company entered into the separation agreement and transition services agreement with Cummins, among other transaction agreements, all of which will govern the parties relationship following the IPO and full separation.

This includes services provided by Cummins to the Company for a fixed term on a service-by-service basis.

We will pay Cummins mutually agreed-upon fees for the services provided under the TSA.

We will pay Cummins mutually agreed-upon fees for the services provided under the transition services agreement.

Corporate Costs/Allocations

The Condensed Consolidated Financial Statements include corporate costs incurred by Cummins for services that were provided to or on behalf of Atmus for the period prior to IPO.

Such costs represent shared

services and infrastructure provided by Cummins, including administrative, finance, human resources, information technology, legal, and other corporate and infrastructure services.

Such costs represent shared services and infrastructure provided by Cummins, including administrative, finance, human resources, information technology, legal, and other corporate and infrastructure services.

The corporate costs reflected in the Condensed Consolidated Financial Statements consist of direct charges to the business and indirect allocations to Atmus.

The costs that were directly charged to Atmus, such as the shared services for finance provided by Cummins Business Services, were primarily determined based on actual usage.

Indirect allocations are related to shared services and infrastructure provided by Cummins that would benefit Atmus but have not been directly charged to Atmus in a manner discussed above.

Indirect allocations are related to shared services and infrastructure provided by Cummins that would benefit Atmus but were not directly charged to Atmus in a manner discussed above.

These corporate costs were allocated to Atmus using methods management believes are consistent and reasonable.

The primary allocation factor is third-party revenue;

however, other relevant metrics are also utilized based on the nature of the underlying activities.

For example, headcount is used as the allocation driver to allocate the human resource departmental costs.

The primary allocation factor was third-party revenue;

however, other relevant metrics were also utilized based on the nature of the underlying activities.

For example, headcount was used as the allocation driver to allocate the human resource departmental costs.

The expenses allocated and directly charged reflect all expenses that Cummins incurred on behalf of the Company.

The expenses reflected in the Condensed Consolidated Financial Statements may not be indicative of the actual expenses that would have been incurred during the period presented if Atmus historically operated as a separate, stand-alone entity.

The expenses reflected in the Condensed Consolidated Financial Statements prior to the IPO may not be indicative of the actual expenses that would have been incurred during the period presented if Atmus historically operated as a separate, stand-alone entity.

All corporate charges and allocations have been deemed paid by Atmus to Cummins in the period in which the cost was recognized in the Condensed Consolidated Statements of Income.

Total corporate costs allocated to Atmus were zero and $ 13.7 million for the three and nine months ended September 30, 2023, respectively, compared with $ 9.7 million and $ 36.4 million for the three and nine months ended September 30, 2022, respectively.

Allocated corporate costs are included in Net sales, Cost of sales, Selling, general and administrative expenses, Research, development and engineering expenses and Other income, net.

Total corporate costs allocated to Atmus were zero for the three months ended March 31, 2024 compared with $ 8.2 million for the three months ended March 31, 2023.

Allocated corporate costs are included in Net sales, Cost of sales, Selling, general and administrative expenses, Research, de velopment and engineering expenses and Other income, net.

Post-IPO, Atmus has and will continue to incur its own corporate costs associated with being a standalone publicly traded company.

Related Party Balances

Atmus had trade receivables of $ 45.1 million and $ 52.0 million for products sold to, and accounts payable of $ 59.9 million and $ 57.6 million for products and services purchased in the ordinary course from Cummins as of September 30, 2023 and December 31, 2022, respectively.

Atmus’s sales to Cummins were $ 71.7 million and $ 221.1 million for the three and nine months ended September 30, 2023, respectively, compared to $ 78.6 million and $ 227.0 million for the three and nine months ended September 30, 2022, respectively.

Following the full separation and as of March 31, 2024, Cummins is no longer considered a related party.

Atmus had trade receivables of $ 37.9 million for products sold to, and accounts payable of $ 54.8 million for products and services purchased in the ordinary course from Cummins as of December 31, 2023 .

Atmus’ sales to Cummins from January 1, 2024 through the date of full separation, March 18, 2024, were $ 65.4 million compared to $ 76.7 million for the three months ended March 31, 2023 .

EARNINGS PER SHARE

Basic and diluted earnings per share (“EPS”) were calculated as follows:

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

For the Three Months Ended March 31,

(in millions, except per share data)

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Diluted earnings per share $ 0.54 $ 0.63

Basic and diluted earnings per share for the three and nine months ended September 30, 2022 was calculated using the shares of common stock that were issued and outstanding as of the completion of the IPO.

Basic and diluted earnings per share for the three months ended March 31, 2024 was calculated using the shares of common stock that were issued and outstanding as of the completion of the IPO.

For the periods prior to the IPO, it is assumed that there were no dilutive equity instruments as there were no equity awards of Atmus outstanding prior to the IPO.

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Other assets included the following:

September 30,

2024 December 31,

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Operating lease assets $ 28.0 $ 24.8

$ 26.2 $ 32.4

Deferred income taxes 14.1 14.2

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Other accrued expenses included the following:

September 30,

2024 December 31,

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Marketing accruals $ 36.4 $ 42.6

Other taxes payables 12.1 7.5

Income taxes payable 14.0 10.3

Other taxes payables 8.9 12.7

Current portion of operating lease liabilities 7.3 7.1

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Other liabilities included the following:

September 30,

2024 December 31,

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Long-term portion of operating lease liabilities $ 21.4 $ 18.5

$ 19.7 $ 23.2

Deferred income taxes 1.4 1.4

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Other liabilities $ 34.5 $ 31.8

(1) Balances at December 31, 2022 included an unrecognized tax liability for FIN48 reserves and leased assets and related depreciation, which have been retained by Cummins upon completion of Atmus’s IPO and are no longer included on Atmus’s Condensed Consolidated Balance Sheets at September 30, 2023.

See Note 1, Description of the Business , and in Note 2, Basis of Presentation for more information.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

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The discussion and analysis presented below refers to and should be read in conjunction with the unaudited condensed consolidated financial statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q.

The following is our discussion and analysis of changes in our financial condition and results of operations for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022.

The following is our discussion and analysis of changes in our financial condition and results of operations for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 .

Cautionary Note Regarding Forward-Looking Statements

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Forward-looking statements may be identified by the use of words such as “anticipates,” “expects,” “forecasts,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “could,” “should,” “may” or words of similar meaning.

Examples of forward-looking statements include, but are not limited to, statements we make regarding the outlook for our future business and financial performance, discussions of future operations, impact of planned acquisitions and dispositions, our strategy for growth, product development activities, regulatory approvals, market position, expenditures and the effects of the Separation and IPO (each as defined in Note 1, Description of the Business , to our Condensed Consolidated Financial Statements included herein).

Examples of forward-looking statements include, but are not limited to, statements we make regarding the outlook for our future business and financial performance, discussions of future operations, impact of planned acquisitions and dispositions, our strategy for growth, product development activities, regulatory approvals, market position, expenditures and the effects of the Full Separation, Separation and IPO (each as defined in Note 1, Description of the Business , to our Condensed Consolidated Financial Statements included herein).

These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which we refer to as “future factors,” which are difficult to predict.

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Risks and uncertainties include, but are not limited to:

• our ability to retain significant customers;

• the actions of, and income from, joint ventures and other investees that we do not directly control;

• labor relations or work stoppages;

• 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 fluctuations and supply shortages;

• supply chain and manufacturing implications on our ability to meet demand;

• competitor activity;

• the development of new technologies that reduce demand for our current products and services;

• challenging markets for talent and ability to attract, develop and retain key personnel;

• our ability to complete any planned acquisition or divestiture, and the potential that the anticipated benefits of any such acquisition or divestiture may not be realized;

• our ability to manage productivity improvements;

• economic conditions in cyclical industries;

• climate change, global warming, natural disasters, more stringent climate change regulations, accords, mitigation efforts, greenhouse gas regulations or other legislation and regulatory initiatives designed to address climate change and environmental concerns;

• product warranty claims;

• product recalls;

• our ability to establish, maintain, protect and enforce intellectual property rights;

• unauthorized, or counterfeit, sales of our products;

• legal and regulatory compliance costs and risks;

• global legal and ethical compliance costs and risks;

• any adverse effects of the conflict between Russia and Ukraine and the global response (including government bans or restrictions on doing business in Russia);

• changes in taxation;

• exposure to potential security breaches or other disruptions to our information technology environment and data security;

• disruptions to information technology and infrastructure caused by the Separation;

• foreign currency exchange rate changes;

• the impact of impairment of our goodwill and other intangible assets;

• political, economic and other risks from operations in numerous countries including political, economic and social uncertainty and the evolving globalization of our business;

• our ability to achieve the expected benefits of the Separation and related transactions;

• loss of Cummins’ reputation and resources;

• reliance on exemptions from New York Stock Exchange corporate governance requirements;

• restrictions on our business, potential indemnification liabilities and potential change in control implications in connection with the Separation and related transactions;

• our status as a controlled company, and the possibility that Cummins’ interests or those of certain of our executive officers and directors may conflict with our interests and the interests of our other stockholders;

• continued availability of financing, financial instruments and financial resources in the amounts, at the times and on the terms required to support our future business;

• our substantial indebtedness and pledging of our assets as security for such indebtedness;

• our ability to remediate the material weakness in our internal control over financial reporting;

• costs and risks in connection with the restatement of our financial statements.

Additional information about these future factors and the material factors or assumptions underlying such forward-looking statements may be found under the sections entitled Cautionary Note Regarding Forward-Looking Statements and Risk Factors in our IPO Prospectus and the section entitled Risk Factors in this Quarterly Report on Form 10-Q.

• 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;

• 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 impairment of recorded goodwill;

• 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 from Atmus’ term loan, which may impact Atmus' ability to service all its indebtedness and react to changes in the industry;

• Substantially all Atmus' assets being pledged as security for its term loan and revolving credit facility.

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 our Annual Report on Form 10-K for the year ended December 31, 2023.

It is not possible to predict or identify all such factors, and the risks described above should not be considered a complete statement of all potential risks and uncertainties.

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We are one of the global leaders of filtration products for on-highway commercial vehicles and off-highway agriculture, construction, mining and power generation vehicles and equipment.

We design and manufacture advanced filtration products, principally under the Fleetguard brand, that enable lower emissions and provide superior asset protection.

We estimate that approximately 16% of our net sales in 2022 and 19% of our sales in the first nine months of 2023 were generated through first-fit sales to original equipment manufacturers (“OEM”s), where our products are installed as components for new vehicles and equipment, and the balance was generated in the aftermarket, where our products are installed as replacement or repair parts, leading to a strong recurring revenue base.

We design and manufacture advanced filtration products, principally under the Fleetguard brand, that provide superior asset protection and enable lower emissions.

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 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.

Building on our more than 65-year history, we continue to grow and differentiate ourselves through our global footprint, comprehensive offering of premium products, technology leadership and multi-channel path to market.

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These agreements comprehensively provide a framework for our relationship with Cummins and govern various interim and ongoing relationships between us and Cummins post IPO.

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.

The divestiture of Atmus shares by Cummins was completed on March 18, 2024 and resulted in the full

separation of Atmus and divestiture of Cummins’ entire ownership and voting interest in Atmus (“Full Separation”).

Basis of Presentation

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Market demand

Aftermarket demand slowed slightly during the third quarter of 2023 across many of our end markets and we anticipate the slowdown to continue in these markets in the fourth quarter of 2023 due to an anticipated decline in global economic activity, and continued normalization of supply chain backlogs and inventory levels.

The market for our first-fit products remained strong in the third quarter of 2023, primarily as a result of strong demand for vehicles due to ongoing strong order books at most of our OEM customers.

We have continued to increase prices as a result of significant increases in our cost base in 2022, which has contributed to higher net sales in the nine months ended September 30, 2023.

Aftermarket and first-fit demand remained stable during the first quarter of 2024.

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.

We have continued to increase prices as a result of continued inflation and increases to our cost base, which has contributed to higher net sales in the three months ended March 31, 2024 .

Supply chain constraints

We continue to experience supply chain disruptions, incremental costs and related challenges that unfavorably affect customer demand, our ability to meet customer demand and our production.

While overall supply chain conditions have substantially improved from a year ago, it continues to affect inventory and backlog levels throughout our supply chain.

We continued to encounter supply chain challenges which impact our ability to meet customer demand.

While overall supply chain conditions have substantially improved from a year ago, they continue to affect inventory and backlog levels throughout our supply chain.

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.

Commodity prices, labor, inflation and foreign currency exchange rates

We continue to experience generally high inflation, though it has moderated in the first three quarters of 2023.

Direct material cost pressures, driven largely by steel, resin and other petrochemical products, have stabilized somewhat, but we continue to see impacts from labor and energy.

Collectively, these pressures have driven an increase in cost of sales.

To mitigate these pressures, we instituted pricing actions, which have largely offset these cost increases.

During the third quarter of 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.

The appreciation of the U.S.

dollar against foreign currencies in 2022 had a negative impact on our consolidated results of operations due to translation impacts, which have continued to negatively impact our results of operations in the first three quarters of 2023.

While we did see a slightly favorable impact on our results of operations in the third quarter, the overall negative impact on the year may continue through the remainder of 2023.

We continue to experience generally high inflation in the first quarter 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.

Collectively, we incurred higher freight and manufacturing costs resulting in an increase in Cost of sales in the first quarter of 2024.

To mitigate these pressures, we continued to institute pricing actions into the first quarter of 2024.

During the first quarter of 2024, our Selling, general and administrative expenses increased as a result of increased people-related expenses and consulting.

Additionally, the depreciation of the U.S.

dollar against foreign currencies has had and could continue to have a favorable impact on our condensed consolidated results of operations due to translation impacts.

Although we did see a slightly favorable impact on our results of operations in the first quarter of 2024, there can be no assurances that this favorable impact will continue throughout 2024 .

Standalone costs

We have incurred, and expect to continue to incur, additional costs associated with becoming a standalone public company.

During the three months ended September 30, 2023, we incurred approximately $7.4 million of one-time expenses including $3.9 million within Cost of sales and $3.5 million within Selling, general and administrative expenses.

We expect to incur one-time expenses of approximately $30 million to $50 million between December 31, 2022 and December 31, 2024.

In addition, we expect to incur capital expenditures in connection with the Separation of approximately $20 million to $40 million between December 31, 2022 and December 31, 2024.

The actual amount of the one-time expenses and capital expenditures we will incur as a stand-alone public company may be higher, perhaps significantly, from our current estimates for a number of reasons, including, among others, the final terms we are able to negotiate with service providers, as well as

additional costs we may incur that we have not currently anticipated.

During the three months ended March 31, 2024 , we incurred approximately $6.0 million of one-time expenses including $3.3 million within Cost of sales and $2.7 million within Selling, general and administrative expenses.

We expect to incur one-time expenses of approximately $10 million to $20 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.

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.

These expenses and capital expenditures are expected to be substantially complete by the end of 2024 but some expenses and capital expenditures may potentially be incurred in 2025.

The actual amount of the expenses and capital expenditures we will incur as a stand-alone public company may be higher, perhaps significantly, from our current estimates for a number of reasons, including, among others, the final terms we are able to negotiate with service providers, as well as additional costs we may incur that we have not currently anticipated.

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.

Results of Operations

Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022

Three Months Ended

September 30,

(Unfavorable)

2023 2022 Amount %

(in millions)

NET SALES $ 396.2 $ 401.2 $ (5.0) (1.2) %

Cost of sales 293.3 301.5 8.2 2.7 %

GROSS MARGIN 102.9 99.7 3.2 3.2 %

OPERATING EXPENSES AND INCOME

Selling, general and administrative expenses 41.3 32.3 (9.0) (27.9) %

Research, development and engineering expenses 11.1 9.8 (1.3) (13.3) %

Equity, royalty and interest income from investees 8.1 7.3 0.8 11.0 %

Other operating income, net

(0.2) — 0.2 — %

OPERATING INCOME 58.8 64.9 (6.1) (9.4) %

Interest expense 11.0 0.3 (10.7) (3,566.7) %

Other income, net 1.1 — 1.1 — %

INCOME BEFORE INCOME TAXES 48.9 64.6 (15.7) (24.3) %

Income tax expense 11.3 14.2 2.9 20.4 %

NET INCOME $ 37.6 $ 50.4 $ (12.8) (25.4) %

PER SHARE DATA:

Basic earnings per share $ 0.45 $ 0.61 $ (0.16) (26.2) %

Diluted earnings per share $ 0.45 $ 0.61 $ (0.16) (26.2) %

Three Months Ended

September 30,

(Unfavorable)

Percent of Net sales 2023 2022 Percentage Points

Gross margin 26.0% 24.9% 1.1

Selling, general and administrative expenses 10.4% 8.1% (2.3)

Research, development and engineering expenses 2.8% 2.4% (0.4)

Net sales were $396.2 million (which included related party sales of $86.9 million) for the three months ended September 30, 2023, a decrease of $5.0 million compared to $401.2 million (which included related party sales of $90.1 million) for the three months ended September 30, 2022.

Of the total Net sales decrease of $5.0 million, $3.2 million was a decrease of related party sales and $1.8 million was a decrease in external sales.

Additionally, revenues were negatively impacted by lower volumes of approximately $25.3 million, partially offset by $17.0 million due to increased pricing and the favorable impacts of currency of $3.3 million.

Gross margin was $102.9 million for the three months ended September 30, 2023, an increase of $3.2 million compared to $99.7 million for the three months ended September 30, 2022.

The increase in Gross margin was mainly due to approximately $17.0 million of favorable pricing as described above and $15.8 million

of favorable freight and commodities costs, partially offset by $13.4 million of unfavorable manufacturing and other costs, $8.8 million due to lower volumes, $4.0 million of increased variable compensation costs and $3.8 million of one-time separation costs.

Gross margin as a percentage of Net sales was 26.0% for the three months ended September 30, 2023, an increase of 1.1% compared to 24.9% for the three months ended September 30, 2022.

The increase in Gross margin as a percentage of Net sales was primarily due to items noted above.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $41.3 million for the three months ended September 30, 2023, an increase of $9.0 million compared to $32.3 million for the three months ended September 30, 2022.

The increase was primarily driven by costs related to the Separation and increased variable compensation costs.

Selling, general and administrative expenses as a percentage of Net sales were 10.4% for the three months ended September 30, 2023, an increase of 2.3% compared to 8.1% for the three months ended September 30, 2022.

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.

Research, Development and Engineering Expenses

Research, development and engineering expenses were $11.1 million for the three months ended September 30, 2023, an increase of $1.3 million compared to $9.8 million for the three months ended September 30, 2022.

The increase was primarily due to increased variable compensation costs.

Research, development and engineering expenses as a percentage of Net sales were 2.8% for the three months ended September 30, 2023, an increase of 0.4% compared to 2.4% for the three months ended September 30, 2022.

The increase in Research, development and engineering expenses as a percentage of Net sales was mainly due to the items noted above.

Equity, Royalty and Interest Income From Investees

Equity, royalty and interest income from investees were $8.1 million for the three months ended September 30, 2023, an increase of $0.8 million compared to $7.3 million for the three months ended September 30, 2022.

The increase was primarily due to higher earnings of $0.7 million from our joint ventures in China and India.

Interest Expense

Interest expense was $11.0 million for the three months ended September 30, 2023, an increase of $10.7 million compared to $0.3 million for the three months ended September 30, 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 $1.1 million for the three months ended September 30, 2023, an increase of $1.1 million compared to zero for the three months ended September 30, 2022.

The increase in Other income, net was primarily due to higher interest income.

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.

Our effective tax rate for the three months ended September 30, 2023 was 23.1%, an increase of 1.1% compared to 22.0% for the three months ended September 30, 2022.

The increase in the effective tax rate was driven by a change in the mix of earnings among tax jurisdictions partially offset by a change in discrete tax items.

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.

Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022

For the Nine Months Ended

September 30,

Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

For the Three Months Ended March 31, Favorable

(Unfavorable)

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Other operating expense, net

0.2 0.1 (0.1) (100.0) %

OPERATING INCOME 68.6 69.2 (0.6) (0.9) %

Interest expense 10.5 — (10.5) — %

Other income, net 2.2 3.9 (1.7) (43.6) %

Other income (expense), net

0.2 (0.1) 0.3 (300.0) %

INCOME BEFORE INCOME TAXES 58.3 69.1 (10.8) (15.6) %

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Diluted earnings per share $ 0.54 $ 0.63 $ (0.09) (14.0) %

For the Nine Months Ended

September 30,

For the Three Months Ended March 31, Favorable

(Unfavorable)

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Research, development and engineering expenses 2.4% 2.3% (0.1)

Net sales were $1,228.4 million (which included related party sales of $263.2 million) for the nine months ended September 30, 2023, an increase of $51.5 million compared to $1,176.9 million (which included related party sales of $260.1 million) for the nine months ended September 30, 2022.

Of the total Net sales increase of $51.5 million, $48.4 million was an increase in external sales and $3.1 million was an increase of related party sales.

Additionally, sales increased by approximately $85.3 million due to increased pricing, partially offset by lower volumes of $25.9 million and the negative impacts of currency of $7.9 million.

Gross margin was $327.1 million for the nine months ended September 30, 2023, an increase of $50.6 million compared to $276.5 million for the nine months ended September 30, 2022.

The increase in Gross margin was mainly due to approximately $85.3 million of favorable pricing as described above and approximately $29.1 million of favorable freight and commodities costs, partially offset by $28.7 million of unfavorable manufacturing and other costs, $11.9 million of increased variable compensation costs, $9.1 million due to lower volumes, $7.3 million of one-time separation costs and $6.5 million of unfavorable currency impacts.

Gross margin as a percentage of Net sales was 26.6% for the nine months ended September 30, 2023, an increase of 3.1% compared to 23.5% for the nine months ended September 30, 2022.

The increase in Gross margin as a percentage of Net sales was primarily due to the items noted above.

Net sales were $426.6 million for the three months ended March 31, 2024 , an increase of $8.0 million compared to $418.6 million for the three months ended March 31, 2023 .

The increase in Net sales was mainly due to $8.8 million of favorable pricing impacts and the favorable impacts of currency of $1.4 million, partially offset by lower volumes of approximately $2.2 million.

Gross margin was $111.8 million for the three months ended March 31, 2024 , an increase of $2.0 million compared to $109.8 million for the three months ended March 31, 2023 .

The increase in Gross margin was mainly due to approximately $8.8 million of favorable pricing as described above, $2.4 million of favorable commodities costs and $0.1 million of favorable currency impacts, partially offset by $4.6 million increase in manufacturing and other costs, $2.3 million in one-time separation costs, $1.6 million in unfavorable freight costs and $0.8 million in lower volumes.

Gross margin as a percentage of Net sales was 26.2% for the three months ended March 31, 2024 and for the three months ended March 31, 2023 .

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $126.4 million for the nine months ended September 30, 2023, an increase of $29.1 million compared to $97.3 million for the nine months ended September 30, 2022.

The increase was primarily driven by costs related to the Separation, inefficiencies due to delays in the execution of our IPO and increased variable compensation costs.

Selling, general and administrative expenses as a percentage of Net sales were 10.3% for the nine months ended September 30, 2023, an increase of 2.0% compared to 8.3% for the nine months ended September 30, 2022.

Selling, general and administrative expenses were $43.3 million for the three months ended March 31, 2024 , an increase of $4.2 million compared to $39.1 million for the three months ended March 31, 2023 .

The increase was primarily driven by increased people-related expenses and consulting, partially offset by lower one-time separation costs of $0.4 million.

Selling, general and administrative expenses as a percentage of Net sales were 10.2% for the three months ended March 31, 2024 , an increase of 0.9 percentage points compared to 9.3% for the three months ended March 31, 2023 .

Research, Development and Engineering Expenses

Research, development and engineering expenses were $33.2 million for the nine months ended September 30, 2023, an increase of $3.5 million compared to $29.7 million for the nine months ended September 30, 2022.

The increase was primarily due to increased variable compensation costs.

Research, development and engineering expenses as a percentage of Net sales were 2.7% for the nine months ended September 30, 2023, an increase of 0.2% compared to 2.5% for the nine months ended September 30, 2022.

The increase in Research, development and engineering expenses as a percentage of Net sales was mainly due to the items noted above.

Research, development and engineering expenses were $10.1 million for the three months ended March 31, 2024 , an increase of $0.3 million compared to $9.8 million for the three months ended March 31, 2023 .

The increase was primarily due to increased people-related expenses.

Research, development and engineering expenses as a percentage of Net sales were 2.4% for the three months ended March 31, 2024 , an increase of 0.1 percentage points compared to 2.3% for the three months ended March 31, 2023 .

The increase in Research, development and engineering expenses as a percentage of Net sales was mainly due to the item noted above.

Equity, Royalty and Interest Income From Investees

Equity, royalty and interest income from investees were $24.8 million for the nine months ended September 30, 2023, an increase of $3.3 million compared to $21.5 million for the nine months ended September 30, 2022.

The increase was primarily due to higher earnings of $2.9 million from our joint ventures in China and India.

Other Operating Expense, Net

Other operating expense, net was $0.1 million for the nine months ended September 30, 2023, a decrease of $3.5 million compared to $3.6 million for the nine months ended September 30, 2022.

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.

Equity, royalty and interest income from investees were $10.4 million for the three months ended March 31, 2024 , an increase of $2.0 million compared to $8.4 million for the three months ended March 31, 2023 .

The increase was due to higher earnings of $2.0 million from our joint ventures, primarily in India.

Interest Expense

Interest expense was $15.2 million for the nine months ended September 30, 2023, an increase of $14.6 million compared to $0.6 million for the nine months ended September 30, 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 $2.2 million for the nine months ended September 30, 2023, a decrease of $1.7 million compared to $3.9 million for the nine months ended September 30, 2022.

The decrease in Other income, net was primarily due to the net loss on foreign exchange rate hedging, partially offset by higher interest income.

Interest expense was $10.5 million for the three months ended March 31, 2024 , an increase of $10.5 million compared to zero for the three months ended March 31, 2023 .

The increase was primarily due to interest on our borrowings under the Credit Agreement beginning with our IPO in May 2023.

Income Tax Expense

Our effective tax rate for the nine months ended September 30, 2023 was 23.8%, an increase of 2.5% compared to 21.3% for the nine months ended September 30, 2022.

The increase in the effective tax rate was driven by a change in the mix of earnings among tax jurisdictions partially offset by a change in discrete tax items.

Our effective tax rate differs from the U.S.

Our effective tax rate for the three months ended March 31, 2024 was 22.0% , a decrease of 1.7 percentage points compared to 23.7% for the three months ended March 31, 2023 .

The decrease in the effective tax rate was driven by a change in the mix of earnings among tax jurisdictions and discrete tax items.

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.

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 September 30, 2023, we have borrowed $600 million on the term loan and zero on the revolving credit facility.

As a result, we had capacity under our revolving credit facility of $400.0 million as of September 30, 2023.

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.

Our facilities under the Credit Agreement provide for $1.0 billion in total availability, which includes a $600 million term loan and a $400 million revolving credit facility.

As of March 31, 2024, we have borrowed $600.0 million on the term loan and zero on the revolving credit facility.

As a result, we had capacity under our revolving credit facility of $400.0 million as of March 31, 2024.

Overall, we do not expect negative effects to our funding sources that would have a material effect on our liquidity.

However, if a serious economic or credit market crisis ensues or other adverse developments arise, it could have a material adverse effect on our liquidity, results of operations and financial condition.

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, supporting any future acquisitions and property, plant and equipment.

However, if a serious economic or credit market crisis ensues or other adverse developments arise, it could have a material adverse effect on our liquidity, financial condition, results of operations and cash flows.

Long-term cash requirements primarily relate to funding long-term debt repayments and our long-term benefit plan obligations.

Our management reviews our liquidity needs in determining any and all indebtedness options.

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.

We have the ability to access the capital markets and other sources of liquidity which management believes are sufficient to allow us to manage our business and give us flexibility to meet our short- and long-term financial commitments.

Our cash flow activity is noted below:

For the Nine Months Ended

September 30,

For the Three Months Ended March 31,

(in millions)

Net cash provided by operating activities $ 147.3 $ 87.9

Net cash (used in) provided by operating activities

$ (8.2) $ 42.8

Net cash used in investing activities (10.6) (6.4)

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Operating Cash Flow

Net cash provided by operating activities was $147.3 million for the nine months ended September 30, 2023, an increase of $59.4 million compared to Net cash provided by operating activities of $87.9 million for the nine months ended September 30, 2022.

The increase was driven primarily by lower working capital requirements of $48.3 million, a favorable change in other liabilities of $7.7 million and an increase in Net income of $2.1 million.

During the nine months ended September 30, 2023, lower working capital requirements resulted in a cash inflow of $2.0 million compared to a cash outflow of $46.3 million for the nine months ended September 30, 2022, mainly due to lower inventories, higher other accrued expenses and lower trade receivables, partially offset by lower related party and trade payables.

Dividends received from our unconsolidated equity investees were $17.3 million and $13.9 million for the nine months ended September 30, 2023 and September 30, 2022, respectively.

Dividends are typically paid in the second through the fourth quarters and are included in Net cash provided by operating activities.

Net cash used in operating activities was $8.2 million for the three months ended March 31, 2024 , a decrease of $51.0 million compared to Net cash provided by operating activities of $42.8 million for the three months ended March 31, 2023 .

The decrease was driven primarily by higher working capital requirements of $46.1 million and a decrease in Net income of $7.2 million .

During the three months ended March 31, 2024 , higher working capital requirements resulted in a cash outflow of $59.1 million compared to a cash outflow of $13.0 million for the three months ended March 31, 2023 , mainly due to lower other accrued expenses, driven by variable compensation of $23.7 million and one-time working capital inefficiencies associated with the move from intercompany settlement terms with Cummins to standalone practices of $3.3 million, higher trade receivables and lower trade payables.

Dividends received from our unconsolidated equity investees were $9.6 million and zero for the three months ended March 31, 2024 and March 31, 2023 , respectively.

During the first quarter of 2024, we received a partial dividend from our joint venture in India which is included in Net cash used in operating activities.

Investing Cash Flow

Net cash used in investing activities for the nine months ended September 30, 2023 and September 30, 2022 was primarily used for capital expenditures.

Our capital expenditures were $29.6 million (of which approximately $4.8 million related to one-time separation costs) and $22.4 million for the nine months ended

September 30, 2023 and September 30, 2022, respectively, corresponding to approximately 2.4% of Net sales for the nine months ended September 30, 2023 and approximately 1.9% of Net sales for the nine months ended September 30, 2022.

Net cash used in investing activities for the three months ended March 31, 2024 and March 31, 2023 was primarily used for capital expenditures.

Our capital expenditures were $10.6 million (of which approximately $2.8 million related to one-time separation costs) and $6.4 million for the three months ended March 31, 2024 and March 31, 2023 , respectively, corresponding to approximately 2.5% of Net sales for the three months ended March 31, 2024 and approximately 1.5% of Net sales for the three months ended March 31, 2023 .

Financing Cash Flow

Net cash provided by financing activities for the nine months ended September 30, 2023 consisted primarily of long-term debt proceeds from our borrowings of $650 million under our Credit Agreement, partially offset by net transfers of $580.3 million to Cummins as part of the Separation and $50 million in payments made on our revolving credit facility.

Net cash used in financing activities for the nine months ended September 30, 2022 consisted entirely of transfers to Cummins.

Net cash provided by financing activities for the nine months ended September 30, 2023 was $21.1 million and Net cash used in financing activities for the nine months ended September 30, 2022 was $65.5 million.

Net cash provided by financing activities for the three months ended March 31, 2024 was zero and Net cash used in financing activities for the three months ended March 31, 2023 was $36.4 million .

Net cash used in financing activities for the three months ended March 31, 2023 consisted entirely of transfers to Cummins.

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 historical combined financial statements included in the IPO Prospectus and to the revised financial statements for the years ended December 31, 2022, 2021 and 2020 as filed with the Commission on August 8, 2023 on Form 8-K, which provides a summary of our future minimum lease payments.

Our total debt was $600.0 million at September 30, 2023 and zero at December 31, 2022.

At September 30, 2023, the weighted-average term of our outstanding long-term debt was 4.2 years.

For more information regarding our lease obligations, see Note 9, Leases , to the historical consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, which provides a summary of our future minimum lease payments.

Our total debt was $600.0 million at both March 31, 2024 and December 31, 2023 .

At March 31, 2024 , the weighted-average term of our outstanding long-term debt was 3.4 years.

Refer to Note 9, Debt and Borrowing Arrangements , to the Condensed Consolidated Financial Statements for more information on our debt and debt covenants.

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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 associated with becoming a standalone public company.

• “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.

We believe Free cash flow and Adjusted free cash flow are useful metrics used by management and investors to analyze our ability to service and repay debt and return value to shareholders.

12 unchanged sentences

A reconciliation of Net income to EBITDA and Adjusted EBITDA is shown in the table below:

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

2023 2022 2023 2022

For the Three Months Ended March 31,

(in millions)

5 unchanged sentences

One-time separation costs (a)

$ 7.4 $ 1.5 $ 20.4 $ 2.5

Adjusted EBITDA (non-GAAP) $ 80.2 $ 78.7

5 unchanged sentences

A reconciliation of Diluted earnings per share to Adjusted earnings per share is shown in the table below:

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

2023 2022 2023 2022

For the Three Months Ended March 31,

Diluted earnings per share $ 0.54 $ 0.63

5 unchanged sentences

(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.

The tax impact of one-time separation costs for the three months ended September 30, 2023 and 2022 were $1.7 million and $0.3 million, respectively, and for the nine months ended September 30, 2023 and 2022 were $4.8 million and $0.5 million, respectively.

The tax impact of one-time separation costs for the three months ended March 31, 2024 and 2023 were $1.3 million and $1.0 million, respectively.

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 Three Months Ended

September 30,

For the Nine Months Ended

September 30,

2023 2022 2023 2022

For the Three Months Ended March 31,

(in millions)

Cash provided by operating activities $ 58.3 $ 48.2 $ 147.3 $ 87.9

Cash (used in) provided by operating activities $ (8.2) $ 42.8

Capital expenditures $ 10.6 $ 6.4

1 unchanged sentence

One-time separation capital expenditures $ 2.8 $ 0.8

Other one-time separation related (a)

Adjusted free cash flow $ (12.7) $ 37.2

(a) Primarily comprised of one-time working capital inefficiencies associated with the move from intercompany settlement terms with Cummins to standalone practices.

Critical Accounting Policies and Estimates

2 unchanged sentences

Actual results could differ from those estimates and assumptions.

Our significant accounting policies are described in Note 3, Summary of Significant Accounting Policies , to our historical combined financial statements in the IPO Prospectus, our Form 8-K as filed with the Commission on August 8, 2023 and Note 3, Summary of Significant Accounting Policies , to the Condensed Consolidated Financial Statements.

Our significant accounting estimates are described in the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations in our IPO Prospectus and in our Form 8-K as filed with the Commission on August 8, 2023 .

Our significant accounting policies are described in Note 3, Summary of Significant Accounting Policies , to our historical consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023.

Our significant accounting estimates are described in the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements