Atmus Filtration Technologies (US:ATMU)2024-11-08 17:33Financial Performance - Net sales for the three months ended September 30, 2024, were $403.7 million, an increase of $7.5 million or 1.9% compared to $396.2 million for the same period in 2023 [103]. - For the nine months ended September 30, 2024, net sales were $1,262.9 million, an increase of $34.5 million or 2.8% compared to $1,228.4 million in 2023 [112]. - Gross margin increased to $111.3 million for the three months ended September 30, 2024, up $8.4 million or 8.2% from $102.9 million in 2023, with a gross margin percentage of 27.6%, an increase of 1.6 percentage points [104][102]. - Gross margin for the nine months ended September 30, 2024, was $355.0 million, an increase of $27.9 million or 8.5% from $327.1 million in 2023, with a gross margin percentage of 28.1%, up 1.5 percentage points [113][111]. - Operating income for the three months ended September 30, 2024, was $63.2 million, an increase of $4.4 million or 7.5% compared to $58.8 million in 2023 [1]. - Net income for the three months ended September 30, 2024, was $43.8 million, representing a $6.2 million increase or 16.5% from $37.6 million in 2023 [1]. - The net income margin improved to 11.5% for the nine months ended September 30, 2024, compared to 11.1% in the prior year [143]. - Diluted earnings per share for Q3 2024 was $0.52, up from $0.45 in Q3 2023, representing a 15.6% increase [144]. - Adjusted earnings per share for the nine months ended September 30, 2024, was $1.92, compared to $1.82 for the same period in 2023, reflecting a 5.5% growth [144]. Expenses and Costs - The company incurred approximately $8.9 million in one-time expenses during the three months ended September 30, 2024, and approximately $18.7 million during the nine months ended September 30, 2024, related to becoming a standalone public company [99]. - The company expects to incur one-time expenses of approximately $20 million to $25 million in 2024 in connection with becoming a standalone public company [99]. - Selling, general and administrative expenses were $46.4 million for the three months ended September 30, 2024, an increase of $5.1 million or 12.3% compared to $41.3 million in 2023 [105]. - Research, development, and engineering expenses decreased to $9.7 million for the three months ended September 30, 2024, down $1.4 million or 12.6% from $11.1 million in 2023 [106]. - Interest expense for the nine months ended September 30, 2024, was $31.4 million, an increase of $16.2 million compared to $15.2 million in 2023, primarily due to the timing of borrowings [118]. - Higher working capital requirements resulted in a cash outflow of $81.9 million for the nine months ended September 30, 2024, compared to a cash inflow of $2.0 million in the same period of 2023 [127]. Cash Flow and Capital Expenditures - Net cash provided by operating activities was $85.4 million for the nine months ended September 30, 2024, a decrease of $61.9 million compared to $147.3 million in the same period of 2023 [127]. - Capital expenditures for the nine months ended September 30, 2024, were $38.6 million, representing approximately 3.1% of net sales, compared to $29.6 million or 2.4% of net sales in the prior year [129]. - Capital expenditures for Q3 2024 were $16.4 million, up from $10.5 million in Q3 2023, representing a 56.2% increase [146]. - Adjusted free cash flow for the nine months ended September 30, 2024, was $86.1 million, down from $122.5 million in the same period of 2023, indicating a decrease of 29.6% [146]. - Free cash flow for Q3 2024 was $54.3 million, compared to $47.8 million in Q3 2023, marking a 13.6% increase [146]. Debt and Financing - As of September 30, 2024, total debt was $596 million, a slight decrease from $600 million at December 31, 2023, with a weighted-average term of 2.9 years [134]. - The company borrowed $650 million from a credit agreement upon completion of its IPO to pay Cummins in partial consideration for the Separation [88]. - The company has a revolving credit facility capacity of $400 million as of September 30, 2024, with no outstanding borrowings [122]. - The company has a $600 million term loan facility and a $400 million revolving credit facility, with interest rates tied to SOFR [152]. - A 0.125% change in SOFR would result in a $0.7 million annual impact on interest expense based on outstanding borrowings as of September 30, 2024 [152]. Market Conditions - Aftermarket demand remained depressed in the first nine months of 2024, reflecting soft market conditions, with uncertainty regarding recovery [94]. - Overall supply chain conditions have largely stabilized from a year ago, with minimal disruptions and backorders largely recovered [95]. - Direct material cost pressures have stabilized, but labor impacts continue to affect the company's Selling, general and administrative expenses, which increased during the first nine months of 2024 [97]. - The appreciation of the U.S. dollar against foreign currencies had a slightly unfavorable impact on the company's condensed consolidated results of operations in the first nine months of 2024 [98]. Taxation - The effective tax rate for the three months ended September 30, 2024, was 18.4%, a decrease of 4.7 percentage points from 23.1% in 2023, driven by a change in the mix of earnings among tax jurisdictions [108]. - The effective tax rate decreased to 20.9% for the nine months ended September 30, 2024, down 2.9 percentage points from 23.8% in the prior year, driven by a change in the mix of earnings among tax jurisdictions [121]. - The tax impact of one-time separation costs for Q3 2024 was $1.6 million, slightly lower than $1.7 million in Q3 2023 [144].