ATMU 10-K & 10-Q changes, risk factors and insider trading

•Atmus’ customersCustomers operating in cyclical industries and the current economic conditions in these industries.

•Potential failure of performance by Atmus or Cummins fail to perform under various transaction agreements that were executed as part of the Separation.IPO.

•TermsWe may have received better terms from unaffiliated third parties may have been better than whatthe Atmusterms we received in our agreements with Cummins;Cummins.

•Applicable laws and regulations, provisions of Atmus' amendedSecond Amended and restatedRestated certificateCertificate of incorporationIncorporation (the “Charter”) and Atmus' bylawsAmended and Restated Bylaws (the “Bylaws”) and certain contractual rights granted to Cummins that may discourage takeover attempts and business combinations that stockholdersshareholders might consider in their best interests.

•The designation of the Court of Chancery in the State of Delaware and the federal district courts for the District of Delaware as exclusive forums provision in Atmus’ amended and restated certificate of incorporation.Charter.

Cummins is our largest customer. For the year ended December 31, 2024,2025, net sales to CumminsCummins, our largest customer, accounted for approximately 17.6%18.8% of our net sales. Sales to Cummins joint ventures and to distributors that Cummins has a relationship with also account for a portion of our net sales. A portion of our net sales is dependent upon customer acceptance of, and demand for, Cummins’ engines or generators that use our filters. This customer concentration increases the risk of fluctuations in our operating results and our sensitivity to any material adverse developments experienced by Cummins. While our relationship with Cummins is defined by our first-fit supply agreement and aftermarket supply agreement, we may fail in the future to renew these contracts, and, moreover, even if renewed, Cummins’ purchasing power may give it the ability to make greater demands on us with regard to pricing and contractual terms in general. In addition, Cummins may procure supplemental supply of top volume aftermarket products from alternative suppliers for a limited time if we fail to meet certain delivery performance requirements or if we do not offer a product or similar product for sale.

Cummins historically did not seek competitive bids for filtration products. However, prior to the completion of the IPO, Cummins initiated a competitive process to source a selective group of future first-fit programs and associated aftermarket products from its filtration product suppliers, including us. Subsequently, we were successful in being awarded this business. In the future, we expect that Cummins will continue to seek competitive bids for new filtration productsproducts. and, whileWhile we will have a preferred supplier relationship with Cummins, we will have to successfully win bids through Cummins’ bidding process in order to maintain or grow our current level of sales to Cummins and cannot guarantee that Cummins will always select our products. The loss of, or any substantial reduction in sales to, Cummins would have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, our association with Cummins has contributed to the relationships we have with certain significant customers due to the relationship those customers had with Cummins. We may not be able to attract new customers of Cummins, or retain existing customers, without Cummins’ support.

We earn equity, royalty and interest income from our joint venture in China — Shanghai Fleetguard Filter Co. Ltd., where we indirectly hold 50% of the economic interest. We also earn equity, royalty and interest income from our joint ventures in India — Fleetguard Filter Private Ltd. (“FFPL”), where we directly hold 49.491% of the economic interest (and 50% of the voting interest), and Filtrum Fibretechnologies Pvt. Ltd., where we hold, directly or indirectly, 49.75% of the economic interests (25% directly and 24.75% indirectly through our proportionate ownership of FFPL’s 50% ownership interest). For the year ended December 31, 2024,2025, we recognized $34.3$33.8 million of equity, royalty and interest income from investees, compared to $34.3 million for the year ended December 31, 2024 and $33.6 million for the year ended December 31, 2023 and $28.0 million for the year ended December 31, 2022. Of these amounts, $21.8 million, $21.5 million and $17.1 million, respectively, were from our joint venture in India — FFPL.2023. Although a significant percentage of our net income is derived from these unconsolidated entities (which were approximately 18.5% for the year ended December 31, 2024, approximately 19.6% for the year ended December 31, 2023 and 16.4% for the year ended December 31, 2022, of which approximately 11.7%, approximately 12.6% and approximately 10.0% were from FFPL for the year ended December 31, 2024, 2023 and 2022, respectively),entities, we do not unilaterally control their management or their operations, which puts a substantial portion of our net income and cash flow through dividend payments at risk from the actions or inactions of these entities. A significant reduction in the level of contribution by these entities to our net income would likely have a material adverse effect on our business, financial condition, results of operations or cash flows.

The businesses and product lines in which we participate are very competitive and we risk losing business based on a wide range of factors, including price, quality, technological and engineering capability, manufacturing and distribution capability, innovation, performance, reliability and availability, geographic coverage, delivery and customer service. Our customers continue to seek technological innovation, productivity gains and competitive prices from us and our other suppliers. As a result of these and other factors, if we do not meet our customers’ expectations, we may not be able to compete effectively. The competitive environment in which we operate is also subject to change. There is no guarantee that we will be successful in implementing new product expansions, as we may fail to successfully complete product development or achieve the level of sales for these products that we expect. There may also be unexpected costs for such new product offerings, which would lower our margins.

Moreover,For on November 15, 2019,example, Cummins, our largest customer, has established a new set of goals for 2030 as part of its environmental sustainability strategy and since then has continued to implement such strategy to make progress towards its target of reaching carbon neutrality in its products and operations by 2050. Among Cummins’ new goals forto, 2030among isother reducingthings, reduce its Scope 3 absolute lifetime GHG emissions from newly sold products, and partneringpartner with its customers to reduce its indirect GHG emissions from its products. These goals may result in Cummins preferring products that reduce its direct and/or indirect GHG emissions. As a result of these risks, and as we have seen OEMs begin to invest heavily in these new technologies and launch new non internal combustion engines, we have been working, and continue to work, to expand our product offerings across industries and application types, including electric powertrain, hydrogen internal combustion engines and fuel cells, among others.types. However, there can be no assurance that we will be successful in doing so, or even if we are successful, that such new products will generate the same revenue or margin as internal combustion engine filtration products. Some of these technologies, such as battery electric vehicles, may not utilize as much filtration content. Additionally, there can be no assurance that our expectations regarding new and developing alternate fuel technologies, including with respect to which technologies will prevail and the development of filtration content for those technologies, will prove to be accurate. Such disruptive innovation could create new markets for others and displace existing companies and products. If we are unsuccessful in adapting our technologies or expanding into adjacent markets, these disruptions could result in significant negative consequences for us. Our future growth is dependent on properly addressing future customer and end-user needs and adapting our products in line with global technology trends.

WeOur relyability onto attract and retain qualified personnel is critical to our executive leadership team and other key personnel as a critical part of our human capital resources.success.

WeOur dependsuccess depends on the skills, institutional knowledge, working relationships and continued services and contributions of keyqualified personnel, including our executive leadership team,team. as critical parts of our human capital resources. In addition, ourOur ability to achieve our operating and strategic goals depends on our ability to identify, hire, train and retain qualified individuals.individuals and successfully execute management transitions at leadership levels of the Company. We compete with other companies, both within and outside of our industry, for talented personnel and we may lose key personnel or fail to attract, train and retain other talented personnel. Any such loss or failure could have material adverse effects on our business, financial condition, results of operations or cash flows.

In particular, ourOur continued success will depend in part on our ability to retain the talents and dedication of key employees. As of December 31, 2024, we employed approximately 350 total technical employees. As of December 31, 2024,2025, 47%we employed approximately 355 total technical employees and 51% of our technical employees were employed outside the United States, in India, China and France, many of whom we consider key employees.France. If enough keytechnical employees terminate their employment or become ill or otherwise cannot work, our business activities may be adversely affected and our management team’s attention may be diverted. In addition, we may not be able to locate suitable replacements for any keytechnical employees who leave.

We are actively evaluating potential strategic acquisitions or investment opportunities and consider divestitures of non-strategic business lines, and thewe filtration business hashave historically pursued and undertaken certain of those opportunities. For example,instance, in 2026 we closed the acquisition of a business in the industrial filtration market and in 1987 and 1994, our filtration businesswe established our joint ventures in India and China, respectively, for our entry into those two markets, and has continued to explore additional joint ventures since then.markets. Acquisitions, joint ventures and strategic investments could negatively impact our profitability and financial condition due to operating and integration inefficiencies, the incurrence of debt, contingent liabilities and amortization of expenses related to intangible assets. There are also a number of other risks inherent to acquisitions, including the potential loss of key customers and suppliers of the acquired businesses or adverse effects on relationships with existing customers and suppliers; the inability to identify all issues or potential liabilities during due diligence; difficulties or delays in integrating and assimilating the acquired operations and products or in realizing projected efficiencies, growth prospects, cost savings and synergies; the loss of key employees; the potential increase in exposure to more onerous or costly legal and regulatory requirements and the diversion of management’s time and attention away from other business matters, which may prevent us from realizing the anticipated return on our investment. Additionally, we may require substantial additional capital, which could be raised pursuant to debt or equity financings, to pursue acquisitions and other business ventures, if any, in the future. We cannot assure you that we will be able to raise such additional capital on commercially reasonable terms, or at all. Divestitures may involve significant challenges and risks, such as difficulty separating out portions of our business or the potential loss of revenue or negative impacts on margins. Divestitures may also result in ongoing financial or legal proceedings, such as retained liabilities, which could have an adverse impact on our business, financial condition, results of operations and cash flows. Further, during the pendency of a proposed transaction, we may be subject to risks related to a decline in the business, loss of employees, customers or suppliers and the risk that the transaction may not close, any of which could adversely impact our business. Additionally, because acquisitions, divestitures, joint ventures, strategic partnerships and other similar arrangements are inherently risky, any such transaction may not be successful and may, in some cases, harm our business, financial condition, results of operations or cash flows. Failure to complete any such planned transaction may adversely impact our business, financial condition, results of operations or cash flows.

Our long-term performance targets assume certain ongoing productivity improvements as a key component of our business strategy to, among other things, contain operating expenses, increase operating efficiencies and align manufacturing capacity to demand. We may not be able to realize the expected benefits and cost savings if we do not successfully execute these plans while continuing to invest in business growth. Factors that can cause us to not realize expected benefits or execute our plans for productivity improvements include, but are not limited to, unanticipated costs or complications resulting from the Separation,to unforeseen complications arising from leveraging existing filtration technology to new industries, global commodities pricing and availability, manufacturing costs and delays, inflationary pressures and labor availability. If any of these, or other, difficulties are encountered, expected benefits of such cost savings may not otherwise be realized, which could adversely impact our business, financial condition, results of operations or cash flows.

As of December 31, 2024,2025, we employed approximately 4,500 persons worldwide.worldwide As of December 31, 2024,and approximately 53% of our employees worldwide were represented by various unions under collective bargaining agreements. AmongAgreements these collective bargaining agreements, those for thecovering employees in Mexico, Brazil and France are renewed annually afterfollowing compensation negotiations, whilewhich thewere recently completed for Mexico and Brazil and will begin in February 2026 for Brazil, with terms expiring between December 2026 and February 2027. The collective bargaining agreement for theour Cookeville, Tennessee plant typicallywas has a four- to five-year term. Collective bargaining for Brazil Annual Profit Sharing will take place on February 19, 2025. Annual term collective bargaining for Mexico and France were recently successfully completed. These collective bargaining agreements have terms that will expire between December 2025 and February 2026. Contract negotiations at the Cookeville, Tennessee plant took placerenegotiated in February of 2024 resultingand will remain in aeffect new four year contract that will expire at the end of its four year term onthrough February 29, 2028. While we have no reason to believe that we will be materially impacted by work stoppages or other labor matters, we have experienced such issues and there can be no assurance that future issues with our labor unions will be resolved favorably or that we will not encounter future strikes, work stoppages, or other types of conflicts with labor unions or our employees. For example, during periodic collective bargaining in 2020, the United Auto Workers union representing manufacturing employees at the Cookeville, Tennessee site conducted a strike for six weeks after failing to accept modified terms and conditions offered. Any of these consequences may have an adverse effect on us or may limit our flexibility in dealing with our workforce. In addition, many of our customers and suppliers have unionized work forces. Work stoppages or slowdowns experienced by us, our customers or suppliers could result in slowdowns or closures that would have a material adverse effect on our business, financial condition, results of operations or cash flows.

Our business establishes prices with our customers in accordance with contractual timeframes; however, the timing of material and commodity market price increases may prevent us from passing these additional costs on to our customers through timely pricing actions, which may lead to an adverse impact on our profit margins. Additionally, higher material and commodity costs around the world may offset our efforts to reduce our cost structure. EconomiesIn recent years, economies around the world have also generally seen significant inflationary pressurespressures. since 2021. AlthoughWhile those inflationary pressures beganhave to abate towards the end of 2023 and stabilize by the end of 2024,stabilized, we are still subject to the risk of material and commodity cost increases and there can be no assurances that such cost increases do not return in 2025 and beyond.return. As of the date of this Annual Report on Form 10-K, we have not entered into any hedging arrangements or agreements with respect to the purchase of the commodities used in our products. While we customarily have contractual pricing adjustment mechanisms with our first-fit customers that attempt to address some of these risks (notably with respect to steel and resins), there can be no assurance that material and commodity price fluctuations will not adversely affect our business, financial condition, results of operations or cash flows. In addition, while the use of contractual pricing adjustments may provide us with some protection from adverse fluctuations in commodity prices, we potentially forego the benefits that might result from favorable fluctuations in costs. As a result, higher material and commodity costs, as well as hedging these commodity costs during periods of decreasing prices, could result in declining margins.

In recent years, we have experienced supply chain disruptions, including longer lead times for materials used in manufacturing our products and increased commodity prices and related challenges throughout the supply chain. For example, in the wake of the COVID-19 pandemic, shortages in steel, resin, other petrochemical products and electronic components, as well as shortages in labor at our suppliers, resulted in reduced capacity at our North America plants in 2021 and 2022. While conditions moderated in 2023, many of the underlying risks remain. We source a significant number of parts and raw materials critical to our business operations. Any delay in our suppliers’ deliveries may adversely affect our operations at multiple manufacturing locations, forcing us to seek alternative supply sources to avoid serious disruptions. Delays may be caused by factors affecting our suppliers (including pandemics, capacity constraints, port congestion, labor disputes, economic downturns, availability of credit, impaired financial condition and geopolitical turmoil), suppliers’ allocations to other purchasers, weather emergencies, natural disasters, acts of government or acts of war or terrorism. In particular, if there are extended periods of commercial, transportation or other restrictions we could incur global supply disruptions. Any extended delay in receiving critical supplies could impair our ability to deliver products to our customers and have a material adverse effect on our business, financial condition, results of operations or cash flows.

Our ability to fulfill customer orders is dependent on our manufacturing and distribution operations. Although we forecast demand, additional plant capacity takes significant time to bring online and thus changes in demand could result in longer lead times. We cannot guarantee that we will be able to adjust manufacturing capacity, in the short-term, to meet higher customer demand. For example, the COVID-19 pandemic caused significant supply chain disruptions. These disruptions impacted the availability of raw materials, including steel, resin, other petrochemical products and electronic components, and freight availability and reliability, which resulted in increased lead times. Efficient operations require streamlining processes, which we may not be capable of achieving. Unacceptable levels of service for key customers may result if we are not able to fulfill orders on a timely basis or if product qualityquality, or warrantywarranty, or safety issues result from compromised production. Due to the complexity of our manufacturing operations, we may be unable to timely respond to fluctuations in demand, which could adversely impact our business, financial condition, results of operations or cash flows.

Competitors and others may also initiate litigation or other proceedings to challenge the scope, validity or enforceability of our intellectual property or allege that we infringed, misappropriated or otherwise violated their intellectual property. Any litigation or proceedings to defend us against allegations of infringement, misappropriation, or other violations of intellectual property rights, regardless of merit, could be costly, divert attention of management and may not ultimately be resolved in our favor. If we are unable to successfully defend against claims that we have infringed the intellectual property rights of others, we may be prevented from using certain intellectual property or offering certain products, or may be liable for substantial damages, which in turn could materially adversely affect our business, financial condition, results of operations or cash flows.damages. We may also be required to develop an alternative, non-infringing product that could be costly, time-consuming or impossible, or seek a license from a third party, which may not be available on terms that are favorable to us, or at all. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations or cash flows.

There could be an occurrence of one or more unexpected events, including a terrorist attack, war or civil unrest, a weather event, an earthquake, a pandemic, cyber-attack or other catastrophe in countries in which we operate or in which our suppliers are located.operate.

Such an event could result in physical damage to and complete or partial closure of one or more of our headquarters, manufacturing facilities or distribution centers, temporaryas orwell long-termas disruptiondisruptions in the supply of component products from some local and international suppliers, disruption into the transport of our products to customers and disruptionto ofour information systems. The insurance coverage we have entered into,maintain, may not provide protection for all costs that may arise from any such event. Any disruption in our operations could have an adverse impact on our ability to meet our customer needs or may require us to incur additional expenses in order to produce sufficient inventory. Certain unexpected events could adversely impact our business, financial condition, results of operations or cash flows.

We manufacture, sell and service products globally and rely upon a global supply chain to deliver the raw materials, components, systems and parts that we need to manufacture and service our products. Changes in laws, regulations and government policies on foreign trade and investment, including as a result of the recent changechanges in U.S. presidential administration, can affect the demand for our products and services, causing customers and end-users to shift preferences toward domestically manufactured or branded products and impact the competitive position of our products or prevent us from being able to sell products in certain countries. Our business benefits from free trade agreements, such as the United States-Mexico-Canada Agreement, the U.S. trade relationships with China, Brazil and France and the Comprehensive Economic Partnership Agreement between India and South Korea. Efforts to withdraw from, or substantially modify such agreements or arrangements, in addition to the implementation of more restrictive trade policies, such as more detailed inspections, higher tariffs (including, but not limited to, additional tariffs on the import of steel or aluminum and imposition of new or retaliatory tariffs against certain countries, including based on developments in U.S.-China, U.S.-Mexico, U.S.-Canada, U.S.-Russia and EU-Russia relations), import or export licensing requirements, and exchange controls or new barriers to entry, could limit our ability to capitalize on current and future growth opportunities in international markets, impair our ability to ship media from our plant in South Korea directly to our joint venture partners, impair our ability to expand the business by offering new technologies, products, and services, and could adversely impact our production costs, customer and end-user demand and our relationships with customers and suppliers. Any of these consequences could have a material adverse effect on our business, financial condition, results of operations or cash flows.

Due to the international scope of our operations, we are subject to a complex system of commercial regulations around the world. Recent years have seen an increase in the development and enforcement of laws regarding trade compliance, as well as new regulatory requirements regarding privacy and data protection, such as the European Union General Data Protection Regulation. For example, in January 2024, the Tax Administration Service in Mexico amended the customs requirements for transactions between a maquiladora in Mexico shipping its manufactured goods to a domestic Mexican company resulting in increased costs for our Mexican operations. Our foreign subsidiaries and affiliates are governed by laws, rules and business practices that differ from those of the U.S. The activities of these entities may not comply with U.S. laws or business practices or our Code of Business Conduct. Violations of these laws may result in severe criminal or civil sanctions, could disrupt our business and result in an adverse effect on our reputation, business, financial condition, results of operations or cash flows. We cannot predict the nature, scope or effect of future regulatory requirementsrequirements, or the ability to obtain any government certification or permit pursuant to any regulatory requirement, to which our operations might be subject or the manner in which existing laws might be administered or interpreted.

Concerns regarding climate change may lead to additional international, national, regional and local legislative and regulatory responses. For example, proposed SEC rules to enhance disclosures regarding the effects of climate change could increase our reporting and compliance costs, and in October 2023, the California Governor signed the Climate-Related Financial Risk and the Climate Corporate Data Accountability Act into law, which impose significant and mandatory climate-related reporting requirements for large companies doing business in the state. Similarly, enhanced mandatory climate reporting requirements came into force in 2019 and again in 2022 in the United Kingdom and broader sustainability reporting requirements (including climate) will apply to certain European Union entities on a staged basis from 2024 and to their non-European Union parent undertakings from 2028. We believe these reporting requirements could increase our reporting and compliance costs. Various stakeholders, including legislators and regulators, shareholders and non-governmental organizations, are continuing to look for ways to reduce GHG emissions, including limits on GHG emissions, bans on future sales of gas-powered vehicles, and measures intended to incentivize GHG reduction such as fuel taxes, carbon taxes and subsidies. As the impact of any future GHG legislative or regulatory requirements on our global businesses and products is dependent on the timing, scope and design of the mandates or standards, we are currently unable to predict the potential impact. Moreover, as discussed in “— Risks Related to our Business Operations — Evolving customer needs and developing technologies may threaten our existing business and growth”, certain consequences of climate change, such as shifts in customer and end-user preferences and the pace and extent to which customers and end-users adopt alternative power, including electrified vehicles, could impact demand for our products and could have a material adverse effect on our business, financial condition, results of operations or cash flows.

In order to support the new business processes under the terms of our transition services agreement with Cummins, we have made significant configuration, process and data changes within many of the information technology systems that we use. If our information technology systems and processes arewere not sufficient to support our business and financial reporting functions, or if we failfailed to properly implement our new business processes, manufacturing, shipping, invoicing or other critical operating activities may be interrupted or negatively affected, and our financial reporting may be delayed or inaccurate and, as a result, our business, financial condition, results of operations or cash flows may be materially adversely affected. Even if we arewere able to successfully configure and change our systems, all technology systems, even with implementation of security measures, are vulnerable to disability, failures or unauthorized access. If our information technology systems were to fail or be breached, this could materially adversely affect our reputation and our ability to perform critical business functions, and sensitive and confidential data could be compromised.

Increased tariffs or the imposition of other barriers to international trade could impact the cost of our products, demand for our products and our competitive position.

Changes to trade protection measures and import or export licensing requirements; the imposition of new, additional, or retaliatory tariffs, quotas, exchange controls, sanctions, trade barriers or other restrictions (including recent U.S. tariffs imposed or threatened to be imposed by the current U.S presidential administration on China, Canada and Mexico and other countries and any retaliatory actions taken by such countries); and the withdrawal from or modification of trade agreements or the negotiation of new trade agreements, in countries where we operate, particularly in Mexico, Canada, China, and India, could impact the cost of our products, demand for our products and the competitive position of our products. Our largest global manufacturing facility is in San Luis Potosi, Mexico, and it supplies products to our U.S. market.and global markets. There can be no assurance that the consequences of these actions, given our global operations, will not have a material adverse effect upon our business, financial condition, results of operations or cash flows.

•public health crises, including the spread of a contagious disease, such as COVID-19disease and other catastrophic events;

We, or Cummins, may fail to perform under various transaction agreements that were executed as part of the IPO or we may fail to have necessary systems and services in place when certain of the transaction agreements expire.IPO.

The separation agreement and other agreements entered intoexecuted in connection with the IPO determined the allocation of assets and liabilities between Cummins and us following the IPO for those respective areas and include certain indemnifications related to liabilities and obligations. The transition services agreement provides for the performance of certain services by Cummins and us for the benefit of the other for a period of time after the IPO. We will rely on Cummins to satisfy Cummins’ performance and payment obligations under these agreements. If Cummins is unable to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties or losses.losses Ifthat we do notcould have inan placeadverse oureffect own systems and services, or if we do not have agreements with other providers of these services once certain transaction agreements expire, we may not be able to operate our businesses effectively andon our business, financial condition, results of operations or cash flows could be materially adversely affected. We are in the process of creating our own, or engaging third parties to provide, systems and services to replace many of the systems and services that Cummins currently provides to us. However, we may not be successful in implementing these systems and services or in transitioning data from Cummins’ systems to us. In addition, we have historically received certain informal support from Cummins, including customer relationship management, marketing, communications, technical support, market intelligence and market data, which may not be addressed in our transition services agreement. The level of this informal support may be eliminated following the Separation.flows.

The discussion and analysis presented below provides information which management believes is relevant to an assessment and understanding of Atmus Filtration Technologies Inc. (the “Company,” “Atmus,” “we,” “our” and “us”) consolidated results of operations and financial condition. The discussion should be read in conjunction with Atmus’ consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described under the heading “Risk Factors.” Actual results may differ materially from those contained in any forward-looking statements. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “Atmus” is intended to mean the business and operations of Atmus Filtration Technologies Inc. and its consolidated subsidiaries.

The following is the discussion and analysis of changes in the financial condition and results of operations for the year ended December 31, 2025 compared to the year ended December 31, 2024. A discussion of the changes in the financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 can be found in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the year ended December 31, 20232024, comparedwhich towas filed with the yearSEC endedon DecemberFebruary 31,21, 2022.2025.

•Potential failure of performance by Atmus or Cummins under transaction agreements executed as part of the SeparationIPO;

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

While overallOverall supply chain conditions continue to affect inventory and backlog levels, they haveremained largely stabilizedstable during 2025 with minimal disruptions now being experiencedexperienced. Logistics costs increased during 2025, primarily due to the transition to a standalone distribution network as part of the Separation and backordersthe largelyimpact recovered.of tariffs. Our management team continues to monitor and evaluate all of these factors and the related impacts of our business and operations, and we are diligently working to continue to minimize any supply chain impacts to our business and to our customers.

We have incurred, and expect to continue to incur,incurred additional costs associated with becoming a standalone public company. During the year ended December 31, 2024,2025, we incurred approximately $25.2$15.5 million related to one-time separation costs including $14.5$11.2 million within Cost of Sales and $4.3 million within Selling, general and administrative expenses and $10.7 million within Cost of sales. We expect to incur one-time expenses of approximately $5 million to $10 million in 2025 in connection with becoming a standalone public company.expenses. In addition, we expecthave to incurincurred capital expenditures in connection with the Separation of approximately $5$9.5 million to $10 million in 2025.million. 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. The actualone-time amountcosts incurred during the year ended December 31, 2025, were primarily associated with establishing our own distribution network and our technology transformation and modernization project. The transition services agreement under which Cummins had continued to provide certain services related primarily to administrative services ended in September 2025. With the conclusion of thethis agreement, we do not expect to incur any additional one-time expenses andor capital expenditures wein willfuture incurperiods asin connection with becoming a stand-alonestandalone 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.company.

Net sales were $1,764.3 million for the year ended December 31, 2025, an increase of $94.7 million compared to $1,669.6 million for the year ended December 31, 2024, an increase of $41.5 million compared to $1,628.1 million for the year ended December 31, 2023.2024. The increase in Net sales was mainly due to $26.3higher volumes of $51.9 million ofand favorable pricing impacts and higher volumes of $22.3$50.0 million, partially offset by the unfavorable impacts of currency of $7.1$7.3 million. The favorable impact from pricing is primarily driven by normal pricing initiatives and select increases as a result of tariffs.

Gross margin was $498.3 million for the year ended December 31, 2025, an increase of $36.2 million compared to $462.1 million for the year ended December 31, 2024, an increase of $29.4 million compared to $432.7 million for the year ended December 31, 2023.2024. The increase in Gross margin was mainly due to approximately $26.3 million of favorable pricing impactsof $50.0 million as described above, higherfavorable volumes of approximately $7.8$21.0 million, favorablea variable compensation of $7.2$7.7 million anddecrease favorable materials costs of $7.0 million, partially offset by higherin manufacturing and other costs ofand $9.0a million,$0.9 highermillion reduction in one-time restructuring and separation costs, partially offset by unfavorable logistics and duties costs of $36.2 million, $5.8 million,million in unfavorable currency impacts ofand $2.7a $1.4 million andincrease higherin one-timewarranty restructuring costs of $1.4 million.costs. Gross margin as a percentage of Net sales was 27.7%,28.2%, an increase of 1.10.5 percentage points compared to 26.6%.27.7%. The increase in Gross margin as a percentage of Net sales was primarily due to the items noted above.

Selling, general and administrative expenses were $184.3 million for the year ended December 31, 2025, a decrease of $3.3 million compared to $187.6 million for the year ended December 31, 2024, an increase of $12.9 million compared to $174.7 million for the year ended December 31, 2023.2024. The increasedecrease was primarily driven by lower one-time separation and restructuring costs of $11.6 million, partially offset by increased people-related and consulting expenses,expenses includingand one-timean restructuringincrease costs,in partiallyamortization offsetof byinternal-use lower one-time separation costs.software. Selling, general and administrative expenses as a percentage of Net sales were 10.4% for the year ended December 31, 2025, a decrease of 0.8 percentage points compared to 11.2% for the year ended December 31, 2024, an increase of 0.5 percentage points compared to 10.7% for the year ended December 31, 2023.2024. The increasedecrease 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.above.

Equity, royalty and interest income from investees was $34.3generally millionconsistent for the year ended December 31, 2024, an increase of $0.7 million2025 compared to $33.6 million for the year ended December 31, 2023. The increase was primarily due to higher earnings of $0.5 million from our joint ventures in India and China.2024.

Our effective tax rate for the year ended December 31, 20242025 was 21.0%,22.1%, aan decreaseincrease of 3.31.1 percentage points compared to 24.3%21.0% for the year ended December 31, 2023.2024. The decreaseincrease in the effective tax rate was driven by aunfavorable favorable changechanges in the mix of earnings amongand lower U.S. credits and incentives following cash tax jurisdictionsplanning andaround discreterecent U.S. tax itemslaw relatedchanges, topartially USoffset andby a valuation allowance release on foreign deferred tax return filings.assets. 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.

Since February 2025, the U.S. presidential administration has announced new and substantial tariff increases on imports to the United States from China, Mexico, Canada and India. Since then, various modifications, delays, and sector‑specific measures have been implemented, with further changes anticipated. These actions have prompted a variety of tariff responses by affected countries, which have the potential to affect our business. Several tariff announcements have been followed by temporary pauses and limited exemptions, such as the temporary exemption for goods entering the United States as qualifying goods under the United States‑Mexico‑Canada Agreement (“USMCA”), for which the majority of our products from Mexico for the U.S. market are certified compliant, or expected to be certified compliant. These exemptions may be reduced or eliminated in the future. Most recently, onOn February 20, 2026, the U.S. Supreme Court held that tariffs imposed pursuant to the International Emergency Economic Powers Act (“IEEPA”) exceeded the statutory authority granted under that law but did not address potential refunds. On March 4, 2026, the Court of International Trade ordered U.S. Customs and Border Protection to begin the refund process for all importers who were subject to IEEPA duties. The situation continues to evolve, and therefore the ultimate availability, timing and amount of any potential refunds of these tariffs is highly uncertain.

The following is our discussion and analysis of changes in our financial condition and results of operations for the three and six months ended MarchJune 31,30, 20262026, compared to the three and six months ended MarchJune 31,30, 2025.

We are one of the global leaders of filtration products and solutions. Our reportable operating segments consist of Power Solutions and Industrial Solutions. The Power Solutions Segment consists of products for on-highway commercial vehicles and off-highway agriculture, construction, mining vehicles and equipment. 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 14% of our net sales in 2025 were generated through first-fit sales to OEMs, where our products are installed as components for new vehicles and equipment. We estimate that approximately 86% of our net sales in 2025 were generated in the aftermarket, where our products are installed as replacement or repair parts, leading to a strong recurring revenue base. The Industrial Solutions segment was created with the acquisition of Koch Filter on January 7, 2026. The Industrial Solutions segment addresses commercial and industrial HVAC applications, and high-growth end markets including commercial and industrial HVAC, data centers andcenters, power generation and healthcare environments. Products include a broad portfolio of air filtration solutions. 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.

During 2025, the United States announced changes to U.S. trade policy, including increasing tariffs on imports, in some cases significantly, and potentially negotiating or terminating existing trade agreements. The United States also indicated that tariffs may change and that additional measures are under consideration to be introduced. These tariff and tariff-related measures include potential impacts to the industry in which we operate and the commodities to which our products are exposed. These actions, along with corresponding retaliatory tariffs imposed by other countries on U.S. exports, have led to significant volatility and uncertainty in global demand in both aftermarket and first-fit. In response to these developments, we mitigated the cost impact on our business by employing anythe exemptions for which we were eligible, such as compliance under the United States-Mexico-Canada Agreement (“USMCA”), adjusting our supply chain, and implementing select price adjustments. In February of 2026, the U.S. Supreme Court held that tariffs imposed pursuant to the International Emergency Economic Powers Act (“IEEPA”) exceeded the statutory authority granted under that law. The ruling, however, did not address potentialthe timing, availability or extent of any refunds of anypreviously previouspaid tariffs. On March 4, 2026, the Court of International Trade ordered U.S. Customs and Border Protection to begin the refund process for all importers who were subject to IEEPA duties.

Aftermarket demand remained soft in the first threesix months of 2026. We continue to be in a period of slow growth in global aftermarkets, and this trend is expected to continue for the remainder of 2026. First-fit demand continues to reflect depressed market conditions with recovery expected in the latter half of 2026.

We have experienced general variability in direct material costs through the first threesix months of 2026.2026, and various key commodities have been exposed to inflationary pressures. While the costs of our principal materials fluctuate, generally we believe there will continue to be an adequate supply of the materials we use and that they will broadly remain available.

Logistics and warehousing costs increased during the first threesix months of 2026, primarily due to macro-economic conditions and the transition to a standalone distribution network as part of our separation from Cummins Inc. (“Cummins”) into a standalone publicly traded company (the “Separation”). Our management team continues to monitor and evaluate all of the factors affecting our supply chain condition and the related impacts on our business and operations, and we continue to minimize any supply chain impacts to our business and to our customers.

Additionally, the appreciation of the U.S. dollar against certain foreign currencies had a favorable impact on our condensed consolidated results of operations in the first threesix months of 2026 due to translation impacts. We remain in a volatile currency environment and as such, there can be no assurances that this trend will continue for the remainder of 2026.

Three Months Ended MarchJune 31,30, 2026 Compared to the Three Months Ended MarchJune 31,30, 2025

Net sales were $477.5$527.9 million for the three months ended MarchJune 31,30, 2026, an increase of $61.0$74.4 million compared to $416.5$453.5 million for the three months ended MarchJune 31,30, 2025. The increase in Net sales was mainly due to incremental sales of $38.4$42.4 million recorded by Koch Filter, acquired in January 2026, favorable pricing of $12.9 million, favorable impacts of currency of $16.3$10.8 million and favorable pricingvolumes of $8.3 million, partially offset by lower volumes of $2.0 million. The favorable impact from pricing is primarily driven by normal pricing initiatives and select increasesadjustments as a result of tariffs.

Gross margin was $136.8$153.9 million for the three months ended MarchJune 31,30, 2026, an increase of $26.3$22.9 million compared to $110.5$131.0 million for the three months ended MarchJune 31,30, 2025. The increase in Gross margin was mainly due to favorable pricing of $12.9 million as described above, incremental margin of $10.9$10.7 million recorded by Koch Filter, favorable pricingimpacts of $8.3currency millionof as$3.6 describedmillion, above,favorable volumes of $2.9 million, and a $6.3$1.6 million decrease in one-time costs, favorable impacts of currency of $5.6 million and a $3.0 million decrease in warranty costs, partially offset by unfavorable logistics and duties costs of $6.2 million, unfavorable manufacturing and other costs of $0.8$5.0 million, unfavorable material and freight costs of $3.2 million and lower volumes of $0.7 million. Gross margin as a percentage of Net sales was 28.6% for the three months ended March 31, 2026, an increase of 2.1 percentage points compared to 26.5% for the three months ended March 31, 2025. The increase in Grosswarranty margin as a percentagecosts of Net$1.0 sales was primarily driven by the items noted above.million.

Selling, general and administrative expenses were $51.0$51.7 million for the three months ended MarchJune 31,30, 2026, an increase of $5.1$5.6 million compared to $45.9$46.1 million for the three months ended MarchJune 31,30, 2025. The increase was primarily driven by higher people-related and consulting expenses and an increase in amortization of internal-use software. Selling, general and administrative expenses as a percentage of Net sales were 10.7%9.8% for the three months ended MarchJune 31,30, 2026, a decrease of 0.30.4 percentage points compared to 11.0%10.2% for the three months ended MarchJune 31,30, 2025. The decrease in Selling, general and administrative expenses as a percentage of Net sales was primarily driven by the items noted above increasing at a lower rate in relation to the changeincrease in Net sales.

Research, development and engineering expenses were $8.1$9.8 million for the three months ended MarchJune 31,30, 2026, a decrease of $1.0$0.9 million compared to $9.1$10.7 million for the three months ended MarchJune 31,30, 2025. The decrease was primarily due to timing of engineering projects. Research, development and engineering expenses as a percentage of Net sales were 1.7%1.9% for the three months ended MarchJune 31,30, 2026 a decrease of 0.5 percentage points compared to 2.2%2.4% for the three months ended MarchJune 31,30, 2025. The decrease in Research, development and engineering expenses as a percentage of Net Sales was mainly due to the items noted above.

Intangible asset amortization was $2.9 million for the three months ended MarchJune 31,30, 2026, an increase of $2.9 million compared to $0 for the three months ended MarchJune 31,30, 2025. The increase was due to the $2.9 million in amortization of intangible assets acquired in the Koch Filter acquisition.

Other operating expense (income), net was $6.1$6.0 million for the threesix months ended MarchJune 31,30, 2026, an increase of $6.3$6.2 million compared to $(0.2) million for the threesix months ended MarchJune 31,30, 2025. The increase was primarily due to transaction costs of $6.3 million associated with the acquisition of Koch Filter.

Interest expense was $14.1$27.8 million for the threesix months ended MarchJune 31,30, 2026, an increase of $5.7$10.9 million compared to $8.4$16.9 million for the threesix months ended MarchJune 31,30, 2025. The increase was primarily driven by the increased outstanding borrowings on our credit facility as additional borrowings were made duringin theJanuary quarter2026 due tofor the Koch Filter acquisition.

Other (expense) income, net was $(1.01.7) million for the threesix months ended MarchJune 31,30, 2026, a decrease of $1.3$5.5 million compared to $0.3$3.8 million for the threesix months ended MarchJune 31,30, 2025. The decrease in Other (expense) income, net was due to gains recognized in 2025 that did not recur and an increase in the net loss on foreign exchange rate hedging which offset interest income that remained stable between the comparable periods.hedging.

Our effective tax rate for the threesix months ended MarchJune 31,30, 2026 was 20.9%,22.0%, aan decreaseincrease of 0.4 percentage points compared to 21.3%21.6% for the threesix months ended MarchJune 31,30, 2025. The varianceincrease in the effective tax rate is primarily attributable to higher excessdiscrete tax benefitsitems on stock compensation due to stock price appreciation and an increase in U.S. tax deductions andfrom foreign tax creditsfilings, duewhich to the adoption of the One Big Beautiful Bill Act (“OBBBA”),is partially offset by unfavorablea favorable change in the mix of earnings among tax jurisdictions. 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.

On January 7, 2026, we entered into an Amended and Restated Credit Agreement (the “2026 Credit Agreement”). Our facilities under the 2026 Credit Agreement provide for $1.5 billion in total availability, which includes a $1.0 billion term loan and a $500 million revolving credit facility. The term loan facility was drawn on fully for the amount of $1.0 billion with proceeds used to refinance the outstanding term loan facility and finance in part the acquisition of Koch Filter. As of MarchJune 31,30, 2026, we have outstanding borrowings of $1.0 billion on the term loan and no amount was drawn on the revolving credit facility. As a result, we had capacity under our revolving credit facility of $500.0 million as of MarchJune 31,30, 2026.

Net cash provided by operating activities was $38.1$115.9 million for the threesix months ended MarchJune 31,30, 2026, an increase of $9.4$42.8 million compared to $28.7$73.1 million for the threesix months ended MarchJune 31,30, 2025. The increase was driven primarily by a favorable change in other assets of $5.6 million and higher net income adjusted for non-cash items of $4.3$24.7 million,million partiallyand offset by higherlower working capital requirements of $1.1$13.5 million. During the threesix months ended MarchJune 31,30, 2026, higherlower working capital requirements resulted in a cash outflow of $23.2$27.8 million compared to a cash outflow of $22.1$41.3 million for the threesix months ended MarchJune 31,30, 2025. The higherlower working capital cash outflow for the threesix months ended MarchJune 31,30, 2026 was mainly due to lowerhigher accounts payable, partially offset by lowerhigher trade and other receivables and higherprepaid accruedexpenses expenses.and other current assets.

There were no dividendsDividends received from our unconsolidated equity investees were $6.2 million for the threesix months ended MarchJune 31,30, 2026. Dividends received from our unconsolidated equity investees were $5.7 million for the threesix months ended MarchJune 31,30, 2025.

Net cash used in investing activities for the threesix months ended MarchJune 31,30, 2026 and March 31, 2025 was primarily used for the $453.9 million acquisition of Koch Filter and capital expenditures. Net cash used in investing activities for the six months ended June 30, 2025 was primarily used for capital expenditures. Our capital expenditures were $12.6 million for the three months ended March 31, 2026 and $12.4$25.6 million (of which approximately $3.5$1.3 million related to one-time integration capital expenditures) for the six months ended June 30, 2026 and $24.4 million (of which approximately $6.6 million related to one-time separation capital expenditures) for the threesix months ended MarchJune 31,30, 2025, corresponding to approximately 2.6%3% and 3.0%3% of Net sales for the threesix months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively.

Net cash provided by (used in) financing activities for the threesix months ended MarchJune 31,30, 2026 was $402.6$384.8 million compared to $(17.945.9) million for the threesix months ended MarchJune 31,30, 2025. Net cash provided by financing activities for the threesix months ended MarchJune 31,30, 2026 consisted of net debt proceeds of $995.6 million from our term loan, partially offset by payments made in the refinancing of our previous term loan of $570.0 million, withholding taxes paid on stock-based compensation, repurchases of common stock and dividends paid. Net cash used in financing activity for the threesix months ended MarchJune 31,30, 2025 consisted primarily of repurchases of common stock, dividends paid and payments made on our term loan.

We paid dividends of $4.4$9.0 million in the first threesix months of 2026 and $4.1$8.3 million in the first threesix months of 2025. The first quarter 2026 dividend of $0.055 per share, declared on February 9, 2026 for shareholders of record as of February 20, 2026, was paid on March 4, 2026. The second quarter 2026 dividend of $0.055 per share, declared on May 13, 2026 for shareholders of record as of May 26, 2026, was paid on June 10, 2026. The declaration of dividends is subject to the discretion of our Board of Directors and depends on various factors, including our net earnings, financial condition, cash requirements, future prospects and other factors that our Board of Directors deems relevant to its analysis and decision making.

Our total debt was $998.1$998.3 million at MarchJune 31,30, 2026 and $570.0 million at December 31, 2025. At MarchJune 31,30, 2026, the weighted-average term of our outstanding long-term debt was 4.84.6 years. Refer to Note 8, Debt and Borrowing Arrangements, to the Condensed Consolidated Financial Statements for more information on our debt and debt covenants.

•“Free cash flow” is defined as cash flows provided by (used in) operating activities less capital expenditures and “Adjusted free cash flow” is defined as Free cash flow after adding back certain one-time itemscapital expenditures and other separation costs associated with becoming a standalone public company, transaction costs associated with the Koch Filter acquisition and capital expenditures and other costs related to the integration of Koch Filter. 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.

(a)Primarily comprised of transaction costs associated with the Koch Filter acquisition and other Information Technology, Human Resources and manufacturing costs related to the integration of Koch Filter. The tax impact of acquisition and integration costs for the three and six months ended MarchJune 31,30, 20262026, werewas $1.3$0.3 million and $0.2$1.9 million, respectively.

(b)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 and six months ended MarchJune 31,30, 20252025, werewas $2.0$0.5 million.million and $2.6 million, respectively.

(c)Amortization expense of the intangible assets acquired in the Koch Filter acquisition were $2.9 million and $5.8 million for the three and six months ended MarchJune 31,30, 2026.2026, respectively. The tax impact of the amortization expense for the three and six months ended MarchJune 31,30, 20262026, was $0.6$0.7 million.million and $1.3 million, respectively.

Identifiable intangible assets include customer relationships and trade names acquired during business combinations. Identifiable intangible assets are amortized on a straight-line basesbasis with estimated useful lives ranging from 15-20 years. See Note 2, Acquisitions for additional information.