DENVER, Nov. 3, 2023
/PRNewswire/ --
Third-Quarter 2023 Financial Summary
- Record third-quarter net sales of $872.9
million, up 1.4% compared to the prior-year period and
representing a core revenue decrease of (0.5)% year-over-year.
- Net income attributable to shareholders of $78.7 million, or $0.29 per diluted share.
- Adjusted Net Income per diluted share of $0.35.
- Net income from continuing operations of $85.6 million, or a margin of 9.8%.
- Adjusted EBITDA of $189.4
million, or a margin of 21.7%.
- Generated $291.7 million of
operating cash flow year to date, compared to $18.8 million in the prior year.
- Raising 2023 full-year adjusted EPS and adjusted EBITDA
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 third quarter ended
September 30, 2023.
Ivo Jurek, Gates Industrial's
Chief Executive Officer, commented, "We generated record revenues
and diluted earnings per share for a third quarter. Our
year-over-year margin improvement was fueled by a 330 basis point
increase in gross margin and supported by various enterprise
initiatives. In addition, we generated solid free cash flow and
improved our balance sheet position relative to the prior year
period."
Jurek continued, "We have increased the midpoint of our full
year 2023 guidance for adjusted EBITDA and adjusted earnings per
share. I am pleased with our results year to date and appreciate
the hard work and diligence of our more than 15,000 employees. We
are highly focused on finishing 2023 strong and maintaining our
operational momentum heading in 2024."
Third-Quarter Financial Results
Third-quarter net sales were $872.9 million, an increase of 1.4% over the
prior-year quarter net sales of $860.7 million, including a 0.5% core
revenue decrease more than offset by a favorable foreign currency
impact of 1.9%. Our Replacement business grew year-over-year and
partially mitigated slower activity in our Industrial First-Fit
businesses. Automotive Replacement core revenues increased in the
mid-single digit range year-over-year. The company generated solid
core growth in the On-Highway, Automotive and Energy end markets
relative to the prior-year period.
Third-quarter net income attributable to shareholders was
$78.7 million, or $0.29 per diluted share, compared to net income
attributable to shareholders of $51.9 million, or $0.18 per diluted share, in the prior-year
quarter. Adjusted Net Income was $94.6 million, or $0.35 per diluted share, compared to $89.4 million, or $0.31 per diluted share in the prior-year period,
fueled by improved operating performance. The diluted
weighted-average number of shares outstanding in the third quarter
of 2023 was 267,835,011 compared to 285,174,344 in the third
quarter of 2022.
Third-quarter net income from continuing operations was
$85.6 million, or 9.8% of net
sales, compared to $56.0 million, or 6.5% of net sales in the
prior-year quarter representing an expansion of 330 basis points
year-over-year driven by higher operating income and lower income
tax expense partially offset by higher net interest expense.
Third-quarter Adjusted EBITDA was $189.4 million compared to $177.7 million in the prior-year quarter.
Third-quarter Adjusted EBITDA margin of 21.7% represented an
expansion of 110 basis points compared to the prior-year quarter.
The increase in Adjusted EBITDA margin stemmed largely from
favorable pricing slightly offset by inflation, lower volumes and
higher variable compensation expense.
Power Transmission Segment Results
|
For the three months
ended
|
|
|
|
|
(USD in
millions)
|
September 30,
2023
|
|
October 1,
2022
|
|
%
Change
|
|
% Core
Change
|
Net sales
|
$536.4
|
|
$522.5
|
|
2.7 %
|
|
1.2 %
|
Adjusted
EBITDA
|
$116.5
|
|
$101.9
|
|
14.3 %
|
|
|
Adjusted EBITDA
margin
|
21.7 %
|
|
19.5 %
|
|
220 bps
|
|
|
|
|
|
|
|
|
|
For the nine months
ended
|
|
|
|
|
(USD in
millions)
|
September 30,
2023
|
|
October 1,
2022
|
|
%
Change
|
|
% Core
Change
|
Net sales
|
$1,658.4
|
|
$1,621.1
|
|
2.3 %
|
|
3.8 %
|
Adjusted
EBITDA
|
$343.2
|
|
$302.1
|
|
13.6 %
|
|
|
Adjusted EBITDA
margin
|
20.7 %
|
|
18.6 %
|
|
210 bps
|
|
|
Third-quarter Power Transmission net sales increased 2.7% to
$536.4 million compared to the
prior-year quarter, reflecting a core revenue increase of 1.2%,
excluding favorable currency effects of 1.5%. The segment saw
the highest core growth rates in the Automotive, On-Highway,
Construction and Energy end markets. The replacement channels
posted moderate core growth year-over-year partially offset by a
modest decrease in first-fit core revenues.
Third-quarter Power Transmission Adjusted EBITDA was
$116.5 million compared
to $101.9 million in the prior-year quarter. The
expansion in Adjusted EBITDA was driven by pricing offset partially
by lower volumes. Adjusted EBITDA margin of 21.7% represented an
improvement of 220 basis points compared to the prior-year
quarter.
Fluid Power Segment Results
|
For the three months
ended
|
|
|
|
|
(USD in
millions)
|
September 30,
2023
|
|
October 1,
2022
|
|
%
Change
|
|
% Core
Change
|
Net sales
|
$336.5
|
|
$338.2
|
|
(0.5 %)
|
|
(3.0 %)
|
Adjusted
EBITDA
|
$72.9
|
|
$75.8
|
|
(3.8 %)
|
|
|
Adjusted EBITDA
margin
|
21.7 %
|
|
22.4 %
|
|
(70 bps)
|
|
|
|
|
|
|
|
|
|
For the nine months
ended
|
|
|
|
|
(USD in
millions)
|
September 30,
2023
|
|
October 1,
2022
|
|
%
Change
|
|
% Core
Change
|
Net sales
|
$1,048.5
|
|
$1,039.8
|
|
0.8 %
|
|
0.4 %
|
Adjusted
EBITDA
|
$218.0
|
|
$212.5
|
|
2.6 %
|
|
|
Adjusted EBITDA
margin
|
20.8 %
|
|
20.4 %
|
|
40 bps
|
|
|
Third-quarter Fluid Power net sales decreased 0.5% to
$336.5 million compared to the
prior-year quarter, reflecting a core revenue decrease of 3.0%.
Foreign currency effects were favorable by 2.5%. The segment
experienced core revenue growth in the Automotive, Energy and
On-Highway end markets. The replacement channels outperformed the
first-fit channels.
Third-quarter Fluid Power Adjusted EBITDA was $72.9 million compared to $75.8 million in the prior-year quarter,
resulting in an Adjusted EBITDA margin of 21.7%, a decline of 70
basis points compared to the prior-year quarter. The decrease in
Adjusted EBITDA was driven by lower volumes and higher variable
incentive compensation offset partially by pricing.
Liquidity and Capital Resources
During the third quarter of 2023, the Company generated
$107.8 million of cash from
operations. Third-quarter capital expenditures decreased to
$17.4 million from $27.6 million in the prior-year quarter.
As of September 30, 2023, the Company had total cash and
cash equivalents of $556.8 million
and total outstanding debt of $2.5
billion, as well as committed borrowing headroom of
$468.4 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
|
0 to 2%
|
0 to 2%
|
No Change
|
Adjusted
EBITDA
|
$710 to $740
Million
|
$725 to $735
Million
|
+$5 Million
|
Adjusted EPS
|
$1.18 to
$1.24
|
$1.22 to
$1.28
|
+$0.04
|
Capital
Expenditures
|
<$100
Million
|
<$85
Million
|
Lower
|
Free Cash Flow
Conversion
|
100%+
|
100%+
|
No Change
|
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
Third 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) 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, 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
|
|
Nine months
ended
|
(USD in millions,
except per share amounts)
|
September
30,
2023
|
|
October 1,
2022
|
|
September
30,
2023
|
|
October 1,
2022
|
Net sales
|
$
872.9
|
|
$
860.7
|
|
$
2,706.9
|
|
$
2,660.9
|
Cost of
sales
|
529.5
|
|
551.2
|
|
1,685.7
|
|
1,720.3
|
Gross
profit
|
343.4
|
|
309.5
|
|
1,021.2
|
|
940.6
|
Selling, general and
administrative expenses
|
213.4
|
|
199.7
|
|
666.2
|
|
644.0
|
Transaction-related
expenses
|
1.3
|
|
0.7
|
|
2.1
|
|
2.0
|
Asset
impairments
|
0.1
|
|
0.5
|
|
0.1
|
|
1.1
|
Restructuring
expenses
|
2.6
|
|
4.7
|
|
10.3
|
|
8.4
|
Other operating
expenses
|
0.1
|
|
0.1
|
|
0.2
|
|
0.2
|
Operating income
from continuing operations
|
125.9
|
|
103.8
|
|
342.3
|
|
284.9
|
Interest
expense
|
39.5
|
|
33.3
|
|
124.8
|
|
98.9
|
Other (income)
expense
|
(0.2)
|
|
3.1
|
|
3.8
|
|
11.8
|
Income from
continuing operations before taxes
|
86.6
|
|
67.4
|
|
213.7
|
|
174.2
|
Income tax
expense
|
1.0
|
|
11.4
|
|
25.9
|
|
21.5
|
Net income from
continuing operations
|
85.6
|
|
56.0
|
|
187.8
|
|
152.7
|
Loss on disposal of
discontinued operations
|
0.1
|
|
—
|
|
0.5
|
|
0.3
|
Net
income
|
85.5
|
|
56.0
|
|
187.3
|
|
152.4
|
Less: non-controlling
interests
|
6.8
|
|
4.1
|
|
17.3
|
|
16.5
|
Net income
attributable to shareholders
|
$
78.7
|
|
$
51.9
|
|
$
170.0
|
|
$
135.9
|
|
|
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
Earnings per share from
continuing operations
|
$
0.30
|
|
$
0.18
|
|
$
0.62
|
|
$
0.48
|
Earnings per share from
discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
Earnings per
share
|
$
0.30
|
|
$
0.18
|
|
$
0.62
|
|
$
0.48
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
Earnings per share from
continuing operations
|
$
0.29
|
|
$
0.18
|
|
$
0.61
|
|
$
0.47
|
Earnings per share from
discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
Earnings per
share
|
$
0.29
|
|
$
0.18
|
|
$
0.61
|
|
$
0.47
|
Gates Industrial
Corporation plc
Condensed
Consolidated Balance Sheets
(Unaudited)
|
|
(USD in millions,
except share numbers and per share amounts)
|
As of
September 30,
2023
|
|
As of
December 31,
2022
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
556.8
|
|
$
578.4
|
Trade accounts
receivable, net
|
821.9
|
|
808.6
|
Inventories
|
646.1
|
|
656.2
|
Taxes
receivable
|
50.0
|
|
13.0
|
Prepaid expenses and
other assets
|
243.1
|
|
221.2
|
Total current
assets
|
2,317.9
|
|
2,277.4
|
Non-current
assets
|
|
|
|
Property, plant and
equipment, net
|
615.7
|
|
637.5
|
Goodwill
|
1,984.3
|
|
1,981.1
|
Pension
surplus
|
9.8
|
|
10.1
|
Intangible assets,
net
|
1,399.6
|
|
1,490.4
|
Right-of-use
assets
|
121.3
|
|
132.2
|
Taxes
receivable
|
15.1
|
|
15.1
|
Deferred income
taxes
|
607.8
|
|
600.3
|
Other non-current
assets
|
37.8
|
|
47.5
|
Total
assets
|
$
7,109.3
|
|
$
7,191.6
|
Liabilities and
equity
|
|
|
|
Current
liabilities
|
|
|
|
Debt, current
portion
|
$
27.7
|
|
$
36.6
|
Trade accounts
payable
|
441.1
|
|
469.6
|
Taxes
payable
|
68.3
|
|
23.5
|
Accrued expenses and
other current liabilities
|
243.3
|
|
222.6
|
Total current
liabilities
|
780.4
|
|
752.3
|
Non-current
liabilities
|
|
|
|
Debt, less current
portion
|
2,417.7
|
|
2,426.4
|
Post-retirement benefit
obligations
|
72.3
|
|
76.2
|
Lease
liabilities
|
111.9
|
|
121.9
|
Taxes
payable
|
65.0
|
|
79.5
|
Deferred income
taxes
|
165.5
|
|
192.0
|
Other non-current
liabilities
|
84.2
|
|
99.7
|
Total
liabilities
|
3,697.0
|
|
3,748.0
|
Shareholders'
equity
|
|
|
|
—Shares, par value of
$0.01 each - authorized shares: 3,000,000,000; outstanding
shares:
264,094,061 (December 31, 2022: authorized shares:
3,000,000,000; outstanding shares:
282,578,917)
|
2.6
|
|
2.8
|
—Additional paid-in
capital
|
2,575.7
|
|
2,542.1
|
—Accumulated other
comprehensive loss
|
(886.4)
|
|
(917.8)
|
—Retained
earnings
|
1,399.3
|
|
1,482.9
|
Total shareholders'
equity
|
3,091.2
|
|
3,110.0
|
Non-controlling
interests
|
321.1
|
|
333.6
|
Total
equity
|
3,412.3
|
|
3,443.6
|
Total liabilities
and equity
|
$
7,109.3
|
|
$
7,191.6
|
Gates Industrial
Corporation plc
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
Nine months
ended
|
(USD in
millions)
|
September 30,
2023
|
|
October 1,
2022
|
Cash flows from
operating activities
|
|
|
|
Net income
|
$
187.3
|
|
$
152.4
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
162.5
|
|
164.1
|
Foreign exchange and
other non-cash financing expenses
|
33.8
|
|
31.0
|
Share-based
compensation expense
|
19.6
|
|
34.8
|
Decrease in
post-employment benefit obligations, net
|
(7.0)
|
|
(11.5)
|
Deferred income
taxes
|
(39.2)
|
|
(53.2)
|
Asset
impairments
|
0.1
|
|
1.4
|
Other operating
activities
|
4.0
|
|
4.7
|
Changes in operating
assets and liabilities:
|
|
|
|
—Change in accounts
receivable
|
(22.9)
|
|
(147.2)
|
—Change in
inventories
|
12.0
|
|
(50.8)
|
—Change in accounts
payable
|
(24.4)
|
|
(17.3)
|
—Change in prepaid
expenses and other assets
|
12.8
|
|
(15.6)
|
—Change in taxes
payable
|
(5.8)
|
|
(23.0)
|
—Change in other
liabilities
|
(41.1)
|
|
(51.0)
|
Net cash provided by
operating activities
|
291.7
|
|
18.8
|
Cash flows from
investing activities
|
|
|
|
Purchases of property,
plant and equipment
|
(39.6)
|
|
(59.0)
|
Purchases of intangible
assets
|
(7.6)
|
|
(6.7)
|
Cash paid under
corporate-owned life insurance policies
|
(18.2)
|
|
(11.6)
|
Cash received under
corporate-owned life insurance policies
|
6.6
|
|
4.6
|
Proceeds from the sale
of property, plant and equipment
|
0.8
|
|
—
|
Other investing
activities
|
—
|
|
1.2
|
Net cash used in
investing activities
|
(58.0)
|
|
(71.5)
|
Cash flows from
financing activities
|
|
|
|
Issuance of
shares
|
17.5
|
|
15.1
|
Buy-back of
shares
|
(251.7)
|
|
(175.8)
|
Proceeds from long-term
debt
|
100.0
|
|
70.0
|
Payments of long-term
debt
|
(114.7)
|
|
(45.5)
|
Debt issuance costs
paid
|
(0.4)
|
|
(0.3)
|
Dividends paid to
non-controlling interests
|
(0.5)
|
|
(28.7)
|
Other financing
activities
|
8.1
|
|
(11.8)
|
Net cash used in
financing activities
|
(241.7)
|
|
(177.0)
|
Effect of exchange rate
changes on cash and cash equivalents and restricted cash
|
(13.3)
|
|
(32.8)
|
Net decrease in cash
and cash equivalents and restricted cash
|
(21.3)
|
|
(262.5)
|
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
|
$
560.1
|
|
$
398.4
|
Supplemental
schedule of cash flow information
|
|
|
|
Interest
paid
|
$
125.8
|
|
$
95.2
|
Income taxes
paid
|
$
70.9
|
|
$
97.7
|
Accrued capital
expenditures
|
$
1.4
|
|
$
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
|
|
Nine months
ended
|
(USD in
millions)
|
September
30,
2023
|
|
October 1,
2022
|
|
September
30,
2023
|
|
October 1,
2022
|
Net income from
continuing operations
|
$
85.6
|
|
$
56.0
|
|
$
187.8
|
|
$
152.7
|
Adjusted
for:
|
|
|
|
|
|
|
|
Income tax
expense
|
1.0
|
|
11.4
|
|
25.9
|
|
21.5
|
Net interest and other
expenses
|
39.3
|
|
36.4
|
|
128.6
|
|
110.7
|
Depreciation and
amortization
|
54.0
|
|
53.2
|
|
162.5
|
|
164.1
|
Transaction-related
expenses (1)
|
1.3
|
|
0.7
|
|
2.1
|
|
2.0
|
Asset
impairments
|
0.1
|
|
0.5
|
|
0.1
|
|
1.1
|
Restructuring
expenses (2)
|
2.6
|
|
4.7
|
|
10.3
|
|
8.4
|
Share-based
compensation expense
|
3.3
|
|
7.2
|
|
19.6
|
|
34.8
|
Inventory impairments
and adjustments (3) (included in cost of
sales)
|
2.2
|
|
7.5
|
|
6.3
|
|
18.7
|
Severance expenses
(included in cost of sales)
|
(0.1)
|
|
—
|
|
0.4
|
|
—
|
Severance expenses
(included in SG&A)
|
—
|
|
—
|
|
0.9
|
|
0.4
|
Credit loss related to
customer bankruptcy (included in SG&A)
(4)
|
—
|
|
—
|
|
11.4
|
|
—
|
Cybersecurity incident
expenses (5)
|
—
|
|
—
|
|
5.1
|
|
—
|
Other items not
directly related to current operations
|
0.1
|
|
0.1
|
|
0.2
|
|
0.2
|
Adjusted
EBITDA
|
$
189.4
|
|
$
177.7
|
|
$
561.2
|
|
$
514.6
|
|
|
|
|
|
|
|
|
Net Sales
|
$
872.9
|
|
$
860.7
|
|
$
2,706.9
|
|
$
2,660.9
|
Adjusted EBITDA
Margin
|
21.7 %
|
|
20.6 %
|
|
20.7 %
|
|
19.3 %
|
(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. 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
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
|
|
Nine months
ended
|
(USD in millions,
except share numbers and per share amounts)
|
September
30,
2023
|
|
October 1,
2022
|
|
September
30,
2023
|
|
October 1,
2022
|
Net income
attributable to shareholders
|
$
78.7
|
|
$
51.9
|
|
$
170.0
|
|
$
135.9
|
Adjusted
for:
|
|
|
|
|
|
|
|
Loss on disposal of
discontinued operations
|
0.1
|
|
—
|
|
0.5
|
|
0.3
|
Amortization of
intangible assets arising from the
2014 acquisition of Gates
|
29.1
|
|
28.4
|
|
87.3
|
|
87.1
|
Transaction-related
expenses (1)
|
1.3
|
|
0.7
|
|
2.1
|
|
2.0
|
Asset
impairments
|
0.1
|
|
0.5
|
|
0.1
|
|
1.1
|
Restructuring expenses
(2)
|
2.6
|
|
4.7
|
|
10.3
|
|
8.4
|
Share-based
compensation expense
|
3.3
|
|
7.2
|
|
19.6
|
|
34.8
|
Inventory impairments
and adjustments (3) (included in cost of
sales)
|
2.2
|
|
7.5
|
|
6.3
|
|
18.7
|
Adjustments relating
to post-retirement benefits
|
(0.7)
|
|
(1.6)
|
|
(2.2)
|
|
(4.8)
|
Financing and other FX
related losses
|
2.5
|
|
4.0
|
|
10.1
|
|
16.1
|
One-time tax benefit
from unrecognized tax
benefit (4)
|
(12.3)
|
|
—
|
|
(12.3)
|
|
—
|
Credit loss related to
customer bankruptcy
(included in SG&A) (5)
|
—
|
|
—
|
|
11.4
|
|
—
|
Cybersecurity incident
expenses (6)
|
—
|
|
—
|
|
5.1
|
|
—
|
Other
adjustments
|
(1.9)
|
|
(2.2)
|
|
(4.5)
|
|
(5.9)
|
Estimated tax effect
of the above adjustments
|
(10.4)
|
|
(11.7)
|
|
(34.8)
|
|
(35.9)
|
Adjusted Net
Income
|
$
94.6
|
|
$
89.4
|
|
$
269.0
|
|
$
257.8
|
|
|
|
|
|
|
|
|
Diluted
weighted-average number of shares
outstanding
|
267,835,011
|
|
285,174,344
|
|
278,488,060
|
|
288,359,685
|
Adjusted Net Income
per diluted share
|
$
0.35
|
|
$
0.31
|
|
$
0.97
|
|
$
0.89
|
(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)
|
During the three and
nine months ended September 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
September 30, 2023
|
(USD in
millions)
|
Power
Transmission
|
|
Fluid Power
|
|
Total
|
Net sales for the three
months ended September 30, 2023 (1)
|
$
536.4
|
|
$
336.5
|
|
$
872.9
|
Impact on net sales of
movements in currency rates
|
(7.8)
|
|
(8.4)
|
|
(16.2)
|
Core revenue for the
three months ended September 30, 2023
|
$
528.6
|
|
$
328.1
|
|
$
856.7
|
|
|
|
|
|
|
Net sales for the three
months ended October 1, 2022
|
522.5
|
|
338.2
|
|
860.7
|
Increase (decrease)
in net sales on a core basis (core revenue)
|
$
6.1
|
|
$
(10.1)
|
|
$
(4.0)
|
|
|
|
|
|
|
Core revenue growth
(decline)
|
1.2 %
|
|
(3.0 %)
|
|
(0.5 %)
|
|
|
Nine months
ended September 30,
2023
|
(USD in
millions)
|
Power
Transmission
|
|
Fluid Power
|
|
Total
|
Net sales for the year
ended September 30, 2023
|
$
1,658.4
|
|
$
1,048.5
|
|
$
2,706.9
|
Impact on net sales of
movements in currency rates
|
24.7
|
|
(4.3)
|
|
20.4
|
Core revenue for the
year ended September 30, 2023
|
$
1,683.1
|
|
$
1,044.2
|
|
$
2,727.3
|
|
|
|
|
|
|
Net sales for the year
ended October 1, 2022
|
1,621.1
|
|
1,039.8
|
|
2,660.9
|
Increase in net
sales on a core basis (core revenue)
|
$
62.0
|
|
$
4.4
|
|
$
66.4
|
|
|
|
|
|
|
Core revenue
growth
|
3.8 %
|
|
0.4 %
|
|
2.5 %
|
(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