Gates Industrial Reports Fourth-Quarter and Full-Year 2019 Results
DENVER, Feb. 4, 2020 /PRNewswire/ --
Fourth-Quarter 2019 Highlights
-- Net sales of $725.7 million compared to prior-year period of $792.1
million.
-- Net income attributable to shareholders of $19.4 million, or $0.07 per
diluted share, compared to prior-year period of $75.6 million, or $0.26
per diluted share.
-- Adjusted Net Income of $56.5 million, or $0.19 per diluted share.
-- Adjusted EBITDA of $135.1 million and Adjusted EBITDA margin of 18.6%.
-- Net cash provided by operations of $203.7 million with capital
expenditures of $24.6 million, resulting in free cash flow of $179.1
million and a conversion rate of 317% of Adjusted Net Income.
Full-Year 2019 Highlights
-- Net sales down 7.8% year-over-year to $3,087.1 million, representing a
core revenue decline of 5.7%.
-- Net income attributable to shareholders of $690.1 million, or $2.37 per
diluted share, compared to prior-year net income attributable to
shareholders of $245.3 million, or $0.84 per diluted share.
-- Adjusted Net Income of $279.3 million, or $0.96 per diluted share.
-- Full-year Adjusted EBITDA of $611.0 million and Adjusted EBITDA margin
of 19.8%.
-- Net cash provided by operations of $348.9 million with capital
expenditures of $83.1 million, resulting in free cash flow of $265.8
million and a conversion rate of over 95% of Adjusted Net Income.
-- Initiating guidance for full-year 2020 core revenue growth, Adjusted
EBITDA, capital expenditures and free cash flow conversion.
Gates Industrial Corporation plc (NYSE:GTES), a leading global provider of application-specific fluid power and power transmission solutions, today reported results for the fourth quarter and full year ended December 28, 2019.
Ivo Jurek, Gates Industrial's Chief Executive Officer, commented, "In the fourth quarter our teams stayed focused on execution. We delivered results in line with our expectations while managing through a difficult environment, as most of our global end markets experienced uncertainty and challenging demand conditions. However, we did begin to see signs of improvement in certain key end markets and regions."
Jurek continued, "The challenges we faced in 2019 and actions we took in response, we believe, have improved the company and better positioned us for future success. Our restructuring activities are progressing according to plan and will not only allow us to manufacture more efficiently, but also improve our flexibility to respond to fluctuations in demand. We continued to fund our new product development and growth initiatives, which we believe positions us well for future growth, particularly as our end markets recover. Despite the difficult environment, we generated a substantial amount of Free Cash Flow this year, at a conversion rate of 95% of Adjusted Net Income. We are optimistic that the areas of improvement we began to see in the fourth quarter of 2019, in combination with the execution of our key growth initiatives, will continue in 2020 and look forward to delivering improved results."
Fourth-Quarter and Full-Year Financial Results
Fourth-quarter net sales of $725.7 million decreased 8.4% over the prior-year quarter net sales of $792.1 million, including a 7.6% core revenue decline, with growth in China offset by persisting weakness in our industrial end markets in Europe and North America. Net sales included an unfavorable foreign currency impact of 0.8%.
Full-year net sales were $3,087.1 million, a decrease of 7.8% over the prior year net sales of $3,347.6 million. Core revenue declined 5.7%, which was driven by weakness across our end markets combined with inventory destocking in our replacement channels. Despite destocking, net sales into replacement channels outperformed those into first-fit channels. Regionally, emerging markets outperformed developed markets, most notably in replacement channels.
Net income attributable to shareholders in the fourth quarter was $19.4 million, or $0.07 per diluted share, compared to $75.6 million, or $0.26 per diluted share, in the prior-year period. Adjusted Net Income, which primarily excludes amortization of certain intangibles, transaction-related expenses and financing-related foreign currency gains and losses, was $56.5 million, or $0.19 per diluted share, compared to $104.9 million, or $0.36 per diluted share, in the prior-year period. The diluted weighted-average number of shares outstanding in the fourth quarter of 2019 was 291,649,100 compared to 294,701,563 in the fourth quarter of 2018.
Net income attributable to shareholders in 2019 was $690.1 million, or $2.37 per diluted share, compared to $245.3 million, or $0.84 per diluted share in 2018. Adjusted Net Income for 2019 was $279.3 million, or $0.96 per diluted share, compared to $379.2 million, or $1.30 per diluted share in 2018. The diluted weighted average number of shares outstanding in 2019 was 291,627,461 compared to 291,698,273 in 2018.
Fourth-quarter Adjusted EBITDA was $135.1 million, or 18.6% of net sales, compared to $185.8 million, or 23.5% of net sales in the prior-year quarter, representing Adjusted EBITDA margin contraction of 490 basis points. The Company maintained positive price/cost in the quarter, which was offset by lower production volumes and related inefficiencies.
Full-year 2019 Adjusted EBITDA was $611.0 million, or 19.8% of net sales, compared to $755.8 million, or 22.6% of net sales in 2018. Full-year, Adjusted EBITDA margin was similarly impacted by lower production volumes and related inefficiencies.
Power Transmission Segment Results
For the three months ended
(USD in millions) December 28, 2019 December 29, 2018 % Change % Core Change
Net sales $470.3 $490.7 (4.2%) (3.4%)
---
Adjusted EBITDA $97.4 $114.6 (15.0%)
---
Adjusted EBITDA
margin 20.7% 23.4%
(270 bps)
---
Depreciation &
amortization (1) $14.0 $15.9 (11.9%)
---
Amort. of
intangibles from
acq. of Gates $19.1 $18.3 +4.4%
---
For the year ended
(USD in millions) December 28, 2019 December 29, 2018 % Change % Core Change
Net sales $1,945.7 $2,098.8 (7.3%) (4.6%)
---
Adjusted EBITDA $412.6 $492.2 (16.2%)
---
Adjusted EBITDA
margin 21.2% 23.5%
(230 bps)
---
Depreciation &
amortization (1) $60.7 $61.3 (1.0%)
---
Amort. of
intangibles from
acq. of Gates $74.5 $75.4 (1.2%)
---
(1) Excludes the amortization of
intangible assets arising from
the 2014 acquisition of Gates.
Power Transmission net sales decreased 4.2% to $470.3 million in the fourth quarter, reflecting a core revenue decline of 3.4% and an additional 0.8% of unfavorable foreign currency effects. The Company observed growth in automotive end markets, led by significant improvement in China and Europe compared to the prior quarter. This growth was offset by declines in industrial end markets, with the larger impact being in developed markets relative to emerging markets.
Power Transmission net sales for the full-year 2019 period decreased 7.3% to $1,945.7 million, reflecting a core revenue decline of 4.6% and unfavorable foreign currency effects of 2.7%. The decline was primarily attributable to a decline in net sales into our automotive end markets, while net sales into industrial end markets were mostly flat compared to the prior-year period.
Fourth-quarter Adjusted EBITDA decreased 15.0% over the prior-year quarter, while Adjusted EBITDA margin contracted by 270 basis points. Full-year 2019 Adjusted EBITDA decreased 16.2% over 2018, while Adjusted EBITDA margin contracted by 230 basis points. Adjusted EBITDA in both periods was primarily impacted by the decline in volumes and related manufacturing inefficiencies.
Fluid Power Segment Results
For the three months ended
(USD in millions) December 28, 2019 December 29, 2018 % Change % Core Change
Net sales $255.4 $301.4 (15.3%) (14.5%)
---
Adjusted EBITDA $37.7 $71.2 (47.1%)
---
Adjusted EBITDA
margin 14.8% 23.6%
(880 bps)
---
Depreciation &
amortization (1) $11.4 $9.8 +16.3%
---
Amort. of
intangibles from
acq. of Gates $10.3 $11.2 (8.0%)
---
For the year ended
(USD in millions) December 28, 2019 December 29, 2018 % Change % Core Change
Net sales $1,141.4 $1,248.8 (8.6%) (7.6%)
---
Adjusted EBITDA $198.4 $263.6 (24.7%)
---
Adjusted EBITDA
margin 17.4% 21.1%
(370 bps)
---
Depreciation &
amortization (1) $43.3 $36.9 +17.3%
---
Amort. of
intangibles from
acq. of Gates $43.7 $44.9 (2.7%)
---
(1) Excludes the amortization of
intangible assets arising from
the 2014 acquisition of Gates.
Fluid Power net sales decreased 15.3% to $255.4 million in the fourth quarter, reflecting a core revenue decline of 14.5% and unfavorable foreign currency effects of 0.8%. The core revenue decline was driven by weakening across industrial end markets, particularly in the agriculture, construction and general industrial end markets. Core revenue growth in China and South America was offset by weakness in North America and Europe, resulting in emerging markets outperforming developed markets in the quarter.
Fluid Power net sales for the full-year 2019 period decreased 8.6% to $1,141.4 million, reflecting a core revenue decline of 7.6%, incremental net sales from acquisitions of 0.6% and unfavorable foreign currency effects of 1.6%. The core revenue decline was driven by weakness in industrial end markets, with the decline in North America more than offsetting growth in China and South America.
Fourth-quarter Adjusted EBITDA margin declined 880 basis points over the prior-year quarter, while full-year 2019 Adjusted EBITDA margin contracted by 370 basis points. Adjusted EBITDA in both periods was primarily impacted by lower production volumes and the associated manufacturing inefficiencies.
Liquidity and Capital Resources
During the fourth quarter of 2019, the Company generated $203.7 million of cash from operations, with the lower Adjusted EBITDA performance offset by lower working capital levels. Fourth-quarter capital expenditures declined slightly to $24.6 million from $27.8 million in the prior-year period, the largest portion of which represented maintenance expenditures.
As of December 28, 2019, the Company had total cash of $635.3 million and total outstanding debt of $3.0 billion, representing a net leverage ratio of 3.8 times last twelve months' ("LTM") Adjusted EBITDA compared to 3.4 times in the fourth quarter of 2018.
2020 Outlook
The Company is introducing its full-year 2020 outlook, with core revenue expected to range from a decline of -1.0% to growth of 2.0%, and Adjusted EBITDA expected in the range of $610 million to $640 million. The Company expects total capital expenditures of approximately $100 million and Free Cash Flow Conversion to be greater than 80% of Adjusted Net Income.
Conference Call and Webcast
Gates Industrial Corporation plc will host a conference call today at 5:00 pm ET to discuss the Company's financial results. The conference call can be accessed by dialing (866) 393-4306 (domestic) or +1 (734) 385-2616 (international) and requesting the Gates Industrial Corporation Fourth Quarter 2019 Earnings Conference Call. A webcast of the conference call and accompanying presentation materials can be accessed through Gates Industrial's website at investors.gates.com. An audio replay of the conference call can be accessed by dialing (855) 859-2056 (domestic) or +1 (404) 537-3406 (international), and providing the passcode 7344847, 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 120 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," "projects," "predicts," "intends," "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, financial results, liquidity and capital resources, growth initiatives, the progression of restructuring activities, and the statements in the "2020 Outlook" section of this press release. Such forward-looking statements are subject to various risks and uncertainties, including, among others, risks inherent to the manufacturing industry, macroeconomic factors beyond the Company's control, continued operation of our manufacturing facilities; our ability to forecast and meet demand; market acceptance of new products, and the significant influence of the Company's majority shareholders, investment funds affiliated with The Blackstone Group 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 29, 2018, filed with the Securities and Exchange Commission ("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
Consolidated Statements of Operations
(Unaudited)
For the three months ended
For the year ended
(USD in millions, December 28, December 29,
except per share 2019 2018
amounts) December 28, 2019 December 29, 2018
--- ---
Net sales $
725.7 $
792.1 $
3,087.1 $
3,347.6
Cost of sales 464.3 482.1 1,944.6 2,017.0
Gross profit 261.4 310.0 1,142.5 1,330.6
Selling, general and
administrative
expenses 186.9 184.7 777.3 805.8
Transaction-related
expenses 1.9 0.5 2.6 6.7
Impairment of
intangibles and
other assets - 0.7 0.6
Restructuring
expenses 2.1 3.2 6.0 6.4
Other operating
expenses 2.5 1.8 9.1 14.3
Operating income
from continuing
operations 68.0 119.8 346.8 496.8
Interest expense 43.3 36.1 157.8 175.9
Other (income)
expenses (2.6) (0.1) (9.8) 17.4
Income from
continuing
operations before
taxes 27.3 83.8 198.8 303.5
Income tax expense
(benefit) 1.9 1.4 (495.9) 31.8
Net income from
continuing
operations 25.4 82.4 694.7 271.7
(Income) loss on
disposal of
discontinued
operations, net of
tax, respectively,
of $0, $0, $0 and
$0 - (0.1) 0.6 0.6
Net income 25.4 82.5 694.1 271.1
Less: non-
controlling
interests 6.0 6.9 4.0 25.8
Net income
attributable to
shareholders $
19.4 $
75.6 $
690.1 $
245.3
Earnings per share
Basic
Earnings per share
from continuing
operations $
0.07 $
0.26 $
2.38 $
0.86
Earnings per share
from discontinued
operations -
Earnings per share $
0.07 $
0.26 $
2.38 $
0.86
Diluted
Earnings per share
from continuing
operations $
0.07 $
0.26 $
2.37 $
0.84
Earnings per share
from discontinued
operations -
Earnings per share $
0.07 $
0.26 $
2.37 $
0.84
Gates Industrial Corporation plc
Consolidated Balance Sheets
(Unaudited)
(USD in millions,
except share numbers
and per share
amounts)
As of
As of
December 28, December 29,
2019 2018
--- ---
Assets
Current assets
Cash and cash
equivalents $
635.3 $
423.4
Trade accounts
receivable, net of
allowances of $8.6
and $7.4 694.7 742.3
Inventories 475.1 537.6
Taxes receivable 22.1 7.2
Prepaid expenses and
other assets 131.4 104.1
Total current assets 1,958.6 1,814.6
Non-current assets
Property, plant and
equipment, net 727.9 756.3
Goodwill 2,060.5 2,045.9
Pension surplus 38.1 52.6
Intangible assets, net 1,876.0 1,990.6
Operating lease right-
of-use assets 123.0
Taxes receivable 23.0 27.9
Deferred income taxes 587.1 5.1
Other non-current
assets 17.1 29.6
Total assets $
7,411.3 $
6,722.6
Liabilities and equity
Current liabilities
Debt, current portion $
46.1 $
51.6
Trade accounts payable 374.7 424.0
Taxes payable 48.5 19.2
Accrued expenses and
other current
liabilities 188.8 184.2
Total current
liabilities 658.1 679.0
Non-current liabilities
Debt, less current
portion 2,912.3 2,953.4
Post-retirement
benefit obligations 151.2 155.9
Lease liabilities 116.2
Taxes payable 108.8 81.9
Deferred income taxes 369.3 439.5
Other non-current
liabilities 84.7 79.2
Total liabilities 4,400.6 4,388.9
Shareholders' equity
-Shares, par value of
$0.01 each -
authorized shares:
3,000,000,000;
outstanding shares:
290,157,299 (December
29, 2018: authorized
shares:
3,000,000,000;
outstanding shares:
289,847,574) 2.9 2.9
-Additional paid-in
capital 2,434.5 2,416.9
-Accumulated other
comprehensive loss (858.4) (854.3)
-Retained earnings 1,072.0 381.9
Total shareholders'
equity 2,651.0 1,947.4
Non-controlling
interests 359.7 386.3
Total equity 3,010.7 2,333.7
Total liabilities and
equity $
7,411.3 $
6,722.6
Gates Industrial Corporation plc
Consolidated Statements of Cash Flows
(Unaudited)
For the year ended
(USD in millions) December 28, December 29,
2019 2018
--- ---
Cash flows from operating activities
Net income $
694.1 $
271.1
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization 222.2 218.5
Non-cash currency transaction
gain on debt and hedging
instruments (16.8) (45.5)
Premium paid on redemption of
long-term debt - 27.0
Other net non-cash financing
costs 27.4 65.6
Share-based compensation
expense 15.0 6.0
Decrease in post-employment
benefit obligations, net (9.4) (4.6)
Deferred income taxes (648.4) (64.9)
Other operating activities 6.0 4.8
Changes in operating assets and liabilities,
net of effects of acquisitions:
-Decrease (increase) in
accounts receivable 41.8 (49.6)
-Decrease (increase) in
inventories 65.1 (96.1)
-(Decrease) increase in
accounts payable (48.2) 42.1
-Increase in prepaid expenses
and other assets (2.6) (27.5)
-Increase (decrease) in taxes
payable 46.2 (15.3)
-Decrease in other liabilities (43.5) (18.1)
Net cash provided by
operations 348.9 313.5
Cash flows from investing activities
Purchases of property, plant
and equipment (72.1) (166.1)
Purchases of intangible assets (11.0) (16.6)
Cash paid under corporate-
owned life insurance policies (10.7) (10.3)
Cash received under corporate-
owned life insurance policies 12.0 2.9
Purchase of businesses, net of
cash acquired - (50.9)
Other investing activities 3.8 (2.6)
Net cash used in investing
activities (78.0) (243.6)
Cash flows from financing activities
Issuance of shares, net of
underwriting costs 1.8 799.7
Other offering costs - (8.6)
Proceeds from long-term debt 568.0
Payments of long-term debt (593.1) (933.5)
Premium paid on redemption of
long-term debt - (27.0)
Debt issuance costs paid (8.3)
Dividends paid to non-
controlling interests (28.8) (35.2)
Other financing activities 1.1 5.7
Net cash used in financing
activities (59.3) (198.9)
Effect of exchange rate
changes on cash and cash
equivalents and restricted
cash 0.4 (12.4)
Net increase (decrease) in
cash and cash equivalents and
restricted cash 212.0 (141.4)
Cash and cash equivalents and
restricted cash at the
beginning of the period 424.6 566.0
Cash and cash equivalents and
restricted cash at the end of
the period $
636.6 $
424.6
Supplemental schedule of cash flow
information
Interest paid, net of amount
capitalized $
150.8 $
157.9
Income taxes paid, net $
108.8 $
114.0
Accrued capital expenditures $
1.8 $
1.0
Non-GAAP Financial Statements
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 revenues 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. 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 and liquidity. 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. 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. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results.
Gates Industrial Corporation plc
Reconciliation of Net Income from Continuing Operations to Adjusted EBITDA
(Unaudited)
For the three months ended
For the year ended
(USD in millions) December 28, December 29, December 28, December 29,
2019 2018 2019 2018
---
Net income from
continuing operations $
25.4 $
82.4 $
694.7 $
271.7
Adjusted for:
Income tax expense
(benefit) 1.9 1.4 (495.9) 31.8
Net interest and other
expenses 40.7 36.0 148.0 193.3
Depreciation and
amortization 54.8 55.2 222.2 218.5
Transaction-related
expenses (1) 1.9 0.5 2.6 6.7
Impairment of intangibles
and other assets - 0.7 0.6
Restructuring expenses
(2) 2.1 3.2 6.0 6.4
Share-based compensation
expense 4.5 0.5 15.0 6.0
Sponsor fees (included in
other operating
expenses) (3) 1.6 2.1 6.5 8.0
Impact of fair value
adjustment on inventory
(included in cost of
sales) - 0.3
Inventory impairments and
adjustments (included in
cost of sales) (0.1) 0.4 1.2 1.2
Duplicate expenses
incurred on facility
relocation - 0.6 5.2
Severance-related
expenses (included in
cost of sales) 1.0 1.7 4.0 1.7
Other primarily
severance-related
expenses (included in
SG&A) 0.4 3.8 3.4 4.4
Other items not directly
related to current
operations 0.9 (2.0) 2.6
Adjusted EBITDA $
135.1 $
185.8 $
611.0 $
755.8
(1) Transaction-related expenses relate
primarily to advisory fees
recognized in respect of our initial
public offering, the acquisition of
businesses and costs related to
other corporate transactions such as
debt refinancings.
(2) Restructuring expenses represent
costs 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) Sponsor fees relate to fees paid to
our private equity sponsor for
monitoring, advisory and consulting
services.
Gates Industrial Corporation plc
Reconciliation of Net Income Attributable to Shareholders to Adjusted Net Income
(Unaudited)
For the three months ended
For the year ended
(USD in millions, except December 28, December 29, December 28, December 29,
share numbers and per 2019 2018 2019 2018
share amounts)
--- ---
Net income attributable
to shareholders $
19.4 $
75.6 $
690.1 $
245.3
Adjusted for:
(Gain) loss on disposal
of discontinued
operations - (0.1) 0.6 0.6
Amortization of
intangible assets
arising from the 2014
acquisition of Gates 29.4 29.5 118.2 120.3
Transaction-related
expenses (1) 1.9 0.5 2.6 6.7
Impairment of intangibles
and other assets - 0.7 0.6
Restructuring expenses
(2) 2.1 3.2 6.0 6.4
Share-based compensation
expense 4.5 0.5 15.0 6.0
Sponsor fees (included in
other operating
expenses) (3) 1.6 2.1 6.5 8.0
Inventory impairments and
adjustments (included in
cost of sales) (0.1) 0.4 1.2 1.5
Adjustments relating to
post-retirement
benefits (0.6) 0.7 (3.2) 3.1
Premium on redemption of
long-term debt - 27.0
Financing-related FX
losses (gains) (4) 0.2 (0.3) (0.8) (8.8)
One-time net tax benefit
(5) - (513.0)
One-time non-
controlling interest
adjustment - (15.0)
Other adjustments 0.2 1.9 1.6 0.8
Estimated tax effect of
the above adjustments (2.1) (9.1) (31.2) (38.3)
Adjusted Net Income $
56.5 $
104.9 $
279.3 $
379.2
Diluted weighted-average
number of shares
outstanding 291,649,100 294,701,563 291,627,461 291,698,273
Adjusted Net Income per
diluted share $
0.19 $
0.36 $
0.96 $
1.30
(1) Transaction-related expenses relate
primarily to advisory fees recognized
in respect of our initial public
offering, the acquisition of
businesses and costs related to other
corporate transactions such as debt
refinancings.
(2) Restructuring expenses represent costs
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) Sponsor fees relate to fees paid to
our private equity sponsor for
monitoring, advisory and consulting
services.
(4) Financing-related FX losses (gains)
relate primarily to net foreign
currency remeasurement losses (gains)
on the unhedged portion of Gates'
Euro-denominated debt, and, in the
year ended December 29, 2018, a gain
of $5.8 million on a currency
derivative entered into as part of
the redemption of our Euro Senior
Notes.
(5) During the first quarter of 2019, we
recognized a one-time, non-cash tax
benefit related to the release of
valuation allowances on net operating
loss carryforwards in Europe. This
benefit was offset partially by
certain indirectly related
unrecognized tax benefits and a tax
charge related to a statutory tax
rate change in April 2019 in the
country in which the net operating
loss carryforwards noted above are
held.
Gates Industrial Corporation plc
Reconciliation of Net Sales to Core Revenue Growth
(Unaudited)
Three months ended December 28, 2019
(USD in Power
millions) Transmission Fluid Power
Total
---
Net sales (1) $
470.3 $
255.4 $
725.7
Impact on net
sales of
movements in
currency rates 3.9 2.3 6.2
Core revenue $
474.2 $
257.7 $
731.9
Net sales for
the three
months ended
December 29,
2018 490.7 301.4 792.1
Decrease in net
sales on a
core basis
(core revenue) $
(16.5) $
(43.7) $
(60.2)
Core revenue (3.4) (14.5) (7.6)
growth % %
%
Year ended December 28, 2019
(USD in Power
millions) Transmission Fluid Power
Total
---
Net sales (1) $
1,945.7 $
1,141.4 $
3,087.1
Impact on net
sales of
movements in
currency rates 56.5 20.5 77.0
Impact on net
sales from
recent
acquisitions - (7.5) (7.5)
Core revenue $
2,002.2 $
1,154.4 $
3,156.6
Net sales for
the year ended
December 29,
2018 2,098.8 1,248.8 3,347.6
Decrease in net
sales on a
core basis
(core revenue) $
(96.6) $
(94.4) $
(191.0)
Core revenue (4.6) (7.6) (5.7)
growth % %
%
(1) Throughout this document the terms "net
sales" and "revenue" are used
interchangeably in reference to the
GAAP measure "net sales."
Gates Industrial Corporation plc
Reconciliation of Free Cash Flow and Free Cash Flow Conversion
(Unaudited)
For the three months ended
For the year ended
(USD in millions) December 28, December 29, December 28, December 29,
2019 2018 2019 2018
--- ---
Cash provided by
operations $
203.7 $
171.2 $
348.9 $
313.5
Capital
expenditures (1) (24.6) (27.8) (83.1) (182.7)
Free Cash Flow $
179.1 $
143.4 $
265.8 $
130.8
(1) Capital expenditures represent
purchases of property, plant
and equipment and purchases of
intangible assets.
For the three months ended
For the year ended
(USD in December 28, December 29, December 28, December 29,
millions) 2019 2018 2019 2018
---
Free Cash Flow $
179.1 $
143.4 $
265.8 $
130.8
Adjusted Net
Income 56.5 104.9 279.3 379.2
Free Cash Flow 317.0 136.7 95.2 34.5
Conversion
% % % %
Contact
Bill Waelke
(303) 744-4887
investorrelations@gates.com
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SOURCE Gates Industrial Corporation plc
