Atmus Filtration Technologies Inc

Previous wording

The following is our discussion and analysis of changes in our financial condition and results of operations for thethree and six months ended June 30, 2024 compared to thethree and six months ended June 30, 2023.

Current wording

The following is our discussion and analysis of changes in our financial condition and results of operations for thethree and nine months ended September 30, 2024 compared to thethree and nine months ended September 30, 2023.

Previous wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995, including, without limitation, those that are based on current expectations, estimates and projections about the industries in which we operate and management’s views, plans, objectives, projections, beliefs and assumptions. 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 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. If the underlying assumptions prove inaccurate, or known or unknown risks or uncertainties materialize, our actual outcomes, results and financial condition may differ materially from what is expressed, implied or forecasted in such forward-looking statements. Risks and uncertainties include, but are not limited to:

Current wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995, including, without limitation, those that are based on current expectations, estimates and projections about the industries in which we operate and management’s views, plans, objectives, projections, beliefs and assumptions. 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 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. If the underlying assumptions prove inaccurate, or known or unknown risks or uncertainties materialize, our actual outcomes, results and financial condition may differ materially from what is expressed, implied or forecasted in such forward-looking statements. Future factors and uncertainties include, but are not limited to:

Previous wording

Our Registration Statement on Form S-1, as amended, filed on May 16, 2023, was declared effective on May 25, 2023, and our 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 Cummins’ exchange of 16,243,070 shares of our common stock, including the underwriters’ full exercise of their option to purchase

Current wording

Our Registration Statement on Form S-1, as amended, filed on May 16, 2023, was declared effective on May 25, 2023, and our 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 Cummins’ exchange of 16,243,070 shares of our common stock, including the underwriters’ full exercise of their option to purchase an additional 2,118,661 shares to cover over-allotments. None of the proceeds of the IPO were for the benefit of

Previous wording

2,118,661 shares to cover over-allotments. None of the proceeds of the IPO were for the benefit of Atmus. As of the closing of the IPO, Cummins owned approximately 80.5% of the outstanding shares of our common stock.

Current wording

Atmus. As of the closing of the IPO, Cummins owned approximately 80.5% of the outstanding shares of our common stock.

Previous wording

For the period subsequent to May 26, 2023, as a standalone public company, we present our financial statements on a consolidated basis. The condensed consolidated financial statements have been prepared in conformity with U.S. GAAP.

Current wording

For the period subsequent to our IPO on May 26, 2023, as a standalone public company, we present our financial statements on a consolidated basis. The condensed consolidated financial statements have been prepared in conformity with U.S. GAAP.

Previous wording

Aftermarket demand remained depressed in the first half of 2024 reflecting soft market conditions. It is uncertain if a recovery can be expected in the second half of 2024. First-fit demand remained stable during the first half of 2024. In the second half of 2024, we expect first-fit demand to soften across many of our key markets.

Current wording

Aftermarket demand remained depressed in the first nine months of 2024 reflecting soft market conditions. It is uncertain when a recovery can be expected. First-fit demand softened across many of our key markets during the third quarter of 2024 which we expect to continue into the fourth quarter of 2024.

Previous wording

While overall supply chain conditions continue to affect inventory and backlog levels, they have largely stabilized from a year ago with minimal disruptions now being experienced and backorders largely recovered in the first half of 2024. 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 continue to minimize any supply chain impacts to our business and to our customers.

Current wording

While overall supply chain conditions continue to affect inventory and backlog levels, they have largely stabilized from a year ago with minimal disruptions now being experienced and backorders largely recovered. 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 continue to minimize any supply chain impacts to our business and to our customers.

Previous wording

We continued to experience generally high inflation in the first half of 2024. Direct material cost pressures, driven largely by steel, resin and other petrochemical products, have stabilized, but we continue to see impacts from labor.

Current wording

We have seen inflationary impacts largely subside in the third quarter. Direct material cost pressures, driven largely by steel, resin and other petrochemical products, have stabilized, but we continue to see impacts from labor.

Previous wording

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

Current wording

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

Previous wording

Additionally, the appreciation of the U.S. dollar against foreign currencies had a slightly unfavorable impact on our condensed consolidated results of operations in the first half of 2024 due to translation impacts; there can be no assurances that this trend will continue throughout 2024.

Current wording

Additionally, the appreciation of the U.S. dollar against foreign currencies had a slightly unfavorable impact on our condensed consolidated results of operations in the first nine months of 2024 due to translation impacts; there can be no assurances that this trend will continue the remainder of 2024.

Previous wording

We have incurred, and expect to continue to incur, additional costs associated with becoming a standalone public company. During the three months ended June 30, 2024, we incurred approximately$3.8 million of one-time expenses including $(0.3) million within Cost of sales and $4.1 million within Selling, general and administrative expenses. During the six months ended June 30, 2024, we incurred approximately$9.8 million of one-time expenses including $3.0 million within Cost of sales and $6.8 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.

Current wording

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, 2024, we incurred approximately$8.9 million of one-time expenses including $5.0 million within Cost of sales and $3.9 million within Selling, general and administrative expenses. During the nine months ended September 30, 2024, we incurred approximately$18.7 million of one-time expenses including $8.0 million within Cost of sales and $10.7 million within Selling, general and administrative expenses. We expect to incur one-time expenses of approximately $20 million to $25 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 $13 million to $18 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, manufacturing 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 will 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.

Previous wording

Net sales were$432.6 million for the three months ended June 30, 2024, an increase of$19.0 million compared to$413.6 million for the three months ended June 30, 2023. The increase in Net sales was mainly due to higher volumes of approximately $11.8 million and $7.9 million of favorable pricing impacts, partially offset by the unfavorable impacts of currency of $0.6 million.

Current wording

Net sales were$403.7 million for the three months ended September 30, 2024, an increase of$7.5 million compared to$396.2 million for the three months ended September 30, 2023. The increase in Net sales was mainly due to higher volumes of approximately $7.5 million and $5.2 million of favorable pricing impacts, partially offset by the unfavorable impacts of currency of $5.2 million.

Previous wording

Gross margin was$131.9 million for the three months ended June 30, 2024, an increase of$17.5 million compared to$114.4 million for the three months ended June 30, 2023. The increase in Gross margin was mainly due to approximately $7.9 million of favorable pricing as described above, higher volumes of approximately $4.1 million, lower one-time separation costs of $2.8 million, $1.8 million of favorable commodities and freight costs and a $1.2 million decrease in manufacturing and other costs, partially offset by $0.3 million in unfavorable currency impacts. Gross margin as a percentage of Net sales was 30.5% for the three months ended June 30, 2024 and 27.7%for the three months ended June 30, 2023.

Current wording

Gross margin was$111.3 million for the three months ended September 30, 2024, an increase of$8.4 million compared to$102.9 million for the three months ended September 30, 2023. The increase in Gross margin was mainly due to approximately $5.2 million of favorable pricing impacts as described above, $4.1 million of favorable commodities costs and higher volumes of approximately $2.6 million, partially offset by $1.4 million in unfavorable currency impacts, higher one-time separation costs of $1.2 million and a $0.9 million increase in manufacturing and other costs. Gross margin as a percentage of Net sales was 27.6% for the three months ended September 30, 2024, an increase of 1.6 percentage points compared to 26.0%for the three months ended September 30, 2023. The increase in Gross margin as a percentage of Net sales was primarily due to the items noted above.

Previous wording

Selling, general and administrative expenses were$49.1 million for the three months ended June 30, 2024, an increase of$3.1 million compared to$46.0 million for the three months ended June 30, 2023. The increase was primarily driven by increased people-related and consulting expenses, partially offset by lower one-time separation costs of $2.0 million. Selling, general and administrative expenses as a percentage of Net sales were 11.3% for the three months ended June 30, 2024, an increase of 0.2 percentage points compared to 11.1% for the three months ended June 30, 2023. 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.

Current wording

Selling, general and administrative expenses were$46.4 million for the three months ended September 30, 2024, an increase of$5.1 million compared to$41.3 million for the three months ended September 30, 2023. The increase was primarily driven by increased people-related and consulting expenses and higher one-time separation costs of $0.4 million, partially offset by lower variable compensation costs. Selling, general and administrative expenses as a percentage of Net sales were 11.5% for the three months ended September 30, 2024, an increase of 1.1 percentage points compared to 10.4% for the three months ended September 30, 2023. 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.

Previous wording

Research, development and engineering expenses were$10.4 million for the three months ended June 30, 2024, a decrease of$1.9 million compared to$12.3 million for the three months ended June 30, 2023. The decrease was primarily due to standalone costs being favorable to previously allocated expenses under Cummins. Research, development and engineering expenses as a percentage of Net sales were 2.4% for the three months ended June 30, 2024, a decrease of 0.6 percentage points compared to 3.0% for the three months ended June 30, 2023. The decrease in Research, development and engineering expenses as a percentage of Net sales was mainly due to the item noted above.

Current wording

Research, development and engineering expenses were$9.7 million for the three months ended September 30, 2024, a decrease of$1.4 million compared to$11.1 million for the three months ended September 30, 2023. The decrease was primarily due to the timing of design projects and lower variable compensation costs. Research, development and engineering expenses as a percentage of Net sales were 2.4% for the three months ended September 30, 2024, a decrease of 0.4 percentage points compared to 2.8% for the three months ended September 30, 2023. The decrease in Research, development and engineering expenses as a percentage of Net sales was mainly due to the item noted above.

Previous wording

Our effective tax rate for the three months ended June 30, 2024 was 21.8%, a decrease of 2.7 percentage points compared to 24.5% for the three months ended June 30, 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.

Current wording

Our effective tax rate for the three months ended September 30, 2024 was 18.4%, a decrease of 4.7 percentage points compared to 23.1% for the three months ended September 30, 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.

Previous wording

Gross margin was$243.7 million for thesix months ended June 30, 2024, an increase of$19.5 million compared to$224.2 million for thesix months ended June 30, 2023. The increase in Gross margin was mainly due to approximately $16.7 million of favorable pricing as described above, higher volumes of approximately $3.3 million, $2.6 million of favorable commodities and freight costs and $0.5 million of lower one-time separation costs, partially offset by higher manufacturing and other costs of $3.4 million and $0.2 million in unfavorable currency impacts. Gross margin as a percentage of Net sales was 28.4% for thesix months ended June 30, 2024, an increase of 1.5 percentage points compared to 26.9% for thesix months ended June 30, 2023. The increase in Gross margin as a percentage of Net sales was primarily due to the items noted above.

Current wording

Gross margin was$355.0 million for thenine months ended September 30, 2024, an increase of$27.9 million compared to$327.1 million for thenine months ended September 30, 2023. The increase in Gross margin was mainly due to approximately $21.9 million of favorable pricing impacts as described above, $6.9 million of favorable commodities and freight costs and higher volumes of approximately $5.9 million, partially offset by higher manufacturing and other costs of $4.7 million, $1.6 million in unfavorable currency impacts and $0.5 million of higher one-time separation costs. Gross margin as a percentage of Net sales was 28.1% for thenine months ended September 30, 2024, an increase of 1.5 percentage points compared to 26.6% for thenine months ended September 30, 2023. The increase in Gross margin as a percentage of Net sales was primarily due to the items noted above.

Previous wording

Selling, general and administrative expenses were$92.4 million for thesix months ended June 30, 2024, an increase of $7.3 million compared to$85.1 million for thesix months ended June 30, 2023. The increase was primarily driven by increased people-related and consulting expenses, partially offset by lower one-time separation costs of $2.4 million. Selling, general and administrative expenses as a percentage of Net sales were 10.8% for thesix months ended June 30, 2024, an increase of 0.6 percentage points compared to 10.2% for thesix months ended June 30, 2023. 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.

Current wording

Selling, general and administrative expenses were$138.8 million for thenine months ended September 30, 2024, an increase of$12.4 million compared to$126.4 million for thenine months ended September 30, 2023. The increase was primarily driven by increased people-related and consulting expenses, partially offset by lower one-time separation costs of $2.0 million and lower variable compensation costs. Selling, general and administrative expenses as a percentage of Net sales were 11.0% for thenine months ended September 30, 2024, an increase of 0.7 percentage points compared to 10.3% for thenine months ended September 30, 2023. 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.

Previous wording

Research, development and engineering expenses were$20.5 million for thesix months ended June 30, 2024, a decrease of $1.6 million compared to$22.1 million for thesix months ended June 30, 2023. The decrease was primarily due to standalone costs being favorable to previously allocated expenses under Cummins. Research, development and engineering expenses as a percentage of Net sales were 2.4% for thesix months ended June 30, 2024, a decrease of 0.3 percentage points compared to 2.7% for thesix months ended June 30, 2023. The decrease in Research, development and engineering expenses as a percentage of Net sales was mainly due to the items noted above.

Current wording

Research, development and engineering expenses were$30.2 million for thenine months ended September 30, 2024, a decrease of $3.0 million compared to$33.2 million for thenine months ended September 30, 2023. The decrease was primarily due to standalone costs being favorable to previously allocated expenses under Cummins and lower variable compensation costs. Research, development and engineering expenses as a percentage of Net sales were 2.4% for thenine months ended September 30, 2024, a decrease of 0.3 percentage points compared to 2.7% for thenine months ended September 30, 2023. The decrease in Research, development and engineering expenses as a percentage of Net sales was mainly due to the items noted above.

Previous wording

Equity, royalty and interest income from investees was$18.6 million for thesix months ended June 30, 2024, an increase of$1.9 million compared to$16.7 million for thesix months ended June 30, 2023. The increase was primarily due to higher earnings of$1.9 million from our joint ventures in India and China.

Current wording

Equity, royalty and interest income from investees was$26.7 million for thenine months ended September 30, 2024, an increase of$1.9 million compared to$24.8 million for thenine months ended September 30, 2023. The increase was primarily due to higher earnings of$1.9 million from our joint ventures in India and China.

Previous wording

Interest expense was$10.5 million for the three months ended June 30, 2024, an increase of$6.3 million compared to$4.2 million for the three months ended June 30, 2023. The increase in Interest expense was primarily due to interest on our borrowings under the Credit Agreement beginning with our IPO in May 2023.

Current wording

Interest expense was$31.4 million for thenine months ended September 30, 2024, an increase of $16.2 million compared to$15.2 million for thenine months ended September 30, 2023. The increase in Interest expense was primarily due to the timing of borrowings under the Credit Agreement which began with our IPO in May 2023 compared to 2024 where we have had outstanding borrowings for the duration of the year.

Previous wording

Other income, net was$2.8 million for thesix months ended June 30, 2024, an increase of$1.7 million compared to$1.1 million for thesix months ended June 30, 2023. The increase in Other income, net was primarily due to higher interest income.

Current wording

Other income, net was$3.7 million for thenine months ended September 30, 2024, an increase of$1.5 million compared to$2.2 million for thenine months ended September 30, 2023. The increase in Other income, net was primarily due to higher interest income, as a result of higher cash balances.

Previous wording

Our effective tax rate for thesix months ended June 30, 2024 was 21.9%, a decrease of 2.2 percentage points compared to 24.1% for thesix months ended June 30, 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.

Current wording

Our effective tax rate for thenine months ended September 30, 2024 was 20.9%, a decrease of 2.9 percentage points compared to 23.8% for thenine months ended September 30, 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.

Previous wording

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 June 30, 2024, we have outstanding borrowings of $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 million as of June 30, 2024.

Current wording

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 September 30, 2024, we have outstanding borrowings of $596 million on the term loan and zero on the revolving credit facility. As a result, we had capacity under our revolving credit facility of $400 million as of September 30, 2024.

Previous wording

We believe that cash from operations and the facilities under our Credit Agreement will continue to provide sufficient liquidity for our working capital needs, planned capital expenditures and future payments of our contractual, tax and benefit plan obligations in both the short and long term. 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, financial condition, results of operations and cash flows.

Current wording

We believe that cash from operations and the facilities under our Credit Agreement will continue to provide sufficient liquidity for our working capital needs, planned capital expenditures and future payments of our contractual, tax and benefit plan obligations and payments for share repurchases and quarterly dividends in both the short and long term. 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, financial condition, results of operations and cash flows.

Previous wording

Our most significant ongoing short-term cash requirements relate primarily to funding operations (including expenditures for raw materials, labor, manufacturing and distribution, trade and promotions, advertising and marketing, tax liabilities, benefit plan obligations and lease expenses) as well as periodic expenditures for anticipated capital investments, interest payments on our long-term debt and supporting any future acquisitions.

Current wording

Our most significant ongoing short-term cash requirements relate primarily to funding operations (including expenditures for raw materials, labor, manufacturing and distribution, trade and promotions, advertising and marketing, tax liabilities, benefit plan obligations and lease expenses) as well as periodic expenditures for anticipated capital investments, shareholder returns (such as dividend payments and share repurchases), interest payments on our long-term debt and supporting any future acquisitions.

Previous wording

Net cash provided by operating activities was$14.7 million for thesix months ended June 30, 2024, a decrease of$74.3 million compared to Net cash provided by operating activities of$89.0 million for thesix months ended June 30, 2023. The decrease was driven primarily by higher working capital requirements of$68.0 million. During thesix months ended June 30, 2024, higher working capital requirements resulted in a cash outflow of$91.7 million compared to a cash outflow of$23.7 million for thesix months ended June 30, 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 $21.6 million, higher inventories and higher trade receivables.

Current wording

Net cash provided by operating activities was$85.4 million for thenine months ended September 30, 2024, a decrease of$61.9 million compared to Net cash provided by operating activities of$147.3 million for thenine months ended September 30, 2023. The decrease was driven primarily by higher working capital requirements of$83.9 million, partially offset by higher net income and higher other liabilities primarily related to leases of $7.4 million. During thenine months ended September 30, 2024, higher working capital requirements resulted in a cash outflow of$81.9 million compared to a cash inflow of$2.0 million for thenine months ended September 30, 2023, mainly due to lower other accrued expenses, driven by one-time working capital inefficiencies associated with the move from intercompany settlement terms with Cummins to standalone practices of $26.9 million and variable compensation, higher inventories, lower trade payables and higher trade receivables.

Previous wording

Net cash used in investing activities for thesix months ended June 30, 2024 and June 30, 2023 was primarily used for capital expenditures. Our capital expenditures were$22.2 million (of which approximately$7.3 million related to one-time separation costs) and$19.1 million for thesix months ended June 30, 2024 and June 30, 2023, respectively, corresponding to approximately 2.6% of Net sales for thesix months ended June 30, 2024 and approximately 2.3% of Net sales for thesix months ended June 30, 2023.

Current wording

Net cash used in investing activities for thenine months ended September 30, 2024 and September 30, 2023 was primarily used for capital expenditures. Our capital expenditures were$38.6 million (of which approximately$12.4 million related to One-time separation costs) and$29.6 million (of which approximately$4.8 million related to One-time separation costs) for thenine months ended September 30, 2024 and September 30, 2023, respectively, corresponding to approximately 3.1% of Net sales for thenine months ended September 30, 2024 and approximately 2.4% of Net sales for thenine months ended September 30, 2023.

Previous wording

Net cash provided by financing activities for thesix months ended June 30, 2024 waszero and Net cash provided by financing activities for thesix months ended June 30, 2023 was$69.7 million. Net cash provided by financing activities for thesix months ended June 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.

Current wording

Net cash used in financing activities for thenine months ended September 30, 2024 was$18.0 million and Net cash provided by financing activities for thenine months ended September 30, 2023 was$21.1 million. Net cash used in financing activities for thenine months ended September 30, 2024 consisted primarily of repurchases of common stock, dividends paid and payments made on our term loan. Net cash provided by financing activities for thenine 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 repayment on our revolving credit facility.

Previous wording

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 consolidated financial statements includedin our Annual Report on Form 10-K for the year ended December 31, 2023, which provides a summary of our future minimum lease payments.

Current wording

Our commitments consist of lease obligations for real estate and equipment. For more information regarding our lease obligations, see Note 9, Leases, to the consolidated financial statements includedin our Annual Report on Form 10-K for the year ended December 31, 2023, which provides a summary of our future minimum lease payments.

Previous wording

Our total debt was$600 million at both June 30, 2024 and December 31, 2023. At June 30, 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.

Current wording

Our total debt was$596 million at September 30, 2024 and $600 million at December 31, 2023. At September 30, 2024, the weighted-average term of our outstanding long-term debt was 2.9 years. Refer to Note 9, Debt and Borrowing Arrangements, to the Condensed Consolidated Financial Statements for more information on our debt and debt covenants.

Previous wording

•“Adjusted EBITDA” is defined as EBITDA after adding back certain one-time expenses, reflected in Cost of sales and Selling, general and administrative expenses, associated with becoming a standalone public company and “Adjusted EBITDA margin” is defined as Adjusted EBITDA as a percent of Net sales. We believe Adjusted EBITDA and Adjusted EBITDA margin are useful measures of our operating performance as it allows investors and debt holders to compare our performance on a consistent basis without regard to one-time costs attributable to our becoming a standalone public company.

Current wording

•“Adjusted EBITDA” is defined as EBITDA after adding back certain one-time expenses, reflected in Cost of sales and Selling, general and administrative expenses, associated with becoming a standalone public company and “Adjusted EBITDA margin” is defined as Adjusted EBITDA as a percent of Net sales. We believe Adjusted EBITDA and Adjusted EBITDA margin are useful measures of our operating performance as they allow investors and debt holders to compare our performance on a consistent basis without regard to one-time costs attributable to our becoming a standalone public company.

Previous wording

(a)Primarily comprised of one-time expenses related to Information Technology, warehousing and Human Resources separation costs.

Current wording

(a)Primarily comprised of one-time expenses related to Information Technology, warehousing, manufacturing and Human Resources separation costs.

Previous wording

(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 June 30, 2024 and 2023 were $0.8 million and $2.2 million, respectively, and for the six months ended June 30, 2024 and 2023 were $2.1 million and $3.1 million, respectively.

Current wording

(a)Primarily comprised of one-time expenses related to Information Technology, warehousing, manufacturing 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, 2024 and 2023 were $1.6 million and $1.7 million, respectively, and for the nine months ended September 30, 2024 and 2023 were $3.8 million and $4.8 million, respectively.

Previous wording

We prepare our condensed consolidated financial statements in conformity with U.S. GAAP. The preparation of our financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. 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 consolidated financial statementsin 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. There have been no material changes to our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

We prepare our condensed consolidated financial statements in conformity with U.S. GAAP. The preparation of our financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates and assumptions. Our critical accounting policies and estimates which affect our more significant estimates and assumptions used in preparing our consolidated financial statements are identified and described inour Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes to our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.