Atmus Filtration Technologies (US:ATMU)2024-02-13 16:00Financial Performance - For the year ended December 31, 2023, Atmus generated $1,628.1 million in net sales, $171.3 million in net income, and $302.3 million in adjusted EBITDA[13]. - Atmus achieved a net income margin of 10.5% and an Adjusted EBITDA margin of 18.6% in 2023, demonstrating strong financial performance[44]. - The company reported a 16.7% increase in net sales in 2021, followed by an 8.6% increase in 2022, and a 4.2% increase in 2023 compared to the previous years[44]. - The gross margin for 2023 was $432.7 million, representing a gross margin percentage of approximately 26.6%, compared to $359.2 million in 2022[342]. - Operating income for 2023 was $248.4 million, up from $203.9 million in 2022, indicating a growth of 21.8%[342]. - The company reported a net income of $171.3 million for 2023, slightly up from $170.4 million in 2022, reflecting a growth of 0.5%[342]. - Total assets increased to $1,088.6 million in 2023 from $867.4 million in 2022, marking a growth of 25.5%[349]. - Total liabilities rose to $1,007.9 million in 2023, compared to $411.8 million in 2022, indicating a significant increase of 144.3%[349]. - The company reported a net transfer to Parent of $595.5 million in 2023, compared to $128.2 million in 2022, reflecting a significant increase in capital movement[355]. - The cash and cash equivalents at the end of the period stood at $168.0 million, marking a net increase of $168.0 million during the year[352]. - Other comprehensive loss for 2023 was minimal at $0.4 million, compared to $14.2 million in 2022, indicating improved financial stability[355]. Sales and Market Presence - Atmus estimates that aftermarket net sales represented approximately 81% of its total net sales in 2023[19]. - Atmus' largest customer, Cummins, accounted for approximately 17.4% of its net sales in 2023[35]. - Atmus serves approximately 49% of its net sales from outside the United States and Canada in 2023[24]. - The company supports a diverse customer base across various markets, including oil and gas, agriculture, and construction, with products available in over 140 countries[358]. - Related party sales to Cummins represented 17.4% of net sales in 2023, amounting to $282.5 million, compared to 19.3% in 2022[418]. Product Development and Innovation - Atmus launched approximately 300 new products annually over the last three years, focusing on targeted product releases[19]. - Atmus is focused on enhancing product content per vehicle by offering integrated solutions and smart filtration technologies[17]. - Atmus' research and development expenses were $42.3 million in 2023, $38.5 million in 2022, and $41.6 million in 2021, reflecting ongoing investment in innovation[58]. - Research and development expenses were $42.3 million, $38.5 million, and $41.6 million for the years ended December 31, 2023, 2022, and 2021, respectively, indicating a focus on product improvements and innovations[401]. Market Expansion and Strategy - Atmus plans to expand into the industrial filtration market, which had a total addressable market of approximately $48 billion in 2022, growing at a CAGR of approximately 7%[26]. - Atmus' core markets had a total addressable market of approximately $14 billion in 2022, growing at a CAGR of approximately 4% over the last five years[26]. - The company is focused on expanding its geographic coverage and investing in distribution expansion to better serve its customers[39]. - Atmus has entered into three joint ventures, two in India and one in China, to enhance market penetration and reduce capital spending[79]. - Atmus' joint venture Fleetguard Filters Private Ltd. operates seven manufacturing facilities in India, with Atmus holding 49.491% economic interest[80]. Operational Efficiency - Atmus operates 11 distribution centers and 10 manufacturing sites globally, enhancing its market coverage and operational efficiency[42]. - Material costs represented approximately 57% of Atmus' cost of sales in 2023, a decrease from 61% in 2022[52]. - The company has a large installed base that generates recurring revenue, with aftermarket product sales typically having higher profit margins compared to first-fit systems[40]. Leadership and Workforce - Atmus' leadership team has extensive industry experience, which is crucial for executing its strategic vision and driving growth[45]. - Atmus has a diverse leadership team with 44% of its executive team being female and 22% being ethnically diverse[73]. - Atmus emphasizes leadership development and employee support to enhance workforce capabilities and performance[67]. - Atmus conducts annual compensation studies to ensure competitive pay and incorporates living wage assessments to maintain fair compensation[69]. - Atmus' benefit programs include flexible medical benefits and various paid time-off options to meet employee needs[70]. - Atmus aims for zero serious injury fatalities and promotes a positive safety culture across its operations[72]. Environmental Sustainability - Atmus is committed to environmental sustainability, implementing initiatives like solar panels at its manufacturing sites and water conservation programs[76][77]. - Atmus is focused on reducing environmental impacts through pollution prevention and energy efficiency improvements[74]. Financial Reporting and Compliance - The company plans to provide a management report on internal control over financial reporting starting with the annual report for the year ending December 31, 2024[330]. - The company expects to file tax returns independently post-separation from Cummins, which may result in different effective income tax rates[370]. - The new accounting standards issued by FASB are expected to impact disclosures but not the results of operations or financial condition[411][412]. Taxation and Deferred Taxes - Total current income tax expense increased to $65.1 million in 2023 from $54.3 million in 2022, an increase of 19.5%[430]. - The effective tax rate for 2023 was 24.3%, up from 19.6% in 2022, primarily due to changes in income mix between U.S. and foreign operations[432]. - Total deferred tax assets amounted to $42.1 million in 2023, an increase from $37.6 million in 2022[436]. - Net deferred tax assets increased to $12.8 million in 2023, compared to $7.0 million in 2022[436].