DENVER, Feb. 8, 2024
/PRNewswire/ --
Fourth-Quarter 2023 Financial Summary
- Fourth-quarter net sales of $863.3
million, down 3.4% compared to the prior-year period,
including a core revenue decline of 4.6%.
- Net income attributable to shareholders of $62.9 million, or $0.24 per diluted share.
- Adjusted Net Income per diluted share of $0.39.
- Net income from continuing operations of $69.2 million, or a margin of 8.0%.
- Adjusted EBITDA of $185.8
million, or a margin of 21.5%.
- Introducing 2024 financial guidance.
- $100 million share repurchase
authorization approved by Board of Directors.
Full-Year 2023 Financial Summary
- Net sales of $3,570.2 million,
representing 0.5% growth, including core revenue growth of
0.7%.
- Net income attributable to shareholders of $232.9 million, or $0.84 per diluted share.
- Adjusted Net Income per diluted share of $1.36.
- Net income from continuing operations of $257.0 million, or a margin of 7.2%.
- Adjusted EBITDA of $747.0
million, or a margin of 20.9%.
- Generated $481.0 million of
operating cash flow, an increase from $265.8
million in the prior year.
Gates Industrial Corporation plc (NYSE:GTES), a leading global
provider of application-specific power transmission and fluid power
solutions, today reported results for the fourth-quarter and full
year ended December 30, 2023.
Ivo Jurek, Gates Industrial's
Chief Executive Officer, commented, "We finished the year on a
strong note delivering solid margin expansion year-over-year and
robust operating cash flow in the fourth quarter while reducing our
net leverage ratio to 2.3x. For full year 2023, our team generated
a meaningful margin increase and drove significant improvement in
our free cash flow while operating in an uneven global demand
environment."
Jurek continued, "We enter 2024 focused on progressing our
enterprise initiatives and enhancing our business performance. Our
cash balance and net leverage position is in its strongest position
as a public company and we remain highly focused on further
reducing our net leverage ratio and opportunistically utilizing our
recently approved $100 million share
repurchase authorization. We are optimistic about the shareholder
value creation opportunities in front of us. I thank the global
Gates team for their commitment and dedication."
Fourth-Quarter Financial Results
Fourth-quarter net sales were $863.3 million, a decrease of 3.4% compared
to the prior-year quarter net sales of $893.3 million primarily due to lower
volume. Core sales decreased 4.6% year-over-year. The decline in
core revenues was primarily driven by weakness in the Personal
Mobility and Diversified Industrial end markets partially offset by
growth in Automotive. At the channel level, Replacement revenues
decreased less significantly than First Fit revenues on a
year-over-year basis.
Full-year 2023 net sales were $3,570.2 million, an increase of 0.5% over
prior-year net sales of $3,554.2 million due to pricing and
partially offset by lower volume. Core revenue increased 0.7%. From
an end market perspective, Automotive, Energy, Construction and
On-Highway posted solid core growth, which was largely offset by
year-over-year declines in Personal Mobility and Diversified
Industrial. The Replacement channel grew modestly year-over-year,
but softness in the First Fit channel offset most of the growth
benefit.
Fourth-quarter net income attributable to shareholders was
$62.9 million, or $0.24 per diluted share, compared to net income
attributable to shareholders of $84.9 million, or $0.30 per diluted share, in the prior-year
quarter. Higher other expense more than offset higher operating
income resulting in the decrease in net income. Adjusted Net Income
was $104.7 million, or
$0.39 per diluted share, compared to
$71.2 million, or $0.25 per diluted share in the prior-year period,
primarily driven by stronger operating performance and lower net
interest expense. The diluted weighted-average number of shares
outstanding in the fourth quarter of 2023 was 267,523,754 compared
to 284,912,127 in the fourth quarter of 2022.
Full-year 2023 net income attributable to shareholders was
$232.9 million or $0.84 per diluted share, compared to net income
attributable to shareholders of $220.8 million, or $0.77 per diluted share, in the prior-year.
Adjusted net income was $373.7 million, or $1.36 per diluted share, compared to $329.0 million, or $1.14 per diluted share, in the prior-year. On
both a GAAP and adjusted basis, higher operating income fueled by
improved margin performance drove the bulk of the improvement
compared to the prior year period. The diluted weighted-average
number of shares outstanding in 2023 was 275,648,328 compared to
287,586,210 in 2022.
Fourth-quarter net income from continuing operations was
$69.2 million, or 8.0% of net
sales, compared to $90.2 million
or 10.1% of net sales in the prior year quarter representing a
decline of 210 basis points year-over-year fueled by an increase in
other expense relative to the prior year period. Full-year 2023 net
income from continuing operations was $257.0 million, or 7.2% of net sales,
compared to $242.9 million or
6.8% of net sales in the prior year translating to an increase of
40 basis points year-over-year and driven by higher operating
income.
Fourth-quarter Adjusted EBITDA was $185.8 million compared to $166.0 million in the prior-year quarter.
Fourth-quarter Adjusted EBITDA margin of 21.5% represented an
expansion of 290 basis points compared to the prior-year quarter.
The increase in Adjusted EBITDA margin was fueled by commercial
execution and supply chain efficiencies, partially offset by lower
volume and less favorable mix.
Full-year 2023 Adjusted EBITDA was $747.0
million, or 20.9% of net sales, compared to $680.6 million, or 19.1% of net sales in the
prior-year. The improvement in Adjusted EBITDA was primarily
attributable to commercial execution and supply chain efficiencies
partially offset by lower volumes and higher labor and benefit
expenses.
Power Transmission Segment Results
|
For the three months
ended
|
|
|
|
|
(USD in
millions)
|
December 30,
2023
|
|
December 31,
2022
|
|
%
Change
|
|
% Core
Change
|
Net sales
|
$532.8
|
|
$552.6
|
|
(3.6 %)
|
|
(4.6 %)
|
Adjusted
EBITDA
|
$117.4
|
|
$101.9
|
|
15.2 %
|
|
|
Adjusted EBITDA
margin
|
22.0 %
|
|
18.4 %
|
|
360 bps
|
|
|
|
For the year
ended
|
|
|
|
|
(USD in
millions)
|
December 30,
2023
|
|
December 31,
2022
|
|
%
Change
|
|
% Core
Change
|
Net sales
|
$2,191.2
|
|
$2,173.7
|
|
0.8 %
|
|
1.7 %
|
Adjusted
EBITDA
|
$460.6
|
|
$404.0
|
|
14.0 %
|
|
|
Adjusted EBITDA
margin
|
21.0 %
|
|
18.6 %
|
|
240 bps
|
|
|
Fourth-quarter Power Transmission net sales decreased 3.6% to
$532.8 million compared to the
prior-year quarter, reflecting a core revenue decrease of 4.6%.
Solid growth in the Automotive end market was more than offset by
declines in Personal Mobility and Diversified Industrial. From a
channel perspective, Replacement net sales declined less
significantly than First Fit.
Full-year 2023 Power Transmission net sales increased 0.8% to
$2,191.2 million compared to the
prior-year, including a core revenue increase of 1.7%. Net and core
revenue growth was largely driven by the Automotive and On-Highway
markets and partially offset by declines in Personal Mobility and
Diversified Industrial. Replacement channel sales grew modestly
year-over-year on a core basis while First Fit sales declined
slightly.
Fourth-quarter Power Transmission Adjusted EBITDA was
$117.4 million compared
to $101.9 million in the prior-year quarter. The
year-over-year increase in Adjusted EBITDA was fueled by commercial
execution and supply chain improvements partially offset by lower
volume and unfavorable mix. Adjusted EBITDA margin of 22.0%
represented an improvement of 360 basis points compared to the
prior-year quarter.
Full-year 2023 Power Transmission Adjusted EBITDA was
$460.6 million compared to
$404.0 million in the
prior-year. Adjusted EBITDA margin of 21.0% expanded 240 basis
points relative to the prior-year primarily due to commercial
execution and supply chain efficiencies partially mitigated by
lower volumes.
Fluid Power Segment Results
|
For the three months
ended
|
|
|
|
|
(USD in
millions)
|
December 30,
2023
|
|
December 31,
2022
|
|
%
Change
|
|
% Core
Change
|
Net sales
|
$330.5
|
|
$340.7
|
|
(3.0 %)
|
|
(4.7 %)
|
Adjusted
EBITDA
|
$68.4
|
|
$64.1
|
|
6.7 %
|
|
|
Adjusted EBITDA
margin
|
20.7 %
|
|
18.8 %
|
|
190 bps
|
|
|
|
For the year
ended
|
|
|
|
|
(USD in
millions)
|
December 30,
2023
|
|
December 31,
2022
|
|
%
Change
|
|
% Core
Change
|
Net sales
|
$1,379.0
|
|
$1,380.5
|
|
(0.1 %)
|
|
(0.8 %)
|
Adjusted
EBITDA
|
$286.4
|
|
$276.6
|
|
3.5 %
|
|
|
Adjusted EBITDA
margin
|
20.8 %
|
|
20.0 %
|
|
80 bps
|
|
|
Fourth-quarter Fluid Power net sales decreased 3.0% to
$330.5 million compared to the
prior-year quarter. Core revenues decreased 4.7%. The segment
experienced net and core revenue declines in most end markets with
Agriculture and Diversified Industrial most impacted. Core revenues
increased modestly in the Energy end market. At the channel level,
First Fit sales realized a more significant decline than
Replacement.
Full-year 2023 Fluid Power net sales decreased 0.1% to
$1,379.0 million compared to the
prior-year, including a core revenue decrease of 0.8%. Net and core
revenue performance was mixed with Energy and Construction
contributing growth and Agriculture and Diversified Industrial
experiencing declines. Replacement core revenues were relatively
flat and First Fit realized a slight decline compared to the prior
year period.
Fourth-quarter Fluid Power Adjusted EBITDA was $68.4 million compared to $64.1 million in the prior-year quarter,
resulting in an Adjusted EBITDA margin of 20.7% and expansion of
190 basis points compared to the prior-year quarter. The increase
in Adjusted EBITDA was driven by commercial execution and supply
chain improvements partly offset by lower volume and less favorable
mix.
Full-year 2023 Fluid Power Adjusted EBITDA was $286.4 million compared to $276.6 million in 2022, resulting in an
Adjusted EBITDA margin of 20.8% and expansion of 80 basis points
compared to the prior-year. The margin expansion was primarily
driven by commercial execution and supply chain efficiencies
partially offset by lower volumes.
Liquidity and Capital Resources
During the fourth quarter of 2023, the Company generated
$189.3 million of cash from
operations. Fourth-quarter capital expenditures increased to
$24.2 million from $21.3 million in the prior-year quarter.
As of December 30, 2023, the Company had total cash and
cash equivalents of $720.6 million
and total outstanding debt of $2.5
billion, as well as committed borrowing headroom of
$470.3 million.
Share Repurchase Authorization Announced
The Company also announced that its Board of Directors has
authorized a share repurchase program of up to $100 million of
the Company's ordinary shares. This authorization is valid through
October 6, 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,
alternative investment opportunities and any applicable legal
requirements. 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.
2024 Guidance
The Company is introducing full year financial guidance for
2024. Specifically, the company offers the following:
- Core revenue growth in the range of (3%) to +1%
year-over-year
- Adjusted EBITDA of $725 million
to $785 million
- Adjusted Earnings Per Share of $1.28 to $1.43
- Capital Expenditures of approximately $100 million
- Free Cash Flow conversion exceeding 90%
Share-based metrics in the Company's guidance do not include the
effect of any potential 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
Revenue 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
Fourth-Quarter 2023 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 ("first-fit") manufacturers 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 such as agriculture,
construction, manufacturing and energy, to everyday consumer
applications such as printers, power washers, automatic doors and
vacuum cleaners and 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, the condition of our balance sheet,
and our ability to reduce our net leverage ratio), our ability to
create shareholder value, 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
Securities and Exchange Commission, 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
|
Consolidated Statements of
Operations
|
(Unaudited)
|
|
|
Three months
ended
|
|
Year ended
|
(USD in millions,
except per share amounts)
|
December 30,
2023
|
|
December 31,
2022
|
|
December 30,
2023
|
|
December 31,
2022
|
Net sales
|
$
863.3
|
|
$
893.3
|
|
$
3,570.2
|
|
$
3,554.2
|
Cost of
sales
|
525.6
|
|
583.3
|
|
2,211.3
|
|
2,303.6
|
Gross
profit
|
337.7
|
|
310.0
|
|
1,358.9
|
|
1,250.6
|
Selling, general and
administrative expenses
|
216.0
|
|
209.7
|
|
882.2
|
|
853.7
|
Transaction-related
expenses
|
0.1
|
|
0.1
|
|
2.2
|
|
2.1
|
Asset
impairments
|
—
|
|
—
|
|
0.1
|
|
1.1
|
Restructuring
expenses
|
1.3
|
|
1.1
|
|
11.6
|
|
9.5
|
Other operating
expenses
|
—
|
|
—
|
|
0.2
|
|
0.2
|
Operating income
from continuing operations
|
120.3
|
|
99.1
|
|
462.6
|
|
384.0
|
Interest
expense
|
38.4
|
|
40.5
|
|
163.2
|
|
139.4
|
Other expense
(income)
|
10.3
|
|
(25.0)
|
|
14.1
|
|
(13.2)
|
Income from
continuing operations before taxes
|
71.6
|
|
83.6
|
|
285.3
|
|
257.8
|
Income tax expense
(benefit)
|
2.4
|
|
(6.6)
|
|
28.3
|
|
14.9
|
Net income from
continuing operations
|
69.2
|
|
90.2
|
|
257.0
|
|
242.9
|
Loss on disposal of
discontinued operations
|
0.1
|
|
0.1
|
|
0.6
|
|
0.4
|
Net
income
|
69.1
|
|
90.1
|
|
256.4
|
|
242.5
|
Less: non-controlling
interests
|
6.2
|
|
5.2
|
|
23.5
|
|
21.7
|
Net income
attributable to shareholders
|
$
62.9
|
|
$
84.9
|
|
$
232.9
|
|
$
220.8
|
|
|
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
Earnings per share from
continuing operations
|
$
0.24
|
|
$
0.30
|
|
$
0.86
|
|
$
0.78
|
Earnings per share from
discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
Earnings per
share
|
$
0.24
|
|
$
0.30
|
|
$
0.86
|
|
$
0.78
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
Earnings per share from
continuing operations
|
$
0.24
|
|
$
0.30
|
|
$
0.84
|
|
$
0.77
|
Earnings per share from
discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
Earnings per
share
|
$
0.24
|
|
$
0.30
|
|
$
0.84
|
|
$
0.77
|
Gates Industrial
Corporation plc
|
Consolidated Balance
Sheets
|
(Unaudited)
|
|
(USD in millions,
except share numbers and per share amounts)
|
As of
December 30,
2023
|
|
As of
December 31,
2022
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
720.6
|
|
$
578.4
|
Trade accounts
receivable, net
|
768.2
|
|
808.6
|
Inventories
|
647.2
|
|
656.2
|
Taxes
receivable
|
30.4
|
|
13.0
|
Prepaid expenses and
other assets
|
234.9
|
|
221.2
|
Total current
assets
|
2,401.3
|
|
2,277.4
|
Non-current
assets
|
|
|
|
Property, plant and
equipment, net
|
630.0
|
|
637.5
|
Goodwill
|
2,038.7
|
|
1,981.1
|
Pension
surplus
|
8.6
|
|
10.1
|
Intangible assets,
net
|
1,386.1
|
|
1,490.4
|
Right-of-use
assets
|
120.1
|
|
132.2
|
Taxes
receivable
|
18.5
|
|
15.1
|
Deferred income
taxes
|
622.4
|
|
600.3
|
Other non-current
assets
|
28.8
|
|
47.5
|
Total
assets
|
$
7,254.5
|
|
$
7,191.6
|
Liabilities and
equity
|
|
|
|
Current
liabilities
|
|
|
|
Debt, current
portion
|
$
36.5
|
|
$
36.6
|
Trade accounts
payable
|
457.7
|
|
469.6
|
Taxes
payable
|
36.6
|
|
23.5
|
Accrued expenses and
other current liabilities
|
248.5
|
|
222.6
|
Total current
liabilities
|
779.3
|
|
752.3
|
Non-current
liabilities
|
|
|
|
Debt, less current
portion
|
2,415.0
|
|
2,426.4
|
Post-retirement benefit
obligations
|
83.8
|
|
76.2
|
Lease
liabilities
|
110.6
|
|
121.9
|
Taxes
payable
|
79.4
|
|
79.5
|
Deferred income
taxes
|
119.4
|
|
192.0
|
Other non-current
liabilities
|
123.1
|
|
99.7
|
Total
liabilities
|
3,710.6
|
|
3,748.0
|
Shareholders'
equity
|
|
|
|
—Shares, par value of
$0.01 each - authorized shares: 3,000,000,000; outstanding
shares:
264,259,788 (December 31, 2022: authorized shares:
3,000,000,000; outstanding shares:
282,578,917)
|
2.6
|
|
2.8
|
—Additional paid-in
capital
|
2,583.8
|
|
2,542.1
|
—Accumulated other
comprehensive loss
|
(828.5)
|
|
(917.8)
|
—Retained
earnings
|
1,462.3
|
|
1,482.9
|
Total shareholders'
equity
|
3,220.2
|
|
3,110.0
|
Non-controlling
interests
|
323.7
|
|
333.6
|
Total
equity
|
3,543.9
|
|
3,443.6
|
Total liabilities
and equity
|
$
7,254.5
|
|
$
7,191.6
|
Gates Industrial
Corporation plc
|
Consolidated Statements of Cash
Flows
|
(Unaudited)
|
|
|
Year ended
|
(USD in
millions)
|
December 30,
2023
|
|
December 31,
2022
|
Cash flows from
operating activities
|
|
|
|
Net income
|
$
256.4
|
|
$
242.5
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
217.5
|
|
217.2
|
Foreign exchange and
other non-cash financing (income) expenses
|
(24.8)
|
|
5.8
|
Share-based
compensation expense
|
27.4
|
|
44.3
|
Decrease in
post-employment benefit obligations, net
|
(9.9)
|
|
(16.0)
|
Deferred income
taxes
|
(65.7)
|
|
(79.7)
|
Asset
impairments
|
0.1
|
|
2.6
|
Other operating
activities
|
5.3
|
|
6.6
|
Changes in operating
assets and liabilities:
|
|
|
|
—Accounts
receivable
|
45.6
|
|
(129.3)
|
—Inventories
|
24.5
|
|
2.9
|
—Accounts
payable
|
(17.8)
|
|
(15.9)
|
—Prepaid expenses and
other assets
|
22.3
|
|
50.3
|
—Taxes
payable
|
(14.5)
|
|
(24.4)
|
—Other
liabilities
|
14.6
|
|
(41.1)
|
Net cash provided by
operating activities
|
481.0
|
|
265.8
|
Cash flows from
investing activities
|
|
|
|
Purchases of property,
plant and equipment
|
(61.2)
|
|
(77.6)
|
Purchases of intangible
assets
|
(10.2)
|
|
(9.4)
|
Cash paid under
corporate-owned life insurance policies
|
(18.2)
|
|
(11.6)
|
Cash received under
corporate-owned life insurance policies
|
6.6
|
|
6.0
|
Proceeds from the sale
of property, plant and equipment
|
1.2
|
|
—
|
Other investing
activities
|
—
|
|
1.9
|
Net cash used in
investing activities
|
(81.8)
|
|
(90.7)
|
Cash flows from
financing activities
|
|
|
|
Issuance of
shares
|
18.7
|
|
15.9
|
Buy-back of
shares
|
(251.7)
|
|
(175.9)
|
Proceeds from long-term
debt
|
100.0
|
|
645.0
|
Payments of long-term
debt
|
(119.6)
|
|
(676.9)
|
Debt issuance costs
paid
|
(1.3)
|
|
(23.3)
|
Dividends paid to
non-controlling interests
|
(18.2)
|
|
(28.7)
|
Other financing
activities
|
13.8
|
|
(9.2)
|
Net cash used in
financing activities
|
(258.3)
|
|
(253.1)
|
Effect of exchange rate
changes on cash and cash equivalents and restricted cash
|
1.7
|
|
(1.5)
|
Net increase
(decrease) in cash and cash equivalents and restricted
cash
|
142.6
|
|
(79.5)
|
Cash and cash
equivalents and restricted cash at the beginning of the
period
|
581.4
|
|
660.9
|
Cash and cash
equivalents and restricted cash at the end of the
period
|
$
724.0
|
|
$
581.4
|
Supplemental
schedule of cash flow information
|
|
|
|
Interest
paid
|
$
155.1
|
|
$
118.7
|
Income taxes
paid
|
$
110.5
|
|
$
117.8
|
Accrued capital
expenditures
|
$
0.6
|
|
$
1.9
|
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.
Core revenue 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 revenue 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.
Management uses Net Leverage as a measure of our liquidity and
in assessing the strength of our balance sheet. Net Leverage is a
non-GAAP measure that represents the number of times by which net
debt (principal amount of debt less cash and cash equivalents)
exceeds Adjusted EBITDA for the last twelve months of the
applicable period.
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
|
|
Year ended
|
(USD in
millions)
|
December 30,
2023
|
|
December 31,
2022
|
|
December 30,
2023
|
|
December 31,
2022
|
Net income from
continuing operations
|
$
69.2
|
|
$
90.2
|
|
$
257.0
|
|
$
242.9
|
Adjusted
for:
|
|
|
|
|
|
|
|
Income tax expense
(benefit)
|
2.4
|
|
(6.6)
|
|
28.3
|
|
14.9
|
Net interest and other
expenses
|
48.7
|
|
15.5
|
|
177.3
|
|
126.2
|
Depreciation and
amortization
|
55.0
|
|
53.1
|
|
217.5
|
|
217.2
|
Transaction-related
expenses (1)
|
0.1
|
|
0.1
|
|
2.2
|
|
2.1
|
Asset
impairments
|
—
|
|
—
|
|
0.1
|
|
1.1
|
Restructuring
expenses (2)
|
1.3
|
|
1.1
|
|
11.6
|
|
9.5
|
Share-based
compensation expense
|
7.8
|
|
9.5
|
|
27.4
|
|
44.3
|
Inventory impairments
and adjustments (3) (included in cost of
sales)
|
1.1
|
|
2.2
|
|
7.4
|
|
20.9
|
Severance expenses
(included in cost of sales)
|
—
|
|
0.8
|
|
0.4
|
|
0.8
|
Severance expenses
(included in SG&A)
|
0.1
|
|
0.1
|
|
1.0
|
|
0.5
|
Credit loss related to
customer bankruptcy (included in SG&A)
(4)
|
—
|
|
—
|
|
11.4
|
|
—
|
Cybersecurity incident
expenses (5)
|
0.1
|
|
—
|
|
5.2
|
|
—
|
Other items not
directly related to current operations
|
—
|
|
—
|
|
0.2
|
|
0.2
|
Adjusted
EBITDA
|
$
185.8
|
|
$
166.0
|
|
$
747.0
|
|
$
680.6
|
|
|
|
|
|
|
|
|
Net Sales
|
$
863.3
|
|
$
893.3
|
|
$
3,570.2
|
|
$
3,554.2
|
Adjusted EBITDA
Margin
|
21.5 %
|
|
18.6 %
|
|
20.9 %
|
|
19.1 %
|
|
|
|
|
|
|
|
|
Total principal amount
of debt
|
|
|
|
|
$
2,471.9
|
|
$
2,491.4
|
Less: Cash and cash
equivalents
|
|
|
|
|
(720.6)
|
|
(578.4)
|
Net
Debt
|
|
|
|
|
$
1,751.3
|
|
$
1,913.0
|
|
|
|
|
|
|
|
|
Net
Leverage
|
|
|
|
|
2.3 x
|
|
2.8 x
|
|
|
(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. The
recent inflationary environment has caused LIFO values to drop
below First-in, First-out ("FIFO") values because LIFO measurement
resulted in inflated costs being matched against sales while
current, lower costs are retained in inventories.
|
|
|
(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 have recorded an $11.4
million pre-tax charge to reflect our estimated recovery. We
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.
|
Gates Industrial
Corporation plc
|
Reconciliation of
Net Income Attributable to Shareholders to Adjusted Net
Income
|
(Unaudited)
|
|
|
Three months
ended
|
|
Year ended
|
(USD in millions,
except share numbers and per share amounts)
|
December 30,
2023
|
|
December 31,
2022
|
|
December 30,
2023
|
|
December 31,
2022
|
Net income
attributable to shareholders
|
$
62.9
|
|
$
84.9
|
|
$
232.9
|
|
$
220.8
|
Adjusted
for:
|
|
|
|
|
|
|
|
Loss on disposal of
discontinued operations
|
0.1
|
|
0.1
|
|
0.6
|
|
0.4
|
Amortization of
intangible assets arising from the
2014 acquisition of Gates
|
28.9
|
|
28.5
|
|
116.2
|
|
115.6
|
Transaction-related
expenses (1)
|
0.1
|
|
0.1
|
|
2.2
|
|
2.1
|
Asset
impairments
|
—
|
|
—
|
|
0.1
|
|
1.1
|
Restructuring expenses
(2)
|
1.3
|
|
1.1
|
|
11.6
|
|
9.5
|
Share-based
compensation expense
|
7.8
|
|
9.5
|
|
27.4
|
|
44.3
|
Inventory impairments
and adjustments (3) (included in cost of
sales)
|
1.1
|
|
2.2
|
|
7.4
|
|
20.9
|
Adjustments relating
to post-retirement benefits
|
(0.8)
|
|
(1.7)
|
|
(3.0)
|
|
(6.5)
|
Financing and other FX
related losses
|
16.7
|
|
(24.0)
|
|
26.8
|
|
(7.9)
|
One-time tax benefit
from unrecognized tax
benefit (4)
|
—
|
|
(26.4)
|
|
(12.3)
|
|
(26.4)
|
Credit loss related to
customer bankruptcy
(included in SG&A) (5)
|
—
|
|
—
|
|
11.4
|
|
—
|
Cybersecurity incident
expenses (6)
|
0.1
|
|
—
|
|
5.2
|
|
—
|
Other
adjustments
|
(0.2)
|
|
(0.3)
|
|
(4.7)
|
|
(6.2)
|
Estimated tax effect
of the above adjustments
|
(13.3)
|
|
(2.8)
|
|
(48.1)
|
|
(38.7)
|
Adjusted Net
Income
|
$
104.7
|
|
$
71.2
|
|
$
373.7
|
|
$
329.0
|
|
|
|
|
|
|
|
|
Diluted
weighted-average number of shares
outstanding
|
267,523,754
|
|
284,912,127
|
|
275,648,328
|
|
287,586,210
|
Adjusted Net Income
per diluted share
|
$
0.39
|
|
$
0.25
|
|
$
1.36
|
|
$
1.14
|
|
|
(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. The
recent inflationary environment has caused LIFO values to drop
below First-in, First-out ("FIFO") values because LIFO measurement
resulted in inflated costs being matched against sales while
current, lower costs are retained in inventories.
|
|
|
(4)
|
During the year ended
December 30, 2023, one-time tax benefit of $12.3 million
related to unrecognized tax benefits due to lapsed statute of
limitations.
|
|
|
(5)
|
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 have recorded an
$11.4 million pre-tax charge to reflect our estimated
recovery. We continue to monitor the circumstances surrounding the
bankruptcy in determining whether adjustments to this recovery
estimate are necessary.
|
|
|
(6)
|
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.
|
Gates Industrial
Corporation plc
|
Reconciliation of
Net Sales to Core Revenue Growth
|
(Unaudited)
|
|
|
Three months ended
December 30, 2023
|
(USD in
millions)
|
Power
Transmission
|
|
Fluid Power
|
|
Total
|
Net sales for the three
months ended December 30, 2023 (1)
|
$
532.8
|
|
$
330.5
|
|
$
863.3
|
Impact on net sales of
movements in currency rates
|
(5.8)
|
|
(5.7)
|
|
(11.5)
|
Core revenue for the
three months ended December 30, 2023
|
$
527.0
|
|
$
324.8
|
|
$
851.8
|
|
|
|
|
|
|
Net sales for the three
months ended December 31, 2022
|
552.6
|
|
340.7
|
|
893.3
|
Decrease in net
sales on a core basis (core revenue)
|
$
(25.6)
|
|
$
(15.9)
|
|
$
(41.5)
|
|
|
|
|
|
|
Core revenue
decline
|
(4.6 %)
|
|
(4.7 %)
|
|
(4.6 %)
|
|
|
|
Year ended
December 30, 2023
|
(USD in
millions)
|
Power
Transmission
|
|
Fluid Power
|
|
Total
|
Net sales for the year
ended December 30, 2023
|
$
2,191.2
|
|
$
1,379.0
|
|
$
3,570.2
|
Impact on net sales of
movements in currency rates
|
18.9
|
|
(10.0)
|
|
8.9
|
Core revenue for the
year ended December 30, 2023
|
$
2,210.1
|
|
$
1,369.0
|
|
$
3,579.1
|
|
|
|
|
|
|
Net sales for the year
ended December 31, 2022
|
2,173.7
|
|
1,380.5
|
|
3,554.2
|
Increase (decrease)
in net sales on a core basis (core revenue)
|
$
36.4
|
|
$
(11.5)
|
|
$
24.9
|
|
|
|
|
|
|
Core revenue growth
(decline)
|
1.7 %
|
|
(0.8 %)
|
|
0.7 %
|
|
|
(1)
|
Throughout this
document the terms "net sales" and "revenue" are used
interchangeably in reference to the GAAP measure "net
sales."
|
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SOURCE Gates Industrial Corporation plc