DENVER, July 31,
2024 /PRNewswire/ --
Second-Quarter 2024 Financial Summary
- Second-quarter net sales of $885.5
million, down 5.4% compared to the prior-year period and
representing a core sales decline of 4.0% year-over-year.
- Net income attributable to shareholders of $70.7 million, or $0.26 per diluted share.
- Adjusted Net Income per diluted share of $0.36.
- Net income from continuing operations of $77.9 million, or a margin of 8.8%.
- Adjusted EBITDA of $202.2 million, or a margin of 22.8%.
- Generated $72.8 million of
operating cash flow year to date, compared to $183.9 million in the prior year.
- Adjusting full year 2024 guidance.
- New $250 million share repurchase
authorization announced.
Gates Industrial Corporation plc (NYSE:GTES), a leading global
provider of application-specific power transmission and fluid power
solutions, today reported results for the second quarter ended
June 29, 2024.
Ivo Jurek, Gates Industrial's
Chief Executive Officer, commented, "During the second quarter, we
delivered a 270 basis point year-over-year increase in gross margin
in an uneven demand environment. I am pleased with the progress
made on our enterprise initiatives to date. Our balance sheet
continues to improve underscored by a meaningful reduction in our
net leverage ratio relative to the prior year period."
Jurek continued, "We have trimmed our full year 2024 guidance
for core sales, adjusted EBITDA and adjusted earnings per share to
reflect softer than expected demand in our First Fit markets during
the second half of the year and our normal business seasonality. At
the updated midpoint, we still expect to increase our adjusted
EBITDA margin by over 100 basis points year-over-year. We are
intently focused on driving our various enterprise initiatives and
achieving our 2026 financial targets. We remain opportunistic about
deploying excess capital. As such, we have announced a new
$250 million share repurchase
authorization that expires at the end of 2025."
Second-Quarter Financial Results
Second-quarter net sales were $885.5 million, a decrease of 5.4% over the
prior-year quarter net sales of $936.3 million, reflecting a 4.0% core sales
decline and unfavorable foreign currency impact of 1.4%. At the
channel level, first fit sales declined year-over-year primarily
driven by Industrial First Fit, partly offset by slight growth in
the replacement business. The replacement channel business grew
year-over-year and benefited from modest growth in Automotive
Replacement. Most end markets posted sales declines on a core
basis.
Second-quarter net income attributable to shareholders was
$70.7 million, or $0.26 per diluted share, compared to net income
attributable to shareholders of $64.9 million, or $0.23 per diluted share, in the prior-year
quarter, with the increase driven by higher operating income and a
lower share count. Adjusted Net Income was $95.5 million, or $0.36 per diluted share, compared to $95.2 million, or $0.34 per diluted share in the prior-year period,
with the increase stemming from improved operating performance and
a lower share count. The diluted weighted-average number of shares
outstanding in the second quarter of 2024 was 266,812,510 compared
to 279,915,448 in the second quarter of 2023.
Second-quarter net income from continuing operations was
$77.9 million, or 8.8% of net
sales, compared to $71.3 million, or 7.6% of net sales in the
prior-year quarter representing an expansion of 120 basis points
year-over-year driven by higher operating income and an increase in
other income partially offset by higher tax expense.
Second-quarter Adjusted EBITDA was $202.2 million compared to $197.3 million in the prior-year quarter.
Second-quarter Adjusted EBITDA margin of 22.8% represented an
expansion of 170 basis points compared to the prior-year quarter.
The increase in Adjusted EBITDA margin was led by benefits from our
enterprise initiatives, favorable channel mix, and pricing,
partially offset by lower volumes.
Power Transmission Segment Results
|
For the three months
ended
|
|
|
|
|
(USD in
millions)
|
June 29,
2024
|
|
July 1,
2023
|
|
%
Change
|
|
% Core
Change
|
Net sales
|
$541.9
|
|
$573.9
|
|
(5.6 %)
|
|
(3.5 %)
|
Adjusted
EBITDA
|
$123.8
|
|
$119.0
|
|
4.0 %
|
|
|
Adjusted EBITDA
margin
|
22.8 %
|
|
20.7 %
|
|
210 bps
|
|
|
|
|
|
|
|
|
|
For the six months
ended
|
|
|
|
|
(USD in
millions)
|
June 29,
2024
|
|
July 1,
2023
|
|
%
Change
|
|
% Core
Change
|
Net sales
|
$1,074.7
|
|
$1,122.0
|
|
(4.2 %)
|
|
(2.6 %)
|
Adjusted
EBITDA
|
$242.8
|
|
$226.7
|
|
7.1 %
|
|
|
Adjusted EBITDA
margin
|
22.6 %
|
|
20.2 %
|
|
240 bps
|
|
|
Second-quarter Power Transmission net sales decreased 5.6% to
$541.9 million compared to the
prior-year quarter, reflecting a core sales decline of 3.5% and
unfavorable currency effects of 2.1%. Segment sales were most
affected by core declines in the Personal Mobility, Construction
and Automotive end markets partially offset by growth in the Energy
and On-Highway markets. At the channel level, first fit sales
declined double-digits primarily impacted by weaker industrial
demand. Core sales in our replacement channel increased slightly
led by modest growth in Industrial Replacement.
Second-quarter Power Transmission Adjusted EBITDA was
$123.8 million compared
to $119.0 million in the prior-year quarter. The
expansion in Adjusted EBITDA was driven by benefits from enterprise
initiatives that supported improved performance, favorable channel
mix, and pricing, partially offset by lower volumes. Adjusted
EBITDA margin of 22.8% represented an improvement of 210 basis
points compared to the prior-year quarter.
Fluid Power Segment Results
|
For the three months
ended
|
|
|
|
|
(USD in
millions)
|
June 29,
2024
|
|
July 1,
2023
|
|
%
Change
|
|
% Core
Change
|
Net sales
|
$343.6
|
|
$362.4
|
|
(5.2 %)
|
|
(4.9 %)
|
Adjusted
EBITDA
|
$78.4
|
|
$78.3
|
|
0.1 %
|
|
|
Adjusted EBITDA
margin
|
22.8 %
|
|
21.6 %
|
|
120 bps
|
|
|
|
|
|
|
|
|
|
For the six months
ended
|
|
|
|
|
(USD in
millions)
|
June 29,
2024
|
|
July 1,
2023
|
|
%
Change
|
|
% Core
Change
|
Net sales
|
$673.4
|
|
$712.0
|
|
(5.4 %)
|
|
(5.7 %)
|
Adjusted
EBITDA
|
$155.0
|
|
$145.1
|
|
6.8 %
|
|
|
Adjusted EBITDA
margin
|
23.0 %
|
|
20.4 %
|
|
260 bps
|
|
|
Second-quarter Fluid Power net sales decreased 5.2% to
$343.6 million compared to the
prior-year quarter, reflecting a core sales decline of 4.9% and
unfavorable foreign currency effects of 0.3%. The segment was most
impacted by declines in Agriculture, Construction and Diversified
Industrial partially offset by a solid increase in Automotive. At
the channel level, first fit sales declined relative to the prior
year period while replacement increased slightly year-over-year
supported by Automotive Replacement growth.
Second-quarter Fluid Power Adjusted EBITDA was $78.4 million compared to $78.3 million in the prior-year quarter,
resulting in an Adjusted EBITDA margin of 22.8%, an increase of 120
basis points compared to the prior-year quarter. The increase in
Adjusted EBITDA was driven by benefits from our enterprise
initiatives, favorable channel mix, and pricing, partially
mitigated by lower volumes.
Liquidity and Capital Resources
During the second quarter of 2024, the Company generated
$93.8 million of cash from
operations. Second-quarter capital expenditures increased to
$27.2 million from $15.2 million in the prior-year quarter.
As of June 29, 2024, the Company had total cash and cash
equivalents of $579.7 million and
total outstanding debt of $2.4
billion, as well as committed borrowing headroom of
$471.7 million.
Share Repurchase Authorization Announced
The Company also announced that its Board of Directors has
authorized a share repurchase program of up to $250 million of the Company's ordinary
shares. This authorization is valid through December 2025. This authorization replaces the
existing authorization that was set to expire in October 2024.
The timing and actual number of shares repurchased will depend
on a variety of factors, including price, available liquidity,
general business and market conditions, tax considerations, and
alternative investment opportunities. Under the share repurchase
program, repurchases can be made from time to time using a variety
of methods, including but not limited to open market purchases and
privately negotiated transactions, all in compliance with the rules
and regulations of the Securities and Exchange Commission ("SEC")
and other applicable legal requirements.
The repurchase program does not obligate the Company to acquire
any specific dollar amount or number of ordinary shares, and the
repurchase program may be suspended or discontinued at any time at
the Company's discretion.
Updated 2024 Guidance
The Company is updating its full year 2024 guidance. The table
below reflects our updated full year 2024 financial guidance.
|
Prior
2024
|
Updated
2024
|
Change (At
Midpoint)
|
Core Sales
Growth
|
(3%) to +1%
|
(4%) to (2%)
|
(2) %
|
Adjusted
EBITDA
|
$745 to $805
Million
|
$740 to $770
Million
|
($20)
Million
|
Adjusted EPS
|
$1.28 to
$1.43
|
$1.29 to
$1.35
|
$(0.04)
|
Capital
Expenditures
|
~$100
Million
|
~$100
Million
|
No Change
|
Free Cash Flow
Conversion
|
90%+
|
90%+
|
No Change
|
Share-based metrics in the Company's guidance do not include the
potential effect of incremental share repurchases.
Because GAAP financial measures on a forward-looking basis are
not accessible, and reconciling information is not available
without unreasonable effort, we have not provided reconciliations
for forward-looking non-GAAP measures, including expected Core
Sales Growth, Adjusted EBITDA, Adjusted Earnings per Share and Free
Cash Flow conversion for 2024. For the same reasons, we are unable
to address the probable significance of the unavailable
information, which could be material to future results.
Conference Call and Webcast
Gates Industrial Corporation plc will host a conference call
today at 9:00 a.m. Eastern Time to
discuss the Company's financial results. The live webcast of the
conference call and accompanying presentation materials can be
accessed through Gates Industrial's website at investors.gates.com.
For those unable to access the webcast, the conference call can be
accessed by dialing (888) 414-4601 (domestic) or +1 (646) 960-0313
(international) and requesting the Gates Industrial Corporation
Second Quarter 2024 Earnings Conference Call or providing the
Conference ID of 5772067. An audio replay of the conference call
can be accessed by dialing (800) 770-2030 (domestic) or +1 (647)
362-9199 (international), and providing the passcode 5772067, or by
accessing Gates Industrial's website at investors.gates.com.
About Gates Industrial Corporation plc
Gates is a global manufacturer of innovative, highly engineered
power transmission and fluid power solutions. Gates offers a broad
portfolio of products to diverse replacement channel customers, and
to original equipment manufacturers ("first-fit") as specified
components. Gates participates in many sectors of the industrial
and consumer markets. Our products play essential roles in a
diverse range of applications across a wide variety of end markets
ranging from harsh and hazardous industries to everyday consumer
applications including virtually every form of transportation. Our
products are sold in more than 130 countries across our four
commercial regions: the Americas; Europe, Middle
East & Africa;
Greater China; and East Asia & India.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. In some cases, you can identify these forward-looking
statements by the use of words such as "outlook," "believes,"
"expects," "potential," "continues," "may," "will," "should,"
"could," "seeks," "predicts," "intends," "trends," "plans,"
"estimates," "anticipates" or the negative version of these words
or other comparable words. These statements include, but are not
limited to, statements related to expectations regarding the
performance of the Company's business and financial results
(including growth initiatives, margin expansion and capital
deployment), market demand, and statements regarding our outlook
for 2024. Such forward-looking statements are subject to various
risks and uncertainties, including, among others, economic,
political and other risks associated with international operations,
risks inherent to the manufacturing industry, macroeconomic factors
beyond the Company's control (including material and logistics
availability, inflation, supply chain and labor challenges and
end-market recovery), risks related to catastrophic events,
continued operation of our manufacturing facilities, including as a
result of cybersecurity attacks, our ability to forecast and meet
demand, market acceptance of new products, and the significant
influence of the Company's large shareholders, investment funds
affiliated with Blackstone Inc. Additional factors that could cause
the Company's results to differ materially from those described in
the forward-looking statements can be found under the section
entitled "Risk Factors" of the Company's Annual Report on Form 10-K
for the fiscal year ended December 30, 2023, filed with the
SEC, as such factors may be updated from time to time in the
Company's periodic filings with the SEC, which are accessible on
the SEC's website at www.sec.gov. Accordingly, there are or will be
important factors that could cause actual outcomes or results to
differ materially from those indicated in these statements. These
factors should not be construed as exhaustive and should be read in
conjunction with the other cautionary statements that are included
in the Company's filings with the SEC. The Company undertakes no
obligation to publicly update or review any forward-looking
statement, whether as a result of new information, future
developments or otherwise, except as required by law.
Gates Industrial
Corporation plc
|
Condensed
Consolidated Statements of Operations
|
(Unaudited)
|
|
|
Three months
ended
|
|
Six months
ended
|
(USD in millions,
except per share amounts)
|
June 29,
2024
|
|
July 1,
2023
|
|
June 29,
2024
|
|
July 1,
2023
|
Net sales
|
$
885.5
|
|
$
936.3
|
|
$
1,748.1
|
|
$
1,834.0
|
Cost of
sales
|
528.1
|
|
583.6
|
|
1,060.7
|
|
1,156.2
|
Gross
profit
|
357.4
|
|
352.7
|
|
687.4
|
|
677.8
|
Selling, general and
administrative expenses
|
218.3
|
|
220.7
|
|
430.0
|
|
452.8
|
Transaction-related
expenses
|
1.2
|
|
0.6
|
|
1.6
|
|
0.8
|
Restructuring
expenses
|
1.6
|
|
2.2
|
|
2.8
|
|
7.7
|
Other operating
expenses
|
0.1
|
|
0.1
|
|
0.1
|
|
0.1
|
Operating income
from continuing operations
|
136.2
|
|
129.1
|
|
252.9
|
|
216.4
|
Interest
expense
|
49.1
|
|
44.5
|
|
86.6
|
|
85.3
|
Other (income)
expense
|
(3.1)
|
|
3.7
|
|
(4.6)
|
|
4.0
|
Income from
continuing operations before taxes
|
90.2
|
|
80.9
|
|
170.9
|
|
127.1
|
Income tax
expense
|
12.3
|
|
9.6
|
|
46.8
|
|
24.9
|
Net income from
continuing operations
|
77.9
|
|
71.3
|
|
124.1
|
|
102.2
|
Loss on disposal of
discontinued operations
|
0.3
|
|
0.1
|
|
0.4
|
|
0.4
|
Net
income
|
77.6
|
|
71.2
|
|
123.7
|
|
101.8
|
Less: non-controlling
interests
|
6.9
|
|
6.3
|
|
13.0
|
|
10.5
|
Net income
attributable to shareholders
|
$
70.7
|
|
$
64.9
|
|
$
110.7
|
|
$
91.3
|
|
|
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
Earnings per share from
continuing operations
|
$
0.27
|
|
$
0.24
|
|
$
0.42
|
|
$
0.33
|
Earnings per share from
discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
Earnings per
share
|
$
0.27
|
|
$
0.24
|
|
$
0.42
|
|
$
0.33
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
Earnings per share from
continuing operations
|
$
0.26
|
|
$
0.23
|
|
$
0.41
|
|
$
0.32
|
Earnings per share from
discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
Earnings per
share
|
$
0.26
|
|
$
0.23
|
|
$
0.41
|
|
$
0.32
|
Gates Industrial
Corporation plc
|
Condensed
Consolidated Balance Sheets
|
(Unaudited)
|
|
(USD in millions,
except share numbers and per share amounts)
|
As of
June 29,
2024
|
|
As of
December 30,
2023
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
579.7
|
|
$
720.6
|
Trade accounts
receivable, net
|
807.5
|
|
768.2
|
Inventories
|
696.5
|
|
647.2
|
Taxes
receivable
|
54.9
|
|
30.4
|
Prepaid expenses and
other assets
|
237.9
|
|
234.9
|
Total current
assets
|
2,376.5
|
|
2,401.3
|
Non-current
assets
|
|
|
|
Property, plant and
equipment, net
|
599.6
|
|
630.0
|
Goodwill
|
1,966.5
|
|
2,038.7
|
Pension
surplus
|
8.3
|
|
8.6
|
Intangible assets,
net
|
1,309.4
|
|
1,386.1
|
Right-of-use
assets
|
127.7
|
|
120.1
|
Taxes
receivable
|
18.3
|
|
18.5
|
Deferred income
taxes
|
608.1
|
|
622.4
|
Other non-current
assets
|
20.4
|
|
28.8
|
Total
assets
|
$
7,034.8
|
|
$
7,254.5
|
Liabilities and
equity
|
|
|
|
Current
liabilities
|
|
|
|
Debt, current
portion
|
$
21.8
|
|
$
36.5
|
Trade accounts
payable
|
441.3
|
|
457.7
|
Taxes
payable
|
61.4
|
|
36.6
|
Accrued expenses and
other current liabilities
|
238.9
|
|
248.5
|
Total current
liabilities
|
763.4
|
|
779.3
|
Non-current
liabilities
|
|
|
|
Debt, less current
portion
|
2,310.3
|
|
2,415.0
|
Post-retirement benefit
obligations
|
79.1
|
|
83.8
|
Lease
liabilities
|
117.8
|
|
110.6
|
Taxes
payable
|
75.6
|
|
79.4
|
Deferred income
taxes
|
106.4
|
|
119.4
|
Other non-current
liabilities
|
87.9
|
|
123.1
|
Total
liabilities
|
3,540.5
|
|
3,710.6
|
Shareholders'
equity
|
|
|
|
—Shares, par value of
$0.01 each - authorized shares: 3,000,000,000; outstanding shares:
261,601,984 (December 30, 2023: authorized shares:
3,000,000,000; outstanding shares: 264,259,788)
|
2.6
|
|
2.6
|
—Additional paid-in
capital
|
2,600.9
|
|
2,583.8
|
—Accumulated other
comprehensive loss
|
(949.0)
|
|
(828.5)
|
—Retained
earnings
|
1,522.5
|
|
1,462.3
|
Total shareholders'
equity
|
3,177.0
|
|
3,220.2
|
Non-controlling
interests
|
317.3
|
|
323.7
|
Total
equity
|
3,494.3
|
|
3,543.9
|
Total liabilities
and equity
|
$
7,034.8
|
|
$
7,254.5
|
Gates Industrial
Corporation plc
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
|
|
Six months
ended
|
(USD in
millions)
|
June 29,
2024
|
|
July 1,
2023
|
Cash flows from
operating activities
|
|
|
|
Net income
|
$
123.7
|
|
$
101.8
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
109.1
|
|
108.5
|
Foreign exchange and
other non-cash financing (income) expenses
|
(11.9)
|
|
20.5
|
Share-based
compensation expense
|
13.8
|
|
16.3
|
Decrease in
post-employment benefit obligations, net
|
(4.2)
|
|
(5.1)
|
Deferred income
taxes
|
(13.2)
|
|
(22.3)
|
Gain on disposal of
property, plant and equipment
|
(7.2)
|
|
(0.1)
|
Other operating
activities
|
(1.2)
|
|
3.6
|
Changes in operating
assets and liabilities:
|
|
|
|
—Accounts
receivable
|
(56.9)
|
|
(66.8)
|
—Inventories
|
(66.0)
|
|
23.0
|
—Accounts
payable
|
(3.2)
|
|
(2.1)
|
—Prepaid expenses and
other assets
|
13.6
|
|
7.6
|
—Taxes
payable
|
(1.4)
|
|
(0.8)
|
—Other
liabilities
|
(22.2)
|
|
(0.2)
|
Net cash provided by
operating activities
|
72.8
|
|
183.9
|
Cash flows from
investing activities
|
|
|
|
Purchases of property,
plant and equipment
|
(37.9)
|
|
(24.4)
|
Purchases of intangible
assets
|
(7.4)
|
|
(5.4)
|
Purchases of
investments
|
(11.2)
|
|
—
|
Cash paid under
corporate-owned life insurance policies
|
(4.1)
|
|
(17.0)
|
Cash received under
corporate-owned life insurance policies
|
10.0
|
|
5.3
|
Proceeds from the sale
of property, plant and equipment
|
10.5
|
|
0.4
|
Net cash used in
investing activities
|
(40.1)
|
|
(41.1)
|
Cash flows from
financing activities
|
|
|
|
Issuance of
shares
|
7.1
|
|
16.7
|
Repurchase of
shares
|
(50.3)
|
|
(251.7)
|
Proceeds from long-term
debt
|
1,800.0
|
|
100.0
|
Payments of long-term
debt
|
(1,907.0)
|
|
(9.8)
|
Debt issuance costs
paid
|
(17.7)
|
|
(0.3)
|
Other financing
activities
|
10.3
|
|
(15.3)
|
Net cash used in
financing activities
|
(157.6)
|
|
(160.4)
|
Effect of exchange rate
changes on cash and cash equivalents and restricted cash
|
(16.2)
|
|
4.4
|
Net decrease in cash
and cash equivalents and restricted cash
|
(141.1)
|
|
(13.2)
|
Cash and cash
equivalents and restricted cash at the beginning of the
period
|
724.0
|
|
581.4
|
Cash and cash
equivalents and restricted cash at the end of the
period
|
$
582.9
|
|
$
568.2
|
Supplemental
schedule of cash flow information
|
|
|
|
Interest
paid
|
$
86.0
|
|
$
76.6
|
Income taxes
paid
|
$
61.4
|
|
$
48.0
|
Accrued capital
expenditures
|
$
1.4
|
|
$
1.6
|
Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures,
which management believes are useful to investors, securities
analysts and other interested parties. Management uses Adjusted
EBITDA as its key profitability measure. This is a non-GAAP measure
that represents EBITDA before certain items that impact comparison
of the performance of our business either period-over-period or
with other businesses. We use Adjusted EBITDA as our measure of
segment profitability to assess the performance of our businesses,
and it is used for total Gates as well because we believe it is
important to consider our total profitability on a basis that is
consistent with that of our operating segments. Adjusted EBITDA
Margin is Adjusted EBITDA for a particular period expressed as a
percentage of net sales for that period.
Management uses Adjusted Net Income as an additional measure of
profitability. Adjusted Net Income is a non-GAAP measure that
represents net income attributable to shareholders before certain
items that impact comparison of the performance of our business,
either period-over-period or with other businesses. Beginning with
the three months ended June 29, 2024,
we revised our definition of Adjusted Net Income to adjust for
discrete tax items, which are significant, unusual or infrequently
occurring tax items. We have revised the prior period amounts to
conform to our current period presentation.
Core sales growth is a non-GAAP measure that represents net
sales for the period excluding the impacts of movements in foreign
currency rates and the first-year impacts of acquisitions and
disposals, where applicable. We present core sales growth because
it allows for a meaningful comparison of year-over-year performance
without the volatility caused by foreign currency gains or losses,
or the incomparability that would be caused by the impact of an
acquisition or disposal.
Management uses Free Cash Flow to measure cash generation. Free
Cash Flow is a non-GAAP measure that represents net cash provided
by operations less capital expenditures. Free Cash Flow Conversion
is a measure of Free Cash Flow expressed as a percentage of
Adjusted Net Income. We use this metric as a measure of the success
of our business in converting Adjusted Net Income into cash.
These non-GAAP financial measures should be considered only as
supplemental to, and not as superior to, financial measures
prepared in accordance with GAAP. Please see below for a
reconciliation of historical non-GAAP financial measures to the
most directly comparable financial measures prepared in accordance
with GAAP.
Gates Industrial
Corporation plc
|
Reconciliation of
Net Income from Continuing Operations to Adjusted
EBITDA
|
(Unaudited)
|
|
|
Three months
ended
|
|
Six months
ended
|
(USD in
millions)
|
June 29,
2024
|
|
July 1,
2023
|
|
June 29,
2024
|
|
July 1,
2023
|
Net income from
continuing operations
|
$
77.9
|
|
$
71.3
|
|
$
124.1
|
|
$
102.2
|
Adjusted
for:
|
|
|
|
|
|
|
|
Income tax
expense
|
12.3
|
|
9.6
|
|
46.8
|
|
24.9
|
Net interest and other
expenses
|
46.0
|
|
48.2
|
|
82.0
|
|
89.3
|
Depreciation and
amortization
|
54.5
|
|
54.0
|
|
109.1
|
|
108.5
|
Transaction-related
expenses (1)
|
1.2
|
|
0.6
|
|
1.6
|
|
0.8
|
Restructuring
expenses (2)
|
1.6
|
|
2.2
|
|
2.8
|
|
7.7
|
Share-based
compensation expense
|
5.2
|
|
6.8
|
|
13.8
|
|
16.3
|
Inventory impairments
and adjustments (3) (included in cost of
sales)
|
3.4
|
|
3.5
|
|
17.3
|
|
4.1
|
Severance expenses
(included in cost of sales)
|
—
|
|
—
|
|
—
|
|
0.5
|
Severance expenses
(included in SG&A)
|
—
|
|
0.3
|
|
0.1
|
|
0.9
|
Credit loss related to
customer bankruptcy (included in SG&A)
(4)
|
—
|
|
0.7
|
|
0.1
|
|
11.4
|
Cybersecurity incident
expenses (5)
|
—
|
|
—
|
|
—
|
|
5.1
|
Other items not
directly related to current operations (6)
|
0.1
|
|
0.1
|
|
0.1
|
|
0.1
|
Adjusted
EBITDA
|
$
202.2
|
|
$
197.3
|
|
$
397.8
|
|
$
371.8
|
|
|
|
|
|
|
|
|
Net Sales
|
$
885.5
|
|
$
936.3
|
|
$
1,748.1
|
|
$
1,834.0
|
Adjusted EBITDA
Margin
|
22.8 %
|
|
21.1 %
|
|
22.8 %
|
|
20.3 %
|
(1)
|
Transaction-related
expenses relate primarily to advisory fees and other costs
recognized in respect of major corporate transactions, including
the acquisition of businesses, and equity and debt
transactions.
|
(2)
|
Restructuring expenses
represent items qualifying for recognition as such under U.S. GAAP
and include costs related to the closure of lines of business,
facility closures and consolidations, fundamental organizational
rationalizations and non-recurring employee severance related to
such actions.
|
(3)
|
Inventory impairments
and adjustments include the reversal of the adjustment to remeasure
certain inventories on a Last-in-First-out ("LIFO")
basis.
|
(4)
|
On January 31, 2023,
one of our customers filed a voluntary petition for reorganization
under Chapter 11 of the U.S. Bankruptcy Code. In connection with
the bankruptcy proceedings, we evaluated our potential risk and
exposure relating to our outstanding pre-petition accounts
receivable balance from the customer and recorded the pre-tax
charge to reflect our estimated recovery. Based on further
developments in the bankruptcy proceedings, we recorded an
additional $0.1 million pre-tax charge during the six months
ended June 29, 2024. We will continue to monitor the
circumstances surrounding the bankruptcy in determining whether
adjustments to this recovery estimate are necessary.
|
(5)
|
On February 11, 2023,
Gates determined that it was the target of a malware attack.
Cybersecurity incident expenses include legal, consulting, and
other costs incurred as a direct result of this incident, some of
which may be partially offset by insurance recoveries.
|
(6)
|
Other items not
directly related to current operations include asset impairment and
other charges.
|
Gates Industrial
Corporation plc
|
Reconciliation of
Net Income Attributable to Shareholders to Adjusted Net
Income
|
(Unaudited)
|
|
|
Three months
ended
|
|
Six months
ended
|
(USD in millions,
except share numbers and per share amounts)
|
June 29,
2024
|
|
July 1,
2023
|
|
June 29,
2024
|
|
July 1,
2023
|
Net income
attributable to shareholders
|
$
70.7
|
|
$
64.9
|
|
$
110.7
|
|
$
91.3
|
Adjusted
for:
|
|
|
|
|
|
|
|
Loss on disposal of
discontinued operations
|
0.3
|
|
0.1
|
|
0.4
|
|
0.4
|
Amortization of
intangible assets arising from the 2014 acquisition of
Gates
|
28.9
|
|
29.2
|
|
58.0
|
|
58.2
|
Transaction-related
expenses (1)
|
1.2
|
|
0.6
|
|
1.6
|
|
0.8
|
Restructuring expenses
(2)
|
1.6
|
|
2.2
|
|
2.8
|
|
7.7
|
Share-based
compensation expense
|
5.2
|
|
6.8
|
|
13.8
|
|
16.3
|
Inventory impairments
and adjustments (3) (included in cost of
sales)
|
3.4
|
|
3.5
|
|
17.3
|
|
4.1
|
Adjustments relating
to post-retirement benefits
|
(0.6)
|
|
(0.8)
|
|
(1.3)
|
|
(1.5)
|
Financing and other FX
related losses
|
(3.0)
|
|
6.0
|
|
(1.5)
|
|
7.6
|
Credit loss related to
customer bankruptcy (included in SG&A)
(4)
|
—
|
|
0.7
|
|
0.1
|
|
11.4
|
Cybersecurity incident
expenses (5)
|
—
|
|
—
|
|
—
|
|
5.1
|
Loss on extinguishment
of debt (6)
|
14.8
|
|
—
|
|
14.8
|
|
—
|
Discrete tax items
(7)
|
(12.2)
|
|
(6.4)
|
|
(0.5)
|
|
—
|
Other
adjustments
|
(1.7)
|
|
(0.8)
|
|
(3.4)
|
|
(2.6)
|
Estimated tax effect
of the above adjustments
|
(13.1)
|
|
(10.8)
|
|
(25.5)
|
|
(24.4)
|
Adjusted Net
Income
|
$
95.5
|
|
$
95.2
|
|
$
187.3
|
|
$
174.4
|
|
|
|
|
|
|
|
|
Diluted
weighted-average number of shares outstanding
|
266,812,510
|
|
279,915,448
|
|
266,951,237
|
|
283,953,084
|
Adjusted Net Income
per diluted share
|
$
0.36
|
|
$
0.34
|
|
$
0.70
|
|
$
0.61
|
(1)
|
Transaction-related
expenses related primarily to advisory fees and other costs
recognized in respect of major corporate transactions, including
the acquisition of businesses, and equity and debt
transactions.
|
(2)
|
Restructuring expenses
represent items qualifying for recognition as such under U.S. GAAP
and included costs related to the closure of lines of business,
facility closures and consolidations, fundamental organizational
rationalizations and non-recurring employee severance related to
such actions.
|
(3)
|
Inventory impairments
and adjustments include the reversal of the adjustment to remeasure
certain inventories on a Last-in-First-out ("LIFO")
basis.
|
(4)
|
On January 31, 2023,
one of our customers filed a voluntary petition for reorganization
under Chapter 11 of the U.S. Bankruptcy Code. In connection with
the bankruptcy proceedings, we evaluated our potential risk and
exposure relating to our outstanding pre-petition accounts
receivable balance from the customer and recorded the pre-tax
charge to reflect our estimated recovery. Based off further
developments in the bankruptcy proceedings, we recorded an
additional $0.1 million pre-tax charge during the six months
ended June 29, 2024. We will continue to monitor the
circumstances surrounding the bankruptcy in determining whether
adjustments to this recovery estimate are necessary.
|
(5)
|
On February 11, 2023,
Gates determined that it was the target of a malware attack.
Cybersecurity incident expenses include legal, consulting, and
other costs incurred as a direct result of this incident, some of
which may be partially offset by insurance recoveries.
|
(6)
|
On June 4, 2024, Gates
extinguished the 2021 Dollar Term Loans and the asset-backed credit
facility in connection with our debt refinancing. As a result, we
accelerated $14.8 million in deferred issuance costs during
the three months ended June 29, 2024.
|
(7)
|
For the three months
ended June 29, 2024, discrete tax benefits of
$12.2 million included $13.8 million from unrecognized
tax benefits due to audit closures offset by $1.6 million of
discrete expenses related to changes in the realizability of
certain deferred tax assets. For the six months ended June 29,
2024, the net impact of discrete items was nominal. For the three
months ended July 1, 2023, discrete tax benefits of
$6.4 million included $4.3 million from adjustments in
various foreign jurisdictions in which returns were filed, and
$1.8 million of net unrecognized tax benefits, primarily
related to India audit settlements. For the six months ended
July 1, 2023, the net impact of discrete items was
nominal.
|
Gates Industrial
Corporation plc
|
Reconciliation of
Net Sales to Core Sales Growth
|
(Unaudited)
|
|
|
Three months ended
June 29, 2024
|
(USD in
millions)
|
Power
Transmission
|
|
Fluid Power
|
|
Total
|
Net sales for the three
months ended June 29, 2024
|
$
541.9
|
|
$
343.6
|
|
$
885.5
|
Impact on net sales of
movements in currency rates
|
12.2
|
|
0.9
|
|
13.1
|
Core sales for the
three months ended June 29, 2024
|
$
554.1
|
|
$
344.5
|
|
$
898.6
|
|
|
|
|
|
|
Net sales for the three
months ended July 1, 2023
|
573.9
|
|
362.4
|
|
936.3
|
Decrease in net
sales on a core basis (core sales)
|
$
(19.8)
|
|
$
(17.9)
|
|
$
(37.7)
|
|
|
|
|
|
|
Core sales
decline
|
(3.5 %)
|
|
(4.9 %)
|
|
(4.0 %)
|
|
|
Six months ended
June 29, 2024
|
(USD in
millions)
|
Power
Transmission
|
|
Fluid Power
|
|
Total
|
Net sales for the six
months ended June 29, 2024
|
$
1,074.7
|
|
$
673.4
|
|
$
1,748.1
|
Impact on net sales of
movements in currency rates
|
18.1
|
|
(2.2)
|
|
15.9
|
Core sales for the
six months ended June 29, 2024
|
$
1,092.8
|
|
$
671.2
|
|
$
1,764.0
|
|
|
|
|
|
|
Net sales for the six
months ended July 1, 2023
|
1,122.0
|
|
712.0
|
|
1,834.0
|
Decrease in net
sales on a core basis (core sales)
|
$
(29.2)
|
|
$
(40.8)
|
|
$
(70.0)
|
|
|
|
|
|
|
Core sales
decline
|
(2.6 %)
|
|
(5.7 %)
|
|
(3.8 %)
|
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SOURCE Gates Industrial Corporation plc