DENVER, Aug. 4, 2023
/PRNewswire/ --
Second-Quarter 2023 Financial Summary
- Record second-quarter net sales of $936.3 million, up 3.3% compared to the
prior-year period, including core revenue growth of 3.9%.
- Net income attributable to shareholders of $64.9 million, or $0.23 per diluted share.
- Adjusted Net Income per diluted share of $0.36.
- Net income from continuing operations of $71.3 million, or a margin of 7.6%.
- Adjusted EBITDA of $197.3
million, or a margin of 21.1%.
- Generated $183.9 million of
operating cash flow year to date, compared to $(81.8) million in the prior year.
- $250 million share repurchase
executed during May 2023.
- Raising 2023 full-year EPS guidance.
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
July 1, 2023.
Ivo Jurek, Gates Industrial's
Chief Executive Officer, commented, "We produced solid increases in
net income attributable to shareholders as well as core revenue
growth and strong margin expansion and cash flow generation. We
also reduced our net leverage ratio compared to the prior year
period and returned $250 million to
shareholders during the quarter."
Jurek continued, "We executed well in the first half of 2023. As
we enter the second half, our business prospects remain
constructive and the operating environment continues to normalize.
We are maintaining the midpoint of our Adjusted EBITDA guidance and
offsetting slower demand trends in the back half of the year. In
addition, we have increased our full year Adjusted EPS guidance.
Long-term, I am confident in our growth, margin and cash flow
generation potential and our ability to improve our balance sheet
while investing in our growth initiatives and returning meaningful
capital to shareholders."
Second-Quarter Financial Results
Second-quarter net sales were $936.3 million, an increase of 3.3% over the
prior-year quarter net sales of $906.8 million, including a 3.9% core
revenue increase partially offset by unfavorable foreign currency
impact of 0.6%. Our Replacement and First-Fit businesses
contributed similarly to our core growth in the quarter. Core
growth in the Automotive Replacement market exceeded the core
growth of the enterprise. The Automotive, Construction and
On-Highway end markets experienced the highest growth rates
compared to the prior-year period.
Second-quarter net income attributable to shareholders was
$64.9 million, or $0.23 per diluted share, compared to net income
attributable to shareholders of $53.1 million, or $0.19 per diluted share, in the prior-year
quarter. Adjusted Net Income was $101.6 million, or $0.36 per diluted share, compared to $90.2 million, or $0.32 per diluted share in the prior-year period,
fueled by improved operating performance. The diluted
weighted-average number of shares outstanding in the second quarter
of 2023 was 279,915,448 compared to 286,038,818 in the second
quarter of 2022.
Second quarter net income from continuing operations was
$71.3 million, or 7.6% of net
sales, compared to $59.3 million, or 6.5% of net sales in the
prior-year quarter. The margin improvement was fueled primarily by
increased operating income partially offset by higher net interest
expense.
Second-quarter Adjusted EBITDA was $197.3
million compared to $180.1
million in the prior-year quarter. Second-quarter Adjusted
EBITDA margin of 21.1% represented an expansion of 120 basis points
compared to the prior-year quarter. The increase in Adjusted EBITDA
margin stemmed largely from favorable pricing slightly offset by
lower volumes.
Power Transmission
Segment Results
|
|
|
For the three months
ended
|
|
|
|
|
(USD in
millions)
|
July 1,
2023
|
|
July 2,
2022
|
|
%
Change
|
|
% Core
Change
|
Net sales
|
$573.9
|
|
$543.0
|
|
5.7 %
|
|
7.0 %
|
Adjusted
EBITDA
|
$119.0
|
|
$102.4
|
|
16.2 %
|
|
|
Adjusted EBITDA
margin
|
20.7 %
|
|
18.9 %
|
|
180 bps
|
|
|
|
|
|
|
|
|
|
For the six months
ended
|
|
|
|
|
(USD in
millions)
|
July 1,
2023
|
|
July 2,
2022
|
|
%
Change
|
|
% Core
Change
|
Net sales
|
$1,122.0
|
|
$1,098.6
|
|
2.1 %
|
|
5.1 %
|
Adjusted
EBITDA
|
$226.7
|
|
$200.2
|
|
13.2 %
|
|
|
Adjusted EBITDA
margin
|
20.2 %
|
|
18.2 %
|
|
200 bps
|
|
|
Second-quarter Power Transmission net sales increased 5.7% to
$573.9 million compared to the
prior-year quarter, reflecting a core revenue increase of 7.0%,
excluding unfavorable currency effects of 1.3%. The segment saw the
highest core growth rates in the Automotive, On-Highway and
Construction end markets. Core growth was relatively balanced
between the first-fit and replacement channels.
Second-quarter Power Transmission Adjusted EBITDA was
$119.0 million compared to
$102.4 million in the prior-year
quarter. The expansion in Adjusted EBITDA was driven by favorable
pricing offset partially by lower fixed cost absorption. Adjusted
EBITDA margin of 20.7% represented an improvement of 180 basis
points compared to the prior-year quarter.
Fluid Power Segment
Results
|
|
|
For the three months
ended
|
|
|
|
|
(USD in
millions)
|
July 1,
2023
|
|
July 2,
2022
|
|
%
Change
|
|
% Core
Change
|
Net sales
|
$362.4
|
|
$363.8
|
|
(0.4 %)
|
|
(0.8 %)
|
Adjusted
EBITDA
|
$78.3
|
|
$77.7
|
|
0.8 %
|
|
|
Adjusted EBITDA
margin
|
21.6 %
|
|
21.4 %
|
|
20 bps
|
|
|
|
|
|
|
|
|
|
For the six months
ended
|
|
|
|
|
(USD in
millions)
|
July 1,
2023
|
|
July 2,
2022
|
|
%
Change
|
|
% Core
Change
|
Net sales
|
$712.0
|
|
$701.6
|
|
1.5 %
|
|
2.1 %
|
Adjusted
EBITDA
|
$145.1
|
|
$136.7
|
|
6.1 %
|
|
|
Adjusted EBITDA
margin
|
20.4 %
|
|
19.5 %
|
|
90 bps
|
|
|
Second-quarter Fluid Power net sales decreased 0.4% to
$362.4 million compared to the
prior-year quarter, reflecting a core revenue decrease of 0.8%.
Foreign currency effects were favorable by 0.4%. The segment
experienced core revenue growth in the Construction, Energy and
On-Highway end markets. The replacement channels slightly
outperformed the first-fit channels.
Second-quarter Fluid Power Adjusted EBITDA was $78.3 million compared to $77.7 million in the prior-year quarter,
resulting in an Adjusted EBITDA margin of 21.6% and expansion of 20
basis points compared to the prior-year quarter. The increase in
Adjusted EBITDA was driven by favorable pricing partially offset by
lower volumes.
Liquidity and Capital Resources
During the second quarter of 2023, the Company generated
$131.4 million of cash from
operations. Second-quarter capital expenditures decreased to
$15.2 million from $20.1 million in the prior-year quarter.
As of July 1, 2023, the Company had total cash and cash
equivalents of $565.0 million and
total outstanding debt of $2.6
billion, as well as committed borrowing headroom of
$368.0 million.
2023 Guidance
The Company is updating its full year financial guidance for
2023. Specifically, the company updates the following:
|
Prior
2023
|
Updated
2023
|
Change (At
Midpoint)
|
Core Revenue
Growth
|
1 to 5%
|
0 to 2%
|
(2) %
|
Adjusted
EBITDA
|
$700 to $750
Million
|
$710 to $740
Million
|
No Change
|
Adjusted EPS
|
$1.13 to
$1.23
|
$1.18 to
$1.24
|
+$0.03
|
Capital
Expenditures
|
~$100
Million
|
<$100
Million
|
Down
Slightly
|
Free Cash Flow
Conversion
|
100 %
|
100%+
|
Higher
|
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 EPS and Free Cash Flow
Conversion for 2023. 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 10:00 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 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 our growth, business prospects, margin expansion and
cash flow generation), statements regarding the operating
environment, demand and backlog trends, cash flow generation
capabilities, our balance sheet management, capital deployment
options (including share repurchases), and statements regarding our
outlook for 2023. 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, bank failures, 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 largest 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 31,
2022, 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)
|
July 1,
2023
|
|
July 2,
2022
|
|
July 1,
2023
|
|
July 2,
2022
|
Net sales
|
$
936.3
|
|
$
906.8
|
|
$
1,834.0
|
|
$
1,800.2
|
Cost of
sales
|
583.6
|
|
580.6
|
|
1,156.2
|
|
1,169.1
|
Gross
profit
|
352.7
|
|
326.2
|
|
677.8
|
|
631.1
|
Selling, general and
administrative expenses
|
220.7
|
|
209.1
|
|
452.8
|
|
444.3
|
Transaction-related
expenses
|
0.6
|
|
0.5
|
|
0.8
|
|
1.3
|
Asset
impairments
|
—
|
|
0.6
|
|
—
|
|
0.6
|
Restructuring
expenses
|
2.2
|
|
3.2
|
|
7.7
|
|
3.7
|
Other operating
expenses
|
0.1
|
|
0.1
|
|
0.1
|
|
0.1
|
Operating income
from continuing operations
|
129.1
|
|
112.7
|
|
216.4
|
|
181.1
|
Interest
expense
|
44.5
|
|
33.0
|
|
85.3
|
|
65.6
|
Other
expenses
|
3.7
|
|
8.1
|
|
4.0
|
|
8.7
|
Income from
continuing operations before taxes
|
80.9
|
|
71.6
|
|
127.1
|
|
106.8
|
Income tax
expense
|
9.6
|
|
12.3
|
|
24.9
|
|
10.1
|
Net income from
continuing operations
|
71.3
|
|
59.3
|
|
102.2
|
|
96.7
|
Loss on disposal of
discontinued operations
|
0.1
|
|
0.2
|
|
0.4
|
|
0.3
|
Net
income
|
71.2
|
|
59.1
|
|
101.8
|
|
96.4
|
Less: non-controlling
interests
|
6.3
|
|
6.0
|
|
10.5
|
|
12.4
|
Net income
attributable to shareholders
|
$
64.9
|
|
$
53.1
|
|
$
91.3
|
|
$
84.0
|
|
|
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
Earnings per share from
continuing operations
|
$
0.24
|
|
$
0.19
|
|
$
0.33
|
|
$
0.29
|
Earnings per share from
discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
Earnings per
share
|
$
0.24
|
|
$
0.19
|
|
$
0.33
|
|
$
0.29
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
Earnings per share from
continuing operations
|
$
0.23
|
|
$
0.19
|
|
$
0.32
|
|
$
0.29
|
Earnings per share from
discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
Earnings per
share
|
$
0.23
|
|
$
0.19
|
|
$
0.32
|
|
$
0.29
|
Gates Industrial
Corporation plc Condensed Consolidated Balance
Sheets (Unaudited)
|
|
(USD in millions,
except share numbers and per share amounts)
|
As
of July 1, 2023
|
|
As
of December 31, 2022
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
565.0
|
|
$
578.4
|
Trade accounts
receivable, net
|
874.8
|
|
808.6
|
Inventories
|
644.4
|
|
656.2
|
Taxes
receivable
|
39.8
|
|
13.0
|
Prepaid expenses and
other assets
|
250.4
|
|
221.2
|
Total current
assets
|
2,374.4
|
|
2,277.4
|
Non-current
assets
|
|
|
|
Property, plant and
equipment, net
|
633.8
|
|
637.5
|
Goodwill
|
2,018.0
|
|
1,981.1
|
Pension
surplus
|
10.1
|
|
10.1
|
Intangible assets,
net
|
1,438.5
|
|
1,490.4
|
Right-of-use
assets
|
126.2
|
|
132.2
|
Taxes
receivable
|
15.1
|
|
15.1
|
Deferred income
taxes
|
618.4
|
|
600.3
|
Other non-current
assets
|
42.4
|
|
47.5
|
Total
assets
|
$
7,276.9
|
|
$
7,191.6
|
Liabilities and
equity
|
|
|
|
Current
liabilities
|
|
|
|
Debt, current
portion
|
$
36.7
|
|
$
36.6
|
Trade accounts
payable
|
470.7
|
|
469.6
|
Taxes
payable
|
52.5
|
|
23.5
|
Accrued expenses and
other current liabilities
|
238.3
|
|
222.6
|
Total current
liabilities
|
798.2
|
|
752.3
|
Non-current
liabilities
|
|
|
|
Debt, less current
portion
|
2,520.6
|
|
2,426.4
|
Post-retirement benefit
obligations
|
74.2
|
|
76.2
|
Lease
liabilities
|
117.3
|
|
121.9
|
Taxes
payable
|
77.3
|
|
79.5
|
Deferred income
taxes
|
176.5
|
|
192.0
|
Other non-current
liabilities
|
121.8
|
|
99.7
|
Total
liabilities
|
3,885.9
|
|
3,748.0
|
Shareholders'
equity
|
|
|
|
—Shares, par value of
$0.01 each - authorized shares: 3,000,000,000; outstanding
shares:
263,685,743 (December 31, 2022: authorized shares:
3,000,000,000; outstanding shares:
282,578,917)
|
2.6
|
|
2.8
|
—Additional paid-in
capital
|
2,573.1
|
|
2,542.1
|
—Accumulated other
comprehensive loss
|
(825.9)
|
|
(917.8)
|
—Retained
earnings
|
1,320.6
|
|
1,482.9
|
Total shareholders'
equity
|
3,070.4
|
|
3,110.0
|
Non-controlling
interests
|
320.6
|
|
333.6
|
Total
equity
|
3,391.0
|
|
3,443.6
|
Total liabilities
and equity
|
$
7,276.9
|
|
$
7,191.6
|
Gates Industrial
Corporation plc Condensed Consolidated Statements
of Cash Flows (Unaudited)
|
|
|
Six months
ended
|
(USD in
millions)
|
July 1, 2023
|
|
July 2, 2022
|
Cash flows from
operating activities
|
|
|
|
Net income
|
$
101.8
|
|
$
96.4
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
108.5
|
|
110.9
|
Foreign exchange and
other non-cash financing expenses
|
20.5
|
|
25.1
|
Share-based
compensation expense
|
16.3
|
|
27.6
|
Decrease in
post-employment benefit obligations, net
|
(5.1)
|
|
(7.9)
|
Deferred income
taxes
|
(22.3)
|
|
(30.8)
|
Asset
impairments
|
—
|
|
0.9
|
Other operating
activities
|
3.5
|
|
4.3
|
Changes in operating
assets and liabilities:
|
|
|
|
—Increase in accounts
receivable
|
(66.8)
|
|
(153.5)
|
—Decrease (increase)
in inventories
|
23.0
|
|
(40.3)
|
—Decrease in accounts
payable
|
(2.1)
|
|
(5.7)
|
—Decrease (increase)
in prepaid expenses and other assets
|
7.6
|
|
(38.0)
|
—Decrease in taxes
payable
|
(0.8)
|
|
(27.8)
|
—Decrease in other
liabilities
|
(0.2)
|
|
(43.0)
|
Net cash provided by
(used in) operating activities
|
183.9
|
|
(81.8)
|
Cash flows from
investing activities
|
|
|
|
Purchases of property,
plant and equipment
|
(24.4)
|
|
(34.9)
|
Purchases of intangible
assets
|
(5.4)
|
|
(3.2)
|
Cash paid under
corporate-owned life insurance policies
|
(17.0)
|
|
(10.3)
|
Cash received under
corporate-owned life insurance policies
|
5.3
|
|
4.6
|
Proceeds from the sale
of property, plant and equipment
|
0.4
|
|
—
|
Other investing
activities
|
—
|
|
1.2
|
Net cash used in
investing activities
|
(41.1)
|
|
(42.6)
|
Cash flows from
financing activities
|
|
|
|
Issuance of
shares
|
16.7
|
|
13.9
|
Buy-back of
shares
|
(251.7)
|
|
(175.8)
|
Proceeds from long-term
debt
|
100.0
|
|
70.0
|
Payments of long-term
debt
|
(9.8)
|
|
(10.3)
|
Debt issuance costs
paid
|
(0.3)
|
|
(0.3)
|
Dividends paid to
non-controlling interests
|
—
|
|
(14.5)
|
Other financing
activities
|
(15.3)
|
|
(10.3)
|
Net cash used in
financing activities
|
(160.4)
|
|
(127.3)
|
Effect of exchange rate
changes on cash and cash equivalents and restricted cash
|
4.4
|
|
(12.9)
|
Net decrease in cash
and cash equivalents and restricted cash
|
(13.2)
|
|
(264.6)
|
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
|
$
568.2
|
|
$
396.3
|
Supplemental
schedule of cash flow information
|
|
|
|
Interest
paid
|
$
76.6
|
|
$
57.4
|
Income taxes
paid
|
$
48.0
|
|
$
68.7
|
Accrued capital
expenditures
|
$
1.6
|
|
$
2.5
|
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
|
|
Six months
ended
|
(USD in
millions)
|
July 1,
2023
|
|
July 2,
2022
|
|
July 1,
2023
|
|
July 2,
2022
|
Net income from
continuing operations
|
$
71.3
|
|
$
59.3
|
|
$
102.2
|
|
$
96.7
|
Adjusted
for:
|
|
|
|
|
|
|
|
Income tax
expense
|
9.6
|
|
12.3
|
|
24.9
|
|
10.1
|
Net interest and other
expenses
|
48.2
|
|
41.1
|
|
89.3
|
|
74.3
|
Depreciation and
amortization
|
54.0
|
|
55.8
|
|
108.5
|
|
110.9
|
Transaction-related
expenses (1)
|
0.6
|
|
0.5
|
|
0.8
|
|
1.3
|
Asset
impairments
|
—
|
|
0.6
|
|
—
|
|
0.6
|
Restructuring
expenses (2)
|
2.2
|
|
3.2
|
|
7.7
|
|
3.7
|
Share-based
compensation expense
|
6.8
|
|
3.5
|
|
16.3
|
|
27.6
|
Inventory impairments
and adjustments (3) (included in cost of
sales)
|
3.5
|
|
3.6
|
|
4.1
|
|
11.2
|
Severance expenses
(included in cost of sales)
|
—
|
|
—
|
|
0.5
|
|
—
|
Severance expenses
(included in SG&A)
|
0.3
|
|
0.1
|
|
0.9
|
|
0.4
|
Credit loss related to
customer bankruptcy
(included in SG&A) (4)
|
0.7
|
|
—
|
|
11.4
|
|
—
|
Cybersecurity incident
expenses (5)
|
—
|
|
—
|
|
5.1
|
|
—
|
Other items not
directly related to current
operations
|
0.1
|
|
0.1
|
|
0.1
|
|
0.1
|
Adjusted
EBITDA
|
$
197.3
|
|
$
180.1
|
|
$
371.8
|
|
$
336.9
|
|
|
|
|
|
|
|
|
Net Sales
|
$
936.3
|
|
$
906.8
|
|
$
1,834.0
|
|
$
1,800.2
|
Adjusted EBITDA
Margin
|
21.1 %
|
|
19.9 %
|
|
20.3 %
|
|
18.7 %
|
(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
inflationary environment of the prior year period 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 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.
|
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)
|
July 1,
2023
|
|
July 2,
2022
|
|
July 1,
2023
|
|
July 2,
2022
|
Net income
attributable to shareholders
|
$
64.9
|
|
$
53.1
|
|
$
91.3
|
|
$
84.0
|
Adjusted
for:
|
|
|
|
|
|
|
|
Loss on disposal of
discontinued operations
|
0.1
|
|
0.2
|
|
0.4
|
|
0.3
|
Amortization of
intangible assets arising from
the 2014 acquisition of Gates
|
29.2
|
|
29.1
|
|
58.2
|
|
58.7
|
Transaction-related
expenses (1)
|
0.6
|
|
0.5
|
|
0.8
|
|
1.3
|
Asset
impairments
|
—
|
|
0.6
|
|
—
|
|
0.6
|
Restructuring expenses
(2)
|
2.2
|
|
3.2
|
|
7.7
|
|
3.7
|
Share-based
compensation expense
|
6.8
|
|
3.5
|
|
16.3
|
|
27.6
|
Inventory impairments
and adjustments (3) (included in cost of
sales)
|
3.5
|
|
3.6
|
|
4.1
|
|
11.2
|
Adjustments relating
to post-retirement benefits
|
(0.8)
|
|
(1.6)
|
|
(1.5)
|
|
(3.2)
|
Financing and other FX
related losses
|
6.0
|
|
9.6
|
|
7.6
|
|
12.1
|
Credit loss related to
customer bankruptcy
(included in SG&A) (4)
|
0.7
|
|
—
|
|
11.4
|
|
—
|
Cybersecurity incident
expenses (5)
|
—
|
|
—
|
|
5.1
|
|
—
|
Other
adjustments
|
(0.8)
|
|
(1.6)
|
|
(2.6)
|
|
(3.7)
|
Estimated tax effect
of the above adjustments
|
(10.8)
|
|
(10.0)
|
|
(24.4)
|
|
(24.2)
|
Adjusted Net
Income
|
$
101.6
|
|
$
90.2
|
|
$
174.4
|
|
$
168.4
|
|
|
|
|
|
|
|
|
Diluted
weighted-average number of shares
outstanding
|
279,915,448
|
|
286,038,818
|
|
283,953,084
|
|
290,550,618
|
Adjusted Net Income
per diluted share
|
$
0.36
|
|
$
0.32
|
|
$
0.61
|
|
$
0.58
|
(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
inflationary environment of the prior year period 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 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.
|
Gates Industrial
Corporation plc Reconciliation of Net Sales to Core
Revenue Growth (Unaudited)
|
|
|
Three months ended
July 1, 2023
|
(USD in
millions)
|
Power
Transmission
|
|
Fluid Power
|
|
Total
|
Net sales for the three
months ended July 1, 2023 (1)
|
$
573.9
|
|
$
362.4
|
|
$
936.3
|
Impact on net sales of
movements in currency rates
|
7.1
|
|
(1.6)
|
|
5.5
|
Core revenue for the
three months ended July 1, 2023
|
$
581.0
|
|
$
360.8
|
|
$
941.8
|
|
|
|
|
|
|
Net sales for the three
months ended July 2, 2022
|
543.0
|
|
363.8
|
|
906.8
|
Increase (decrease)
in net sales on a core basis (core revenue)
|
$
38.0
|
|
$
(3.0)
|
|
$
35.0
|
|
|
|
|
|
|
Core revenue growth
(decline)
|
7.0 %
|
|
(0.8 %)
|
|
3.9 %
|
|
|
Six months ended
July 1, 2023
|
(USD in
millions)
|
Power
Transmission
|
|
Fluid Power
|
|
Total
|
Net sales for the year
ended July 1, 2023
|
$
1,122.0
|
|
$
712.0
|
|
$
1,834.0
|
Impact on net sales of
movements in currency rates
|
32.5
|
|
4.1
|
|
36.6
|
Core revenue for the
year ended July 1, 2023
|
$
1,154.5
|
|
$
716.1
|
|
$
1,870.6
|
|
|
|
|
|
|
Net sales for the year
ended July 2, 2022
|
1,098.6
|
|
701.6
|
|
1,800.2
|
Increase in net
sales on a core basis (core revenue)
|
$
55.9
|
|
$
14.5
|
|
$
70.4
|
|
|
|
|
|
|
Core revenue
growth
|
5.1 %
|
|
2.1 %
|
|
3.9 %
|
(1)
|
Throughout this
document the terms "net sales" and "revenue" are used
interchangeably in reference to the GAAP measure "net
sales."
|
View original content to download
multimedia:https://www.prnewswire.com/news-releases/gates-industrial-reports-second-quarter-2023-results-301893333.html
SOURCE Gates Industrial Corporation plc