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Financial report summary
?Risks
- Risks Related to Our Business Operations
- Risks Related to Legal and Regulatory Issues
- Risks Related to Cybersecurity and Information Technology Infrastructure
- Risks Related to Finance and Financial Market Conditions
- Risks Related to Macroeconomic and Geopolitical Conditions
- Risks Related to Atmus’ Relationship with Cummins
- Risks Related to Atmus’ Capital Structure
- Risks Related to Ownership of Atmus Common Stock
- Risks Related to Our Business Operations
- We have significant customer concentration, with Cummins, PACCAR and the Traton Group respectively accounting for approximately 17.4%, 15.6% and 11.8% of our net sales for the year ended December 31, 2023. The loss of such net sales to any of such significant customers would have a material and adverse effect on our business, financial condition, results of operations and cash flows.
- The loss of a top OEM relationship, or changes in the preferences of our aftermarket end-users, could adversely impact the recurring nature of our aftermarket sales.
- We derive significant earnings from investees that we do not directly control.
- We face significant competition in the markets we serve and maintaining a competitive advantage requires consistent investment with uncertain returns.
- Evolving customer needs and developing technologies may threaten our existing business and growth.
- We rely on our executive leadership team and other key personnel as a critical part of our human capital resources.
- We face risks from strategic transactions, such as acquisitions, divestitures, joint ventures and other similar arrangements that we may pursue or undertake.
- Our long term performance targets assume certain ongoing productivity improvements; if we do not successfully manage productivity improvements, we may not realize the expected benefits.
- We may be adversely impacted by work stoppages and other labor matters.
- Our products are exposed to variability in material and commodity costs.
- We are vulnerable to raw material, transportation and labor price increases and supply shortages, which have adversely impacted and could continue to adversely impact our operations.
- Complexity of supply chain and manufacturing could perpetuate the inability to meet demand and result in the loss of customers.
- A number of our customers operate in similar cyclical industries and economic conditions in these industries could impact our sales.
- Our business is exposed to potential claims related to warranties and claims for support outside of standard warranty obligations.
- Our products are subject to recall for performance or safety-related issues.
- Inability or failure to adequately protect or enforce our intellectual property could reduce or eliminate any competitive advantage and reduce our sales and profitability and the cost of protecting or enforcing our intellectual property may be significant.
- Unexpected events, including natural disasters, may increase our cost of doing business or disrupt our operations.
- Risks Related to Legal and Regulatory Issues
- Sales of counterfeit versions of our products, as well as unauthorized sales of our products, may adversely affect our business, financial condition, results of operations or cash flows.
- Our products are subject to statutory and regulatory requirements that can significantly increase our costs and could have a material adverse impact on our business, financial condition, results of operations or cash flows.
- We operate our business on a global basis and changes in international, national and regional trade laws, regulations, and policies affecting and/or restricting international trade, including sanctions resulting from Russia’s military operation in Ukraine, could adversely impact the demand for our products and our competitive position.
- Unanticipated changes in our effective tax rate, the adoption of new tax legislation or exposure to additional income tax liabilities could adversely affect our profitability and cash flow. In addition, audits by tax authorities could result in additional tax payments for prior periods.
- Changes in tax law relating to multinational corporations could adversely affect our tax position.
- Our global operations are subject to laws and regulations that impose significant compliance costs and create reputational and legal risk.
- We may be adversely impacted by the effects of climate change and may incur increased costs and experience other impacts due to climate change.
- Our operations are subject to increasingly stringent environmental laws and regulations, and we are also subject to laws requiring cleanup of contaminated property.
- Risks Related to Cybersecurity and Information Technology Infrastructure
- Our information technology environment and our products are exposed to potential security or data breaches or other disruptions, which may adversely impact our operations.
- A number of our operations depend on information technology infrastructure and assets that are increasing in complexity, which are undergoing changes as a result of the Separation.
- Risks Related to Finance and Financial Market Conditions
- We are subject to foreign currency exchange rate and other related risks.
- We have recorded goodwill as a result of prior acquisitions, and an economic downturn could cause these balances to become impaired, requiring write-downs that would reduce our operating income.
- Risks Related to Macroeconomic and Geopolitical Conditions
- Political, economic and social uncertainty in geographies where we have significant operations or large offerings of our products could significantly change the dynamics of our competition, customer and end-user base and product offerings and impact our growth opportunities globally.
- Risks arising from uncertainty in worldwide and regional market and economic conditions may harm our business and make it difficult to project long-term performance.
- Risks Related to our Relationship with Cummins
- As a result of the Separation, we lost Cummins’ reputation, economies of scale, capital base and other resources and may experience difficulty operating as a standalone company.
- 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.
- Certain of our executive officers and directors may have actual or potential conflicts of interest because of their equity interest in Cummins.
- Cummins and its directors and officers will have limited liability to us or you for breach of fiduciary duty.
- Potential indemnification liabilities to Cummins pursuant to the separation agreement could materially and adversely affect our businesses, financial condition, results of operations and cash flows.
- In connection with the Separation, Cummins has indemnified us for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that Cummins’ ability to satisfy its indemnification obligation will not be impaired in the future.
- We may have received better terms from unaffiliated third parties than the terms we received in our agreements with Cummins.
- Risks Related to our Capital Structure
- Changes in the capital and credit markets may negatively affect our ability to access financing to support strategic initiatives.
- We have substantial indebtedness, consisting of the term loan and the revolving credit facility, and may incur substantial additional debt from time to time, which may impact our ability to service all our indebtedness and react to changes in our industry and limit our ability to seek further financing on favorable terms.
- Substantially all of our assets, subject to certain exceptions, are pledged as security for our term loan and revolving credit facility, and if we default on our obligations, we may suffer adverse consequences, including foreclosure on our assets.
- Risks Related to Ownership of our Common Stock
- The price of our common stock may fluctuate substantially, and you could lose all or part of your investment in our common stock as a result.
- We have not yet determined whether or the extent to which we will pay any dividends on our common stock or the timing or amount of such dividends.
- Applicable laws and regulations, provisions of our amended and restated certificate of incorporation and bylaws and certain contractual rights granted to Cummins may discourage takeover attempts and business combinations that shareholders might consider in their best interests.
- The provision of our amended and restated certificate of incorporation designating the Court of Chancery in the State of Delaware and the federal district courts for the District of Delaware as the exclusive forums for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers.
- The price of our common stock may fluctuate substantially.
- Our historical consolidated financial statements are not necessarily representative of the results we would have achieved as a standalone company and may not be a reliable indicator of our future results.
- The obligations associated with being an independent, publicly traded company will require significant resources and management attention.