Atmus Filtration Technologies Inc. (ATMU) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026. Atmus Filtration Technologies Inc. operates in two reportable segments: Power Solutions (filtration for commercial vehicles and equipment) and Industrial Solutions. The Industrial Solutions segment was established following the acquisition of Koch Filter Corporation, which closed on January 7, 2026, for approximately $455 million in cash. The company is a large accelerated filer with 81.6 million weighted-average shares outstanding.
Key Financial Metrics
| Metric | Q2 2026 | Q2 2025 | YTD 2026 | YTD 2025 |
|---|---|---|---|---|
| Net Sales | $527.9M | $453.5M | $1,005.4M | $870.0M |
| Gross Margin | $153.9M (29.2%) | $131.0M (28.9%) | $290.7M (28.9%) | $241.5M (27.8%) |
| Operating Income | $97.2M | $81.7M | $173.5M | $146.6M |
| Net Income | $63.9M | $59.9M | $112.3M | $104.6M |
| Diluted EPS | $0.78 | $0.72 | $1.37 | $1.26 |
| Operating Cash Flow (YTD) | $115.9M | |||
| Free Cash Flow (YTD) | $90.3M | |||
| Total Debt (Long-term) | $992.0M (as of June 30, 2026) | |||
| Cash & Equivalents | $259.0M (as of June 30, 2026) |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 16.4% in Q2 and 15.6% YTD, driven primarily by $42.4M (Q2) and $80.8M (YTD) in incremental sales from the Koch Filter acquisition, favorable pricing, and currency impacts.
- Margin Expansion: Gross margin percentage improved to 29.2% in Q2 (from 28.9%) and 28.9% YTD (from 27.8%), aided by pricing initiatives and the margin contribution from Koch Filter, partially offset by higher material and logistics costs.
- Debt Structure: On January 7, 2026, the company entered a new credit agreement, drawing a $1.0 billion term loan to refinance prior debt and fund the Koch Filter acquisition. Interest expense increased significantly ($13.7M in Q2 vs. $8.5M in Q2 2025) due to higher outstanding borrowings.
- Acquisition Costs: The company incurred $6.3 million in transaction-related expenses for the Koch Filter acquisition in the first six months of 2026, recorded in other operating expenses.
Outlook, Risks, and Management Commentary
- Market Conditions: Aftermarket demand remains soft in the first half of 2026, with slow growth expected for the remainder of the year. First-fit demand is depressed but expected to recover in the latter half of 2026.
- Tariffs and Trade: The company faces volatility from U.S. trade policies and tariffs. While the Supreme Court ruled certain IEEPA tariffs unlawful, the timing and amount of refunds remain uncertain. The company has implemented price adjustments and supply chain shifts to mitigate costs.
- Standalone Costs: One-time costs associated with becoming a standalone public company (separation from Cummins) have concluded as of September 2025. Current integration costs relate to the Koch Filter acquisition.
- Liquidity: The company maintains $500 million in available capacity under its revolving credit facility and believes cash from operations and existing facilities are sufficient for working capital, dividends, and share repurchases.
- Shareholder Returns: The company repurchased $20.3 million of stock YTD 2026 and paid $9.0 million in dividends. Approximately $49.0 million remains in the share repurchase authorization.
Investor Verification Checklist
- Acquisition Integration: Verify the progress of Koch Filter integration and the realization of projected synergies in the Industrial Solutions segment.
- Tariff Refund Status: Monitor the status of IEEPA tariff refund claims and the potential impact on future revenue if refunds must be returned to customers.
- Debt Servicing: Assess the impact of the increased $1.0 billion term loan on future interest coverage ratios and free cash flow.
- Aftermarket Demand: Track indicators of recovery in the commercial vehicle aftermarket, which constitutes approximately 86% of the company's sales.
- Goodwill Valuation: Review the provisional purchase price allocation for Koch Filter, specifically the $218 million goodwill recorded, for potential future impairment risks.