DENVER, May 1, 2024
/PRNewswire/ --
First-Quarter 2024 Financial Summary
- First-quarter net sales of $862.6
million, down 3.9% compared to the prior-year period,
including core revenue decline of 3.6%.
- Net income attributable to shareholders of $40.0 million, or $0.15 per diluted share.
- Adjusted Net Income per diluted share of $0.31, inclusive of unfavorable tax impact.
- Net income from continuing operations of $46.2 million, or a margin of 5.4%.
- Adjusted EBITDA of $195.6 million
and margin of 22.7%.
- Increased full-year 2024 Adjusted EBITDA guidance.
Gates Industrial Corporation plc (NYSE:GTES), a leading global
provider of application-specific fluid power and power transmission
solutions, today reported results for the first quarter ended
March 30, 2024.
Ivo Jurek, Gates Industrial's
Chief Executive Officer, commented, "We produced strong
year-over-year margin expansion while experiencing softer
industrial demand. Our enterprise initiatives are building
momentum. I thank our global Gates associates for their commitment
and dedication to serving our customers and communities."
Jurek continued, "We reduced our gross debt during the quarter.
We have raised our full year Adjusted EBITDA guidance to reflect
our outperformance in the first quarter. We are off to a solid
start to the year and recent order improvement points to a more
stable business environment."
First-Quarter Financial Results
First-quarter net sales were $862.6 million, a decrease of 3.9% over the
prior-year quarter net sales of $897.7 million, reflecting a core sales
decrease of 3.6% and unfavorable foreign currency impact of 0.3%.
Core sales in our Replacement channels increased slightly and was
more than offset by a double-digit decline in First Fit. Automotive
Replacement sales increased mid-single digits on a core basis. The
Personal Mobility and Agriculture end markets realized the most
significant declines in core sales partially offset by growth in
Automotive and On Highway.
Net income attributable to shareholders in the first quarter of
2024 was $40.0 million, or
$0.15 per diluted share, compared to
$26.4 million, or $0.09 per diluted share in the first quarter of
2023. Compared to the prior-year period, a higher effective tax
rate reduced earnings per share by approximately $0.07. Adjusted Net Income for the first quarter
of 2024 was $83.5 million, or
$0.31 per diluted share, compared to
$72.8 million, or $0.25 per diluted share in the first quarter of
2023. Relative to the prior-year period, a higher effective tax
rate represented a $0.03 headwind to
adjusted earnings per share in the first quarter of 2024. The
diluted weighted average number of shares outstanding in the first
quarter of 2024 was 267,435,531 compared to 287,878,415 in the
first quarter of 2023.
First-quarter net income from continuing operations was
$46.2 million, or 5.4% of net
sales, compared to $30.9 million, or 3.4% of net sales in the
prior-year quarter.
First-quarter Adjusted EBITDA was $195.6
million, or 22.7% of net sales, compared to $174.5 million, or 19.4% of net sales in the
prior-year quarter. Higher margin was driven primarily by
enterprise initiatives that favorably impacted manufacturing
performance partially offset by lower volume. Lower selling,
general and administrative expenses also contributed to the
year-over-year improvement benefiting from the non-recurrence of
credit loss related to a customer bankruptcy in the prior-year
period, lower labor and benefit costs and corporate-owned life
insurance related income.
Power Transmission
Segment Results
|
|
|
Three months
ended
|
|
|
|
|
(USD in
millions)
|
March 30,
2024
|
|
April 1,
2023
|
|
%
Change
|
|
% Core
Change
|
Net sales
|
$532.8
|
|
$548.1
|
|
(2.8 %)
|
|
(1.7 %)
|
Adjusted
EBITDA
|
$119.0
|
|
$107.7
|
|
10.5 %
|
|
|
Adjusted EBITDA
margin
|
22.3 %
|
|
19.6 %
|
|
270 bps
|
|
|
Power Transmission net sales for the first quarter of 2024
decreased by 2.8% to $532.8 million, reflecting a core revenue
decrease of 1.7% and unfavorable foreign currency effects of 1.1%.
Modest net and core revenue growth in the Replacement channel
largely offset a decline in the First Fit channel. Automotive
Replacement core growth was solid while Industrial First Fit sales
experienced a decline. The Personal Mobility, Diversified
Industrial, and Agriculture end markets realized declines in core
revenues partially offset by growth in Energy, Construction and
Automotive.
Power Transmission Adjusted EBITDA was $119.0 million compared to $107.7 million in the prior-year quarter. Segment
Adjusted EBITDA margin expanded approximately 270 basis points with
the improvement primarily driven by benefits from pricing,
enterprise initiatives which favorably impacted manufacturing
performance and lower inflation, partially offset by lower
volume.
Fluid Power Segment
Results
|
|
|
Three months
ended
|
|
|
|
|
(USD in
millions)
|
March 30,
2024
|
|
April 1,
2023
|
|
%
Change
|
|
% Core
Change
|
Net sales
|
$329.8
|
|
$349.6
|
|
(5.7 %)
|
|
(6.6 %)
|
Adjusted
EBITDA
|
$76.6
|
|
$66.8
|
|
14.7 %
|
|
|
Adjusted EBITDA
margin
|
23.2 %
|
|
19.1 %
|
|
410 bps
|
|
|
Fluid Power net sales decreased by 5.7% to $329.8 million in the first quarter,
reflecting a core revenue decline of 6.6% and favorable foreign
currency effects of 0.9%. Net and core sales in our Industrial
channels declined compared to the prior year period with First Fit
experiencing a greater decrease than Replacement. Automotive
Replacement core sales grew mid to high single digits
year-over-year. At the end market level, Agriculture, Energy and
Construction experienced the greatest declines year-over-year,
partially offset by high single digit growth in Automotive.
Fluid Power Adjusted EBITDA was $76.6 million compared to $66.8 million in the prior-year quarter. The
410 basis point improvement in Adjusted EBITDA margin compared to
the prior-year quarter was largely fueled by enterprise initiatives
that favorably impacted manufacturing performance, pricing, and
favorable movements in average currency exchange rates partially
offset by lower volumes.
Liquidity, Capital Resources and Capital Deployment
During the first quarter of 2024, the Company used $21.0 million of cash in operations and
first-quarter capital expenditures increased to $18.1 million from $14.6 million in the prior-year quarter.
As of March 30, 2024, the Company had total cash and cash
equivalents of $522.2 million
and total outstanding debt of $2.4 billion, as well as committed borrowing
headroom of $471.4 million.
The Company repaid $100 million of
its existing dollar term loans in February
2024.
In February 2024, the Company
repurchased approximately $50 million
of its ordinary shares. The Company's share repurchase
authorization currently has $50
million available.
Updated 2024 Guidance
The Company is updating its full year Adjusted EBITDA guidance
for 2024. The table below reflects our updated full year 2024
financial guidance.
|
Prior
2024
|
Updated
2024
|
Change (At
Midpoint)
|
Core Revenue
Growth
|
(3%) to +1%
|
(3%) to +1%
|
No Change
|
Adjusted
EBITDA
|
$725 to $785
Million
|
$745 to $805
Million
|
$20 Million
|
Adjusted EPS
|
$1.28 to
$1.43
|
$1.28 to
$1.43
|
No Change
|
Capital
Expenditures
|
~$100
Million
|
~$100
Million
|
No Change
|
Free Cash Flow
Conversion
|
90%+
|
90%+
|
No Change
|
Share-based metrics in the Company's guidance do not include the
potential effect of incremental share repurchases.
Because GAAP financial measures on a forward-looking basis are
not accessible, and reconciling information is not available
without unreasonable effort, we have not provided reconciliations
for forward-looking non-GAAP measures, including expected Core
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 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
First-Quarter 2024 Earnings Conference Call or providing the
Conference ID of 5772067. An audio replay of the conference call
can be accessed by dialing (800) 770-2030 (domestic) or +1 (647)
362-9199 (international), and providing the passcode 5772067, or by
accessing Gates Industrial's website at investors.gates.com.
About Gates Industrial Corporation plc
Gates is a global manufacturer of innovative, highly engineered
power transmission and fluid power solutions. Gates offers a broad
portfolio of products to diverse replacement channel customers, and
to original equipment manufacturers ("first-fit") as specified
components. Gates participates in many sectors of the industrial
and consumer markets. Our products play essential roles in a
diverse range of applications across a wide variety of end markets
ranging from harsh and hazardous industries 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, margin expansion and free cash flow
conversion), 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
Condensed
Consolidated Statements of Operations
(Unaudited)
|
|
|
|
Three months
ended
|
(USD in millions,
except per share amounts)
|
|
March 30,
2024
|
|
April 1,
2023
|
Net sales
|
|
$
862.6
|
|
$
897.7
|
Cost of
sales
|
|
532.6
|
|
572.6
|
Gross
profit
|
|
330.0
|
|
325.1
|
Selling, general and
administrative expenses
|
|
211.7
|
|
232.1
|
Transaction-related
expenses
|
|
0.4
|
|
0.2
|
Restructuring
expenses
|
|
1.2
|
|
5.5
|
Operating income
from continuing operations
|
|
116.7
|
|
87.3
|
Interest
expense
|
|
37.5
|
|
40.8
|
Other (income)
expenses
|
|
(1.5)
|
|
0.3
|
Income from
continuing operations before taxes
|
|
80.7
|
|
46.2
|
Income tax
expense
|
|
34.5
|
|
15.3
|
Net income from
continuing operations
|
|
46.2
|
|
30.9
|
Loss on disposal of
discontinued operations
|
|
0.1
|
|
0.3
|
Net
income
|
|
46.1
|
|
30.6
|
Less: non-controlling
interests
|
|
6.1
|
|
4.2
|
Net income
attributable to shareholders
|
|
$
40.0
|
|
$
26.4
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
Basic
|
|
|
|
|
Earnings per share from
continuing operations
|
|
$
0.15
|
|
$
0.09
|
Earnings per share from
discontinued operations
|
|
—
|
|
—
|
Earnings per
share
|
|
$
0.15
|
|
$
0.09
|
|
|
|
|
|
Diluted
|
|
|
|
|
Earnings per share from
continuing operations
|
|
$
0.15
|
|
$
0.09
|
Earnings per share from
discontinued operations
|
|
—
|
|
—
|
Earnings per
share
|
|
$
0.15
|
|
$
0.09
|
Gates Industrial
Corporation plc
Condensed
Consolidated Balance Sheets
(Unaudited)
|
|
(USD in millions,
except share numbers and per share amounts)
|
|
As of
March 30,
2024
|
|
As of
December 30,
2023
|
Assets
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
522.2
|
|
$
720.6
|
Trade accounts
receivable, net
|
|
797.7
|
|
768.2
|
Inventories
|
|
677.2
|
|
647.2
|
Taxes
receivable
|
|
44.2
|
|
30.4
|
Prepaid expenses and
other assets
|
|
245.8
|
|
234.9
|
Total current
assets
|
|
2,287.1
|
|
2,401.3
|
Non-current
assets
|
|
|
|
|
Property, plant and
equipment, net
|
|
619.2
|
|
630.0
|
Goodwill
|
|
2,012.5
|
|
2,038.7
|
Pension
surplus
|
|
8.4
|
|
8.6
|
Intangible assets,
net
|
|
1,347.0
|
|
1,386.1
|
Right-of-use
assets
|
|
120.9
|
|
120.1
|
Taxes
receivable
|
|
18.3
|
|
18.5
|
Deferred income
taxes
|
|
607.4
|
|
622.4
|
Other non-current
assets
|
|
25.1
|
|
28.8
|
Total
assets
|
|
$
7,045.9
|
|
$
7,254.5
|
Liabilities and
equity
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Debt, current
portion
|
|
$
27.9
|
|
$
36.5
|
Trade accounts
payable
|
|
451.4
|
|
457.7
|
Taxes
payable
|
|
44.9
|
|
36.6
|
Accrued expenses and
other current liabilities
|
|
223.7
|
|
248.5
|
Total current
liabilities
|
|
747.9
|
|
779.3
|
Non-current
liabilities
|
|
|
|
|
Debt, less current
portion
|
|
2,313.1
|
|
2,415.0
|
Post-retirement benefit
obligations
|
|
81.6
|
|
83.8
|
Lease
liabilities
|
|
112.0
|
|
110.6
|
Taxes
payable
|
|
83.3
|
|
79.4
|
Deferred income
taxes
|
|
114.3
|
|
119.4
|
Other non-current
liabilities
|
|
98.3
|
|
123.1
|
Total
liabilities
|
|
3,550.5
|
|
3,710.6
|
Shareholders'
equity
|
|
|
|
|
—Shares, par value of
$0.01 each - authorized shares: 3,000,000,000; outstanding
shares:
261,244,776 (December 30, 2023: authorized shares:
3,000,000,000; outstanding shares:
264,259,788)
|
|
2.6
|
|
2.6
|
—Additional paid-in
capital
|
|
2,590.1
|
|
2,583.8
|
—Accumulated other
comprehensive loss
|
|
(865.9)
|
|
(828.5)
|
—Retained
earnings
|
|
1,451.8
|
|
1,462.3
|
Total shareholders'
equity
|
|
3,178.6
|
|
3,220.2
|
Non-controlling
interests
|
|
316.8
|
|
323.7
|
Total
equity
|
|
3,495.4
|
|
3,543.9
|
Total liabilities
and equity
|
|
$
7,045.9
|
|
$
7,254.5
|
Gates Industrial
Corporation plc
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
Three months
ended
|
(USD in
millions)
|
March 30,
2024
|
|
April 1,
2023
|
Cash flows from
operating activities
|
|
|
|
Net income
|
$
46.1
|
|
$
30.6
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
54.6
|
|
54.5
|
Foreign exchange and
other non-cash financing (income) expenses
|
(11.1)
|
|
9.7
|
Share-based
compensation expense
|
8.6
|
|
9.5
|
Decrease in
post-employment benefit obligations, net
|
(2.2)
|
|
(3.0)
|
Deferred income
taxes
|
(1.1)
|
|
(3.1)
|
Other operating
activities
|
(4.8)
|
|
1.0
|
Changes in operating
assets and liabilities:
|
|
|
|
—Accounts
receivable
|
(38.7)
|
|
(27.7)
|
—Inventories
|
(36.9)
|
|
6.5
|
—Accounts
payable
|
(0.4)
|
|
(22.6)
|
—Prepaid expenses and
other assets
|
3.7
|
|
4.8
|
—Taxes
payable
|
(2.3)
|
|
(9.2)
|
—Other
liabilities
|
(36.5)
|
|
1.5
|
Net cash (used in)
provided by operating activities
|
(21.0)
|
|
52.5
|
Cash flows from
investing activities
|
|
|
|
Purchases of property,
plant and equipment
|
(16.0)
|
|
(11.8)
|
Purchases of intangible
assets
|
(2.1)
|
|
(2.8)
|
Cash paid under
corporate-owned life insurance policies
|
(4.1)
|
|
(17.0)
|
Cash received under
corporate-owned life insurance policies
|
2.7
|
|
1.5
|
Proceeds from the sale
of property, plant and equipment
|
—
|
|
0.2
|
Net cash used in
investing activities
|
(19.5)
|
|
(29.9)
|
Cash flows from
financing activities
|
|
|
|
Issuance of
shares
|
2.5
|
|
11.3
|
Buy-back of
shares
|
(50.3)
|
|
—
|
Payments of long-term
debt
|
(104.9)
|
|
(4.9)
|
Debt issuance costs
paid
|
—
|
|
(0.3)
|
Other financing
activities
|
3.8
|
|
(8.2)
|
Net cash used in
financing activities
|
(148.9)
|
|
(2.1)
|
Effect of exchange rate
changes on cash and cash equivalents and restricted cash
|
(8.9)
|
|
(4.1)
|
Net (decrease)
increase in cash and cash equivalents and restricted
cash
|
(198.3)
|
|
16.4
|
Cash and cash
equivalents and restricted cash at the beginning of the
period
|
724.0
|
|
581.4
|
Cash and cash
equivalents and restricted cash at the end of the
period
|
$
525.7
|
|
$
597.8
|
Supplemental
schedule of cash flow information
|
|
|
|
Interest
paid
|
$
45.5
|
|
$
45.9
|
Income taxes
paid
|
$
36.5
|
|
$
27.3
|
Accrued capital
expenditures
|
$
1.6
|
|
$
2.0
|
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.
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
|
(USD in
millions)
|
March 30,
2024
|
|
April 1,
2023
|
Net income from
continuing operations
|
$
46.2
|
|
$
30.9
|
Adjusted
for:
|
|
|
|
Income tax
expense
|
34.5
|
|
15.3
|
Net interest and other
expenses
|
36.0
|
|
41.1
|
Depreciation and
amortization
|
54.6
|
|
54.5
|
Transaction-related
expenses (1)
|
0.4
|
|
0.2
|
Restructuring
expenses (2)
|
1.2
|
|
5.5
|
Share-based
compensation expense
|
8.6
|
|
9.5
|
Inventory impairments
and adjustments (3) (included in cost of
sales)
|
13.9
|
|
0.6
|
Severance expenses
(included in cost of sales)
|
—
|
|
0.5
|
Severance expenses
(included in SG&A)
|
0.1
|
|
0.6
|
Credit loss related to
customer bankruptcy (included in SG&A)
(4)
|
0.1
|
|
10.7
|
Cybersecurity incident
expenses (5)
|
—
|
|
5.1
|
Adjusted
EBITDA
|
$
195.6
|
|
$
174.5
|
|
|
|
|
Net Sales
|
$
862.6
|
|
$
897.7
|
Adjusted EBITDA
Margin
|
22.7 %
|
|
19.4 %
|
(1)
|
Transaction-related
expenses relate primarily to advisory fees and other costs
recognized in respect of major corporate transactions, including
the acquisition of businesses, and equity and debt
transactions.
|
(2)
|
Restructuring expenses
represent items qualifying for recognition as such under U.S. GAAP
and include costs related to the closure of lines of business,
facility closures and consolidations, fundamental organizational
rationalizations and non-recurring employee severance related to
such actions.
|
(3)
|
Inventory impairments
and adjustments include the reversal of the adjustment to remeasure
certain inventories on a Last-in-First-out ("LIFO")
basis.
|
(4)
|
On January 31, 2023,
one of our customers filed a voluntary petition for reorganization
under Chapter 11 of the U.S. Bankruptcy Code. In connection with
the bankruptcy proceedings, we evaluated our potential risk and
exposure relating to our outstanding pre-petition accounts
receivable balance from the customer and recorded the pre-tax
charge to reflect our estimated recovery. Based on further
developments in the bankruptcy proceedings, we recorded an
additional $0.1 million pre-tax charge during the three months
ended March 30, 2024. We will continue to monitor the
circumstances surrounding the bankruptcy in determining whether
adjustments to this recovery estimate are necessary
|
(5)
|
On February 11, 2023,
Gates determined that it was the target of a malware attack.
Cybersecurity incident expenses include legal, consulting, and
other costs incurred as a direct result of this incident, some of
which may be partially offset by insurance recoveries.
|
Gates Industrial
Corporation plc
Reconciliation of
Net Income Attributable to Shareholders to Adjusted Net
Income
(Unaudited)
|
|
|
Three months
ended
|
(USD in millions,
except share numbers and per share amounts)
|
March 30,
2024
|
|
April 1,
2023
|
Net income
attributable to shareholders
|
$
40.0
|
|
$
26.4
|
Adjusted
for:
|
|
|
|
Loss on disposal of
discontinued operations
|
0.1
|
|
0.3
|
Amortization of
intangible assets arising from the 2014 acquisition of
Gates
|
29.1
|
|
29.0
|
Transaction-related
expenses (1)
|
0.4
|
|
0.2
|
Restructuring expenses
(2)
|
1.2
|
|
5.5
|
Share-based
compensation expense
|
8.6
|
|
9.5
|
Inventory impairments
and adjustments (3) (included in cost of
sales)
|
13.9
|
|
0.6
|
Adjustments relating
to post-retirement benefits
|
(0.7)
|
|
(0.7)
|
Financing and other FX
related losses
|
1.5
|
|
1.6
|
One-time deferred tax
benefit from changes in realizability of certain deferred tax
assets (4)
|
3.4
|
|
—
|
Other
adjustments
|
(1.7)
|
|
(1.8)
|
Credit loss related to
customer bankruptcy (included in SG&A)
(5)
|
0.1
|
|
10.7
|
Cybersecurity incident
expenses (6)
|
—
|
|
5.1
|
Estimated tax effect
of the above adjustments
|
(12.4)
|
|
(13.6)
|
Adjusted Net
Income
|
$
83.5
|
|
$
72.8
|
|
|
|
|
Diluted
weighted-average number of shares outstanding
|
267,435,531
|
|
287,878,415
|
Adjusted Net Income
per diluted share
|
$
0.31
|
|
$
0.25
|
(1)
|
Transaction-related
expenses related primarily to advisory fees and other costs
recognized in respect of major corporate transactions, including
the acquisition of businesses, and equity and debt
transactions.
|
(2)
|
Restructuring expenses
represent items qualifying for recognition as such under U.S. GAAP
and included costs related to the closure of lines of business,
facility closures and consolidations, fundamental organizational
rationalizations and non-recurring employee severance related to
such actions.
|
(3)
|
Inventory impairments
and adjustments include the reversal of the adjustment to remeasure
certain inventories on a Last-in-First-out ("LIFO")
basis.
|
(4)
|
During the three months
ended March 30, 2024, a one-time deferred tax benefit of
$3.4 million was recognized due to changes in the
realizability of certain deferred tax assets related to Blackstone
ownership change.
|
(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 recorded the pre-tax
charge to reflect our estimated recovery. Based on further
developments in the bankruptcy proceedings, we recorded an
additional $0.1 million pre-tax charge during the three months
ended March 30, 2024. We will 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
March 30, 2024
|
(USD in
millions)
|
Power
Transmission
|
|
Fluid Power
|
|
Total
|
Net sales for the three
months ended March 30, 2024 (1)
|
$
532.8
|
|
$
329.8
|
|
$
862.6
|
Impact on net sales of
movements in currency rates
|
5.9
|
|
(3.1)
|
|
2.8
|
Core revenue for the
three months ended March 30, 2024
|
$
538.7
|
|
$
326.7
|
|
$
865.4
|
|
|
|
|
|
|
Net sales for the three
months ended April 1, 2023
|
548.1
|
|
349.6
|
|
897.7
|
Decrease in net
sales on a core basis (core sales)
|
$
(9.4)
|
|
$
(22.9)
|
|
$
(32.3)
|
|
|
|
|
|
|
Core revenue
decline
|
(1.7 %)
|
|
(6.6 %)
|
|
(3.6 %)
|
(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