Cover Page
Cover Page - shares | 6 Months Ended | |
Jul. 01, 2023 | Aug. 01, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jul. 01, 2023 | |
Document Transition Report | false | |
Entity File Number | 001-38366 | |
Entity Registrant Name | Gates Industrial Corporation plc | |
Entity Incorporation, Country Code | X0 | |
Entity Tax Identification Number | 98-1395184 | |
Entity Address, Street Address | 1144 Fifteenth Street | |
Entity Address, City | Denver | |
Entity Address, State | CO | |
Entity Address, Postal Zip Code | 80202 | |
City Area Code | 303 | |
Local Phone Number | 744-1911 | |
Title of each class | Ordinary Shares, $0.01 par value per share | |
Trading Symbol(s) | GTES | |
Name of each exchange on which registered | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 264,086,229 | |
Entity Central Index Key | 0001718512 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false |
Unaudited Condensed Consolidate
Unaudited Condensed Consolidated Statements of Operations - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Income Statement [Abstract] | ||||
Net sales | $ 936.3 | $ 906.8 | $ 1,834 | $ 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 | 0.6 | 0 | 0.6 |
Restructuring expenses | 2.2 | 3.2 | 7.7 | 3.7 |
Other operating expense | 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 | 85.3 | 65.6 |
Other expense | 3.7 | 8.1 | 4 | 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, net of tax, respectively, of $0, $0 and $0 | 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 | 10.5 | 12.4 |
Net income attributable to shareholders | $ 64.9 | $ 53.1 | $ 91.3 | $ 84 |
Basic | ||||
Earnings per share from continuing operations (in usd per share) | $ 0.24 | $ 0.19 | $ 0.33 | $ 0.29 |
Earnings per share from discontinued operations (in usd per share) | 0 | 0 | 0 | 0 |
Earnings per share (in usd per share) | 0.24 | 0.19 | 0.33 | 0.29 |
Diluted | ||||
Earnings per share from continuing operations (in usd per share) | 0.23 | 0.19 | 0.32 | 0.29 |
Earnings per share from discontinued operations (in usd per share) | 0 | 0 | 0 | 0 |
Earnings per share (in usd per share) | $ 0.23 | $ 0.19 | $ 0.32 | $ 0.29 |
Unaudited Condensed Consolida_2
Unaudited Condensed Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Income Statement [Abstract] | ||||
Loss on disposal of discontinued operations, net of tax | $ 0 | $ 0 | $ 0 | $ 0 |
Unaudited Condensed Consolida_3
Unaudited Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Net income | $ 71.2 | $ 59.1 | $ 101.8 | $ 96.4 |
Foreign currency translation: | ||||
—Net translation gain (loss) on foreign operations, net of tax expense, respectively, of $(0.2), $(1.0), $(2.2) and $(1.0) | 0.2 | (164.3) | 82.3 | (191.8) |
—(Loss) gain on net investment hedges, net of tax benefit, respectively, of $2.1, $0, $3.8 and $0.9 | (7.8) | 21.9 | (18.3) | 33.1 |
Total foreign currency translation movements | (7.6) | (142.4) | 64 | (158.7) |
Cash flow hedges (interest rate derivatives): | ||||
— Gain arising in the period, net of tax expense, respectively, of $(5.9), $(0.5), $(3.4) and $(8.8) | 17.7 | 1.7 | 10.2 | 26.8 |
—Reclassification to net income, net of tax benefit (expense), respectively, of $1.0, $(1.4), $1.6 and $(2.8) | (2.8) | 4.1 | (4.6) | 8.2 |
Total cash flow hedges movements | 14.9 | 5.8 | 5.6 | 35 |
Post-retirement benefits: | ||||
—Reclassification of prior year actuarial movements to net income, net of tax benefit, respectively, of $0.2, $0, $0.4 and $0.1 | (0.6) | (0.3) | (1.3) | (0.4) |
Total post-retirement benefits movements | (0.6) | (0.3) | (1.3) | (0.4) |
Other comprehensive income (loss) | 6.7 | (136.9) | 68.3 | (124.1) |
Comprehensive income (loss) for the period | 77.9 | (77.8) | 170.1 | (27.7) |
Comprehensive income (loss) attributable to shareholders: | ||||
Comprehensive income (loss) attributable to parent | 96 | (56.3) | 183.2 | (5.6) |
Comprehensive loss attributable to non-controlling interests | (18.1) | (21.5) | (13.1) | (22.1) |
—Income (loss) arising from continuing operations | ||||
Comprehensive income (loss) attributable to shareholders: | ||||
Comprehensive income (loss) attributable to parent | 96.1 | (56.1) | 183.6 | (5.3) |
—Loss arising from discontinued operations | ||||
Comprehensive income (loss) attributable to shareholders: | ||||
Comprehensive income (loss) attributable to parent | $ (0.1) | $ (0.2) | $ (0.4) | $ (0.3) |
Unaudited Condensed Consolida_4
Unaudited Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Foreign currency translation: | ||||
Net translation (loss) gain on foreign operations, tax | $ (0.2) | $ (1) | $ (2.2) | $ (1) |
Gain (loss) on net investment hedges, tax | 2.1 | 0 | 3.8 | 0.9 |
Cash flow hedges (interest rate derivatives): | ||||
(loss) gain arising in the period, tax expense | (5.9) | (0.5) | (3.4) | (8.8) |
Reclassification to net income, tax expense | 1 | (1.4) | 1.6 | (2.8) |
Post-retirement benefits: | ||||
Reclassification of prior year actuarial movements to net income, net of tax benefit | $ 0.2 | $ 0 | $ 0.4 | $ 0.1 |
Unaudited Condensed Consolida_5
Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Millions | Jul. 01, 2023 | Dec. 31, 2022 |
Current assets | ||
Cash and cash equivalents | $ 565 | $ 578.4 |
Trade accounts receivable, net | 874.8 | 808.6 |
Inventories | 644.4 | 656.2 |
Taxes receivable | 39.8 | 13 |
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 | 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 |
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 |
Other non-current liabilities | 121.8 | 99.7 |
Total liabilities | 3,885.9 | 3,748 |
Commitments and contingencies (Note 18) | ||
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 |
Non-controlling interests | 320.6 | 333.6 |
Total equity | 3,391 | 3,443.6 |
Total liabilities and equity | $ 7,276.9 | $ 7,191.6 |
Unaudited Condensed Consolida_6
Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Jul. 01, 2023 | Dec. 31, 2022 |
Statement of Financial Position [Abstract] | ||
Par value (in usd per share) | $ 0.01 | $ 0.01 |
Outstanding shares ( in shares) | 263,685,743 | 282,578,917 |
Authorized shares (in shares) | 3,000,000,000 | 3,000,000,000 |
Unaudited Condensed Consolida_7
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions | 6 Months Ended | |
Jul. 01, 2023 | Jul. 02, 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 | 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 | (40.3) |
—Decrease in accounts payable | (2.1) | (5.7) |
—Decrease (increase) in prepaid expenses and other assets | 7.6 | (38) |
—Decrease in taxes payable | (0.8) | (27.8) |
—Decrease in other liabilities | (0.2) | (43) |
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) | (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 | 0 |
Other investing activities | 0 | 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 | 70 |
Payments of long-term debt | (9.8) | (10.3) |
Debt issuance costs paid | (0.3) | (0.3) |
Dividends paid to non-controlling interests | 0 | (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 | 68.7 |
Accrued capital expenditures | $ 1.6 | $ 2.5 |
Unaudited Condensed Consolida_8
Unaudited Condensed Consolidated Statements of Shareholders’ Equity - USD ($) $ in Millions | Total | Total shareholders’ equity | Share capital | Additional paid-in capital | Treasury Shares | Accumulated other comprehensive loss | Retained earnings | Non- controlling interests |
Beginning balance at Jan. 01, 2022 | $ 3,481.4 | $ 3,099.7 | $ 2.9 | $ 2,484.1 | $ (825.2) | $ 1,437.9 | $ 381.7 | |
Increase (Decrease) in Stockholders' Equity | ||||||||
Net income | 96.4 | 84 | 84 | 12.4 | ||||
Other comprehensive income (loss) | (124.1) | (89.6) | (89.6) | (34.5) | ||||
Total comprehensive (loss) income | (27.7) | (5.6) | 0 | 0 | (89.6) | 84 | (22.1) | |
—Issuance of shares | 13.9 | 13.9 | 13.9 | |||||
—Shares withheld for employee taxes | (1.3) | (1.3) | (1.3) | |||||
—Buy-back and cancellation of shares | (175.9) | (175.9) | (0.1) | (175.8) | ||||
—Share-based compensation | 27.4 | 27.4 | 27.4 | |||||
—Dividends paid to non-controlling interests | (14.5) | (14.5) | ||||||
Ending balance at Jul. 02, 2022 | 3,303.3 | 2,958.2 | 2.8 | 2,524.1 | $ 0 | (914.8) | 1,346.1 | 345.1 |
Beginning balance at Apr. 02, 2022 | 3,376.2 | 2,995.1 | 2.9 | 2,504.7 | (121.9) | (805.4) | 1,414.8 | 381.1 |
Increase (Decrease) in Stockholders' Equity | ||||||||
Net income | 59.1 | 53.1 | 53.1 | 6 | ||||
Other comprehensive income (loss) | (136.9) | (109.4) | (109.4) | (27.5) | ||||
Total comprehensive (loss) income | (77.8) | (56.3) | 0 | 0 | 0 | (109.4) | 53.1 | (21.5) |
—Issuance of shares | 13.7 | 13.7 | 13.7 | |||||
—Cancellation of treasury shares | 0 | (0.1) | 121.9 | (121.8) | ||||
—Share-based compensation | 5.7 | 5.7 | 5.7 | |||||
—Dividends paid to non-controlling interests | (14.5) | (14.5) | ||||||
Ending balance at Jul. 02, 2022 | 3,303.3 | 2,958.2 | 2.8 | 2,524.1 | 0 | (914.8) | 1,346.1 | 345.1 |
Beginning balance at Dec. 31, 2022 | 3,443.6 | 3,110 | 2.8 | 2,542.1 | (917.8) | 1,482.9 | 333.6 | |
Increase (Decrease) in Stockholders' Equity | ||||||||
Net income | 101.8 | 91.3 | 91.3 | 10.5 | ||||
Other comprehensive income (loss) | 68.3 | 91.9 | 91.9 | (23.6) | ||||
Total comprehensive (loss) income | 170.1 | 183.2 | 0 | 0 | 91.9 | 91.3 | (13.1) | |
—Issuance of shares | 17.4 | 17.4 | 17.4 | |||||
—Shares withheld for employee taxes | (1.7) | (1.7) | (1.7) | |||||
—Buy-back and cancellation of shares | (253.8) | (253.8) | (0.2) | (253.6) | ||||
—Share-based compensation | 15.4 | 15.3 | 15.3 | 0.1 | ||||
Ending balance at Jul. 01, 2023 | 3,391 | 3,070.4 | 2.6 | 2,573.1 | 0 | (825.9) | 1,320.6 | 320.6 |
Beginning balance at Apr. 01, 2023 | 3,553.6 | 3,215 | 2.8 | 2,559.9 | 0 | (857) | 1,509.3 | 338.6 |
Increase (Decrease) in Stockholders' Equity | ||||||||
Net income | 71.2 | 64.9 | 64.9 | 6.3 | ||||
Other comprehensive income (loss) | 6.7 | 31.1 | 31.1 | (24.4) | ||||
Total comprehensive (loss) income | 77.9 | 96 | 0 | 0 | 0 | 31.1 | 64.9 | (18.1) |
—Issuance of shares | 6.1 | 6.1 | 6.1 | |||||
—Shares withheld for employee taxes | (0.1) | (0.1) | (0.1) | |||||
—Buy-back and cancellation of shares | (253.8) | (253.8) | (0.2) | (253.6) | ||||
—Share-based compensation | 7.3 | 7.2 | 7.2 | 0.1 | ||||
Ending balance at Jul. 01, 2023 | $ 3,391 | $ 3,070.4 | $ 2.6 | $ 2,573.1 | $ 0 | $ (825.9) | $ 1,320.6 | $ 320.6 |
Introduction
Introduction | 6 Months Ended |
Jul. 01, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Introduction | Introduction A. Background Gates Industrial Corporation plc (the “Company”) is a public limited company that was registered in England and Wales on September 25, 2017. In these condensed consolidated financial statements and related notes, all references to “Gates,” “we,” “us,” and “our” refer, unless the context requires otherwise, to Gates Industrial Corporation plc and its consolidated subsidiaries. B. Accounting periods The Company prepares its annual consolidated financial statements for the period ending on the Saturday nearest December 31. Accordingly, the condensed consolidated balance sheets as of July 1, 2023 and December 31, 2022, and the related condensed consolidated statements of operations, comprehensive income, cash flows, and shareholders’ equity are presented, where relevant, for the 91-day period from April 2, 2023 to July 1, 2023, with comparative information for the 91-day period from April 3, 2022 to July 2, 2022 and for the 182-day period from January 1, 2023 to July 1, 2023, with comparative information for the 182-day period from January 2, 2022 to July 2, 2022. C. Basis of preparation The condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are presented in U.S. dollars unless otherwise indicated. The condensed consolidated financial statements and related notes contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position as of July 1, 2023 and the results of its operations and cash flows for the periods ended July 1, 2023 and July 2, 2022. Interim period results are not necessarily indicative of the results to be expected for the full fiscal year. The preparation of consolidated financial statements under U.S. GAAP requires us to make assumptions and estimates concerning the future that affect the reported amounts of assets, liabilities, revenue and expenses. Estimates and assumptions are particularly important in accounting for items such as revenue, rebates, impairment of long-lived assets, intangible assets and goodwill, inventory valuation, financial instruments, expected credit losses, product warranties, income taxes and post-retirement benefits. Estimates and assumptions used are based on factors such as historical experience, observance of trends in the industries in which we operate and information available from our customers and other outside sources. These condensed consolidated financial statements are unaudited and have been prepared on substantially the same basis as Gates’ audited annual consolidated financial statements and related notes for the year ended December 31, 2022. The condensed consolidated balance sheet as of December 31, 2022 has been derived from those audited financial statements. During 2021, the Company implemented a program with an unrelated third party under which we may periodically sell trade accounts receivable from one of our aftermarket customers with whom we have extended payment terms as part of a commercial agreement. The purpose of using this program is to offset the working capital impact resulting from this terms extension. All eligible accounts receivable from this customer are covered by the program, and any factoring is solely at our option. Following the factoring of a qualifying receivable, because we maintain no continuing involvement in the underlying receivable, and collectability risk is fully transferred to the unrelated third party, we account for these transactions as a sale of a financial asset and derecognize the asset. Cash received under the program is classified as operating cash inflows in the consolidated statement of cash flows. As of July 1, 2023, the collection of $87.5 million of our trade accounts receivable had been accelerated under this program, compared to the accelerated collection of $108.2 million as of December 31, 2022. During the three and six months ended July 1, 2023, we incurred costs in respect of this program of $1.6 million and $3.0 million, respectively, which are recorded under other expense. During the three and six months ended July 2, 2022, we incurred costs in respect of this program of $0.8 million and $1.4 million, respectively. These condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and related notes for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K. |
Recent accounting pronouncement
Recent accounting pronouncements not yet adopted | 6 Months Ended |
Jul. 01, 2023 | |
Accounting Policies [Abstract] | |
Recent accounting pronouncements not yet adopted | Recent accounting pronouncements not yet adopted |
Segment information
Segment information | 6 Months Ended |
Jul. 01, 2023 | |
Segment Reporting [Abstract] | |
Segment information | Segment information A. Background The segment information provided in these condensed consolidated financial statements reflects the information that is used by the chief operating decision maker for the purposes of making decisions about allocating resources and in assessing the performance of each segment. The chief executive officer (“CEO”) of Gates serves as the chief operating decision maker. These decisions are based on net sales and Adjusted EBITDA (defined below). B. Operating segments and segment assets Gates manufactures a wide range of power transmission and fluid power products and components for a large variety of industrial and automotive applications, both in the aftermarket and first-fit channels, throughout the world. Our reportable segments are identified on the basis of our primary product lines, as this is the basis on which information is provided to the CEO for the purposes of allocating resources and assessing the performance of Gates’ businesses. Our operating and reporting segments are therefore Power Transmission and Fluid Power. Segment asset information is not provided to the chief operating decision maker and therefore segment asset information has not been presented. Due to the nature of Gates’ operations, cash generation and profitability are viewed as the key measures rather than an asset-based measure. C. Segment net sales and disaggregated net sales Sales between reporting segments and the impact of such sales on Adjusted EBITDA for each segment are not included in internal reports presented to the CEO and have therefore not been included below. Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Power Transmission $ 573.9 $ 543.0 $ 1,122.0 $ 1,098.6 Fluid Power 362.4 363.8 712.0 701.6 Continuing operations $ 936.3 $ 906.8 $ 1,834.0 $ 1,800.2 Our commercial function is organized by region and therefore, in addition to reviewing net sales by our reporting segments, the CEO also reviews net sales information disaggregated by region, including between emerging and developed markets. The following table summarizes our net sales by key geographic region of origin: Three months ended July 1, July 2, (dollars in millions) Power Transmission Fluid Power Power Transmission Fluid Power U.S. $ 155.6 $ 191.1 $ 166.7 $ 196.2 North America, excluding U.S. 56.5 55.9 52.0 54.0 United Kingdom (“U.K.”) 13.8 19.7 10.7 16.9 EMEA (1) , excluding U.K. 168.4 54.1 151.9 53.6 East Asia and India 70.7 20.2 73.9 19.0 Greater China 80.4 10.5 64.8 11.0 South America 28.5 10.9 23.0 13.1 Net sales $ 573.9 $ 362.4 $ 543.0 $ 363.8 Six months ended July 1, July 2, (dollars in millions) Power Transmission Fluid Power Power Transmission Fluid Power U.S. $ 300.4 $ 372.9 $ 325.8 $ 363.7 North America, excluding U.S. 111.3 107.7 101.2 104.9 U.K. 24.3 40.1 22.7 34.3 EMEA (1) , excluding U.K. 336.1 108.0 311.6 109.3 East Asia and India 144.7 40.0 148.3 40.0 Greater China 150.4 21.8 144.8 24.5 South America 54.8 21.5 44.2 24.9 Net sales $ 1,122.0 $ 712.0 $ 1,098.6 $ 701.6 (1) Europe, Middle East and Africa (“EMEA”). The following table summarizes our net sales into emerging and developed markets: Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Developed $ 632.9 $ 587.1 $ 1,214.1 $ 1,160.2 Emerging 303.4 319.7 619.9 640.0 Net sales $ 936.3 $ 906.8 $ 1,834.0 $ 1,800.2 D. Measure of segment profit or loss The CEO uses Adjusted EBITDA, as defined below, to measure the profitability of each segment. Adjusted EBITDA is, therefore, the measure of segment profit or loss presented in Gates’ segment disclosures. “EBITDA” represents net income for the period before net interest and other expense, income taxes, depreciation and amortization. Adjusted EBITDA represents EBITDA before certain items that are considered to hinder comparison of the performance of our businesses on a period-over-period basis or with other businesses. During the periods presented, the items excluded from EBITDA in computing Adjusted EBITDA primarily included: • non-cash charges in relation to share-based compensation; • transaction-related expenses incurred in relation to major corporate transactions, including the acquisition of businesses and related integration activities, and equity and debt transactions; • asset impairments; • restructuring expenses, including severance-related expenses; • credit loss related to a customer bankruptcy; • cybersecurity incident expenses; and • inventory adjustments related to certain inventories accounted for on a Last-in First-out (“LIFO”) basis. Adjusted EBITDA by segment was as follows: Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Power Transmission $ 119.0 $ 102.4 $ 226.7 $ 200.2 Fluid Power 78.3 77.7 145.1 136.7 Continuing operations $ 197.3 $ 180.1 $ 371.8 $ 336.9 Reconciliation of net income from continuing operations to Adjusted EBITDA: Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Net income from continuing operations $ 71.3 $ 59.3 $ 102.2 $ 96.7 Income tax expense 9.6 12.3 24.9 10.1 Income from continuing operations before taxes 80.9 71.6 127.1 106.8 Interest expense 44.5 33.0 85.3 65.6 Other expense 3.7 8.1 4.0 8.7 Operating income from continuing operations 129.1 112.7 216.4 181.1 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 3.2 7.7 3.7 Share-based compensation expense 6.8 3.5 16.3 27.6 Inventory impairments and adjustments (2) (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) (3) 0.7 — 11.4 — Cybersecurity incident expenses (4) — — 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 (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) Inventory impairments and adjustments include the reversal of the adjustment to remeasure certain inventories on a LIFO basis. The recent inflationary environment has caused LIFO values to drop below First-in, First-out (“FIFO”) values because LIFO measurement results in the more recent inflated costs being matched against current sales while historical, lower costs are retained in inventories. (3) 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 a $10.7 million pre-tax charge during the three months ended April 1, 2023 to reflect our estimated recovery. Based on further developments in the bankruptcy proceedings, we recorded an additional $0.7 million pre-tax charge during the three months ended July 1, 2023. We will continue to monitor the circumstances surrounding the bankruptcy in determining whether adjustments to this recovery estimate are necessary. |
Restructuring and other strateg
Restructuring and other strategic initiatives | 6 Months Ended |
Jul. 01, 2023 | |
Restructuring and Related Activities [Abstract] | |
Restructuring and other strategic initiatives | Restructuring and other strategic initiatives Gates continues to undertake various restructuring and other strategic initiatives to drive increased productivity in all aspects of our operations. These actions include efforts to consolidate our manufacturing and distribution footprint, scale operations to current demand levels, streamline our selling, general and administrative (“SG&A”) back-office functions and relocate certain operations to lower cost locations. Overall costs associated with our restructuring and other strategic initiatives have been recognized in the condensed consolidated statements as set forth below. Expenses incurred in relation to certain of these actions qualify as restructuring expenses under U.S. GAAP. Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Restructuring expenses: —Severance expenses $ 0.3 $ 2.3 $ 4.4 $ 2.3 —Non-severance labor and benefit expenses 0.5 0.1 0.8 0.2 —Consulting expenses 0.4 0.4 0.9 0.4 —Other net restructuring expenses 1.0 0.4 1.6 0.8 2.2 3.2 7.7 3.7 Restructuring expenses in asset impairments: —Impairment of fixed and other assets — 0.6 — 0.6 Restructuring expenses in cost of sales: —Impairment of inventory — 0.3 — 0.3 Total restructuring expenses $ 2.2 $ 4.1 $ 7.7 $ 4.6 Expenses related to other strategic initiatives: —Severance expenses included in cost of sales $ — $ — $ 0.5 $ — —Severance expenses included in SG&A 0.3 0.1 0.9 0.4 Total expenses related to other strategic initiatives $ 0.3 $ 0.1 $ 1.4 $ 0.4 Restructuring and other strategic initiatives during the three and six months ended July 1, 2023 related primarily to severance and other non-labor costs related to relocating certain production activities in China, Mexico and Europe. During the three months ended July 1, 2023, we also incurred additional labor and severance costs of $0.5 million related to relocation and integration of certain support functions into our regional shared service center in Europe. Restructuring and other strategic initiatives during the three and six months ended July 2, 2022 were primarily incurred during the three months ended July 2, 2022, and included severance of $1.9 million related to relocation and integration of certain support functions into our regional shared service center, plus $1.3 million in relation to the suspension of our operations in Russia, which included severance costs of $0.4 million, an impairment of inventories of $0.3 million (recognized in cost of sales), and an impairment of fixed and other assets of $0.6 million (recognized in asset impairments). Other restructuring costs incurred during the three and six months ended July 2, 2022 related to non-severance and other labor and benefit costs, prior period facility closures or relocations in several countries. Restructuring activities As indicated above, restructuring expenses, as defined under U.S. GAAP, form a subset of our total expenses related to restructuring and other strategic initiatives. These expenses include the impairment of inventory, which is recognized in cost of sales. Analyzed by segment, our restructuring expenses were as follows: Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Power Transmission $ 1.0 $ 3.1 $ 5.7 $ 3.4 Fluid Power 1.2 1.0 2.0 1.2 Continuing operations $ 2.2 $ 4.1 $ 7.7 $ 4.6 The following summarizes the reserve for restructuring expenses for the six months ended July 1, 2023 and July 2, 2022, respectively: Six months ended (dollars in millions) July 1, July 2, Balance as of the beginning of the period $ 7.5 $ 6.5 Utilized during the period (8.3) (3.2) Charge for the period 8.1 4.0 Released during the period (0.4) (0.3) Foreign currency translation 0.1 (0.2) Balance as of the end of the period $ 7.0 $ 6.8 Restructuring reserves, which are expected to be utilized during 2023 and 2024, are included in the condensed consolidated balance sheet within the accrued expenses and other current liabilities line. |
Income taxes
Income taxes | 6 Months Ended |
Jul. 01, 2023 | |
Income Tax Disclosure [Abstract] | |
Income taxes | Income taxes We compute the year-to-date income tax provision by applying our estimated annual effective tax rate to our year-to-date pre-tax income and adjust for discrete tax items in the period in which they occur. For the three months ended July 1, 2023, we had income tax expense of $9.6 million on pre-tax income of $80.9 million, which resulted in an effective tax rate of 11.9%, compared to an income tax expense of $12.3 million on pre-tax income of $71.6 million, which resulted in an effective tax rate of 17.2% for the three months ended July 2, 2022. For the three months ended July 1, 2023, the effective tax rate was driven primarily by discrete tax benefits of $6.4 million, of which $4.3 million related to adjustments in various foreign jurisdictions in which returns were filed, and $1.8 million of net unrecognized tax benefits, primarily related to India audit settlements. For the three months ended July 2, 2022, the effective tax rate was driven primarily by discrete benefits of $3.5 million related to the partial release of valuation allowance on deferred tax assets for U.S. foreign tax credits and $1.9 million of other discrete expense. For the six months ended July 1, 2023, we had an income tax expense of $24.9 million on pre-tax income of $127.1 million, which resulted in an effective tax rate of 19.6%, compared to an income tax expense of $10.1 million on pre-tax income of $106.8 million, which resulted in an effective tax rate of 9.5% for the six months ended July 2, 2022. For the six months ended July 1, 2023, the net impact of discrete items was nominal, and the effective tax rate was driven primarily by jurisdictional mix of earnings. For the six months ended July 2, 2022, the effective tax rate was driven primarily by discrete benefits of $11.7 million related to the partial release of valuation allowance on deferred tax assets for U.S. foreign tax credits, partially offset by jurisdictional mix of taxable earnings. Deferred Tax Assets and Liabilities We recognize deferred tax assets and liabilities for future tax consequences arising from differences between the carrying amounts of existing assets and liabilities under U.S. GAAP and their respective tax bases, and for net operating loss carryforwards and tax credit carryforwards. We evaluate the recoverability of our deferred tax assets, weighing all positive and negative evidence, and are required to establish or maintain a valuation allowance for these assets if we determine that it is more likely than not that some or all of the deferred tax assets will not be realized. As of each reporting date, we consider new evidence, both positive and negative, that could impact our view with regard to the future realization of deferred tax assets. We will maintain our positions with regard to future realization of deferred tax assets, including those with respect to which we continue maintaining valuation allowances, until there is sufficient new evidence to support a change in expectations. Such a change in expectations could arise due to many factors, including those impacting our forecasts of future earnings, as well as changes in the international tax laws under which we operate and tax planning. It is not reasonably possible to forecast any such changes at the present time, but it is possible that, should they arise, our view of their effect on the future realization of deferred tax assets may impact materially our financial statements. After weighing all of the evidence, giving more weight to the evidence that was objectively verifiable, we determined during the three months ended July 1, 2023, that it is more likely than not that deferred tax assets in the U.S. totaling $5.3 million are not realizable, none of which was discrete. As a result of changes in estimates of future taxable profits against which the foreign tax credits can be utilized, our judgment changed regarding valuation allowances on these deferred tax assets. |
Earnings per share
Earnings per share | 6 Months Ended |
Jul. 01, 2023 | |
Earnings Per Share [Abstract] | |
Earnings per share | Earnings per share Basic earnings per share represents net income attributable to shareholders divided by the weighted average number of shares outstanding during the period. Diluted earnings per share considers the dilutive effect of potential shares, unless the inclusion of the potential shares would have an anti-dilutive effect. The treasury stock method is used to determine the potential dilutive shares resulting from assumed exercises of equity-related instruments. The computation of earnings per share is presented below: Three months ended Six months ended (dollars in millions, except share numbers and per share amounts) July 1, July 2, July 1, July 2, Net income attributable to shareholders $ 64.9 $ 53.1 $ 91.3 $ 84.0 Weighted average number of shares outstanding 275,875,426 281,768,945 279,697,864 285,713,321 Dilutive effect of share-based awards 4,040,022 4,269,873 4,255,220 4,837,297 Diluted weighted average number of shares outstanding 279,915,448 286,038,818 283,953,084 290,550,618 Number of anti-dilutive shares excluded from the diluted 3,307,714 5,679,838 4,622,998 4,771,573 Basic earnings per share $ 0.24 $ 0.19 $ 0.33 $ 0.29 Diluted earnings per share $ 0.23 $ 0.19 $ 0.32 $ 0.29 |
Inventories
Inventories | 6 Months Ended |
Jul. 01, 2023 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories (dollars in millions) As of July 1, 2023 As of December 31, 2022 Raw materials and supplies $ 188.5 $ 195.9 Work in progress 44.0 42.3 Finished goods 411.9 418.0 Total inventories $ 644.4 $ 656.2 |
Goodwill
Goodwill | 6 Months Ended |
Jul. 01, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | Goodwill (dollars in millions) Power Fluid Total Cost and carrying amount As of December 31, 2022 $ 1,315.2 $ 665.9 $ 1,981.1 Foreign currency translation 8.1 28.8 36.9 As of July 1, 2023 $ 1,323.3 $ 694.7 $ 2,018.0 |
Intangible assets
Intangible assets | 6 Months Ended |
Jul. 01, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible assets | Intangible assets As of July 1, 2023 As of December 31, 2022 (dollars in millions) Cost Accumulated Net Cost Accumulated Net Finite-lived: —Customer relationships $ 1,988.5 $ (1,059.9) $ 928.6 $ 1,973.7 $ (993.2) $ 980.5 —Technology 90.6 (90.1) 0.5 90.4 (89.6) 0.8 —Capitalized software 110.2 (70.2) 40.0 105.4 (65.7) 39.7 2,189.3 (1,220.2) 969.1 2,169.5 (1,148.5) 1,021.0 Indefinite-lived: —Brands and trade names 513.4 (44.0) 469.4 513.4 (44.0) 469.4 Total intangible assets $ 2,702.7 $ (1,264.2) $ 1,438.5 $ 2,682.9 $ (1,192.5) $ 1,490.4 During the three months ended July 1, 2023, the amortization expense recognized in respect of intangible assets was $32.2 million, compared to $32.3 million for the three months ended July 2, 2022. In addition, movements in foreign currency exchange rates resulted in a decrease in the net carrying value of total intangible assets of $1.9 million for the three months ended July 1, 2023, compared to a decrease of $28.3 million for the three months ended July 2, 2022. During the six months ended July 1, 2023, the amortization expense recognized in respect of intangible assets was $64.3 million, compared to $65.3 million for the six months ended July 2, 2022. In addition, movements in foreign currency exchange rates resulted in an increase in the net carrying value of total intangible assets of $7.3 million for the six months ended July 1, 2023, compared to a decrease of $34.8 million for the six months ended July 2, 2022. |
Derivative financial instrument
Derivative financial instruments | 6 Months Ended |
Jul. 01, 2023 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative financial instruments | Derivative financial instruments We are exposed to certain risks relating to our ongoing business operations. From time to time, we use derivative financial instruments, principally foreign currency swaps, forward foreign currency contracts, interest rate caps (options) and interest rate swaps, to reduce our exposure to foreign currency risk and interest rate risk. We do not hold or issue derivatives for speculative purposes and monitor closely the credit quality of the institutions with which we transact. We recognize derivative instruments as either assets or liabilities in the condensed consolidated balance sheet. We designate certain of our currency swaps as net investment hedges and designate our interest rate caps and interest rate swaps as cash flow hedges. The gain or loss on the designated derivative instrument is recognized in other comprehensive income (“OCI”) and reclassified into net income in the same period or periods during which the hedged transaction affects earnings. Derivative instruments that have not been designated in an effective hedging relationship are considered economic hedges, and their change in fair value is recognized in net income in each period. The period end fair values of derivative financial instruments were as follows: As of July 1, 2023 As of December 31, 2022 (dollars in millions) Prepaid expenses and other assets Other non- Accrued expenses and other Other Net Prepaid expenses and other assets Other non- Accrued expenses and other Other Net Derivatives designated as hedging instruments: —Currency swaps $ 14.8 $ — $ — $ (72.7) $ (57.9) $ 9.3 $ — $ — $ (45.2) $ (35.9) —Interest rate swaps 38.4 24.4 (10.7) (15.3) 36.8 33.3 32.7 (10.7) (22.1) 33.2 Derivatives not designated as hedging instruments: —Currency forward contracts 3.8 — (0.7) — 3.1 2.2 — (1.4) — 0.8 $ 57.0 $ 24.4 $ (11.4) $ (88.0) $ (18.0) $ 44.8 $ 32.7 $ (12.1) $ (67.3) $ (1.9) A. Instruments designated as net investment hedges We hold cross currency swaps that have been designated as net investment hedges of certain of our European operations. Concurrent with the refinancing transactions described in Note 12, we executed additional cross currency swaps that have been designated as net investment hedges of certain of our European operations, with the notional principal amount of €501.6 million and contract term from November 16, 2022 to November 16, 2027. During March 2022, we extended our cross currency swaps existing at that time, which originally matured in March 2022, to now mature on March 31, 2027. In May 2023, we amended our existing cross currency swaps to transition from a floating rate based on the London Interbank Offered Rate (“LIBOR”) to a floating rate based on a term secured overnight financing rate (“Term SOFR”). As of July 1, 2023 and December 31, 2022, the aggregated notional principal amount of the cross currency swaps was €756.1 million. In addition, as of January 1, 2022, we had designated €147.0 million of our Euro-denominated debt as a net investment hedge of certain of our European operations. We subsequently reduced the designated amount to €25.0 million during the second quarter of 2022. On November 16, 2022, we extinguished our Euro-denominated term loan and replaced with new Dollar-denominated term loans, and as a result, the net investment hedging designated on our Euro-denominated debt no longer exists. The fair value (losses) gains before tax recognized in OCI in relation to the instruments designated as net investment hedging instruments were as follows: Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Net fair value (losses) gains recognized in OCI in relation to: —Euro-denominated debt $ — $ 5.6 $ — $ 10.7 —Designated cross currency swaps (9.9) 16.3 (22.1) 21.5 Total net fair value (losses) gains $ (9.9) $ 21.9 $ (22.1) $ 32.2 During the three and six months ended July 1, 2023, a net gain of $2.5 million and $5.5 million, respectively, was recognized in interest expense in relation to our cross currency swaps that have been designated as net investment hedges, compared to a net gain of $1.0 million and $1.6 million, respectively, during the three and six months ended July 2, 2022. B. Instruments designated as cash flow hedges We use interest rate swaps and interest rate caps as part of our interest rate risk management strategy to add stability to interest expense and to manage our exposure to interest rate movements. These instruments are all designated as cash flow hedges. As of both July 1, 2023 and December 31, 2022, we held pay-fixed, receive-floating interest rate swaps with an aggregate notional amount of $1,255.0 million. Interest rate swaps with a notional amount of $870.0 million run from June 30, 2020 through June 30, 2025, while interest rate swaps with a notional amount of $385.0 million have the contract term from November 16, 2022 to November 16, 2027. In May 2023, we amended our then-existing interest rate swaps with a notional amount of $870.0 million to transition from a LIBOR-based floating rate to a Term SOFR-based floating rate. Our interest rate caps involve the receipt of variable rate payments from a counterparty if interest rates rise above the strike rate on the contract in exchange for a premium. As of July 2, 2022, the notional amount of our interest rate caps was €425.0 million covering the period from July 1, 2019 to June 30, 2023. During August 2022, we early terminated our interest rate caps. The movements before tax recognized in OCI in relation to our cash flow hedges were as follows: Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Movement recognized in OCI in relation to: —Fair value gain on cash flow hedges $ 23.6 $ 2.2 $ 13.6 $ 35.6 —Amortization to net income of prior period fair value losses 4.4 4.5 8.9 8.9 —Deferred OCI reclassified to net income (8.2) 1.0 (15.1) 2.1 Total movement $ 19.8 $ 7.7 $ 7.4 $ 46.6 C. Derivative instruments not designated as hedging instruments We do not designate our currency forward contracts, which are used primarily in respect of operational currency exposures related to payables, receivables and material procurement, or the currency swap contracts that are used to manage the currency profile of Gates’ cash as hedging instruments for the purposes of hedge accounting. As of July 1, 2023 and December 31, 2022, there were no outstanding currency swaps. As of July 1, 2023, the notional amount of outstanding currency forward contracts that are used to manage operational foreign exchange exposures was $144.8 million, compared to $150.5 million as of December 31, 2022. The fair value gains recognized in net income in relation to derivative instruments that have not been designated as hedging instruments were as follows: Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Fair value gains recognized in relation to: —Currency forward contracts recognized in SG&A $ 2.9 $ 2.5 $ 4.1 $ 5.0 Total $ 2.9 $ 2.5 $ 4.1 $ 5.0 |
Fair value measurement
Fair value measurement | 6 Months Ended |
Jul. 01, 2023 | |
Fair Value Disclosures [Abstract] | |
Fair value measurement | Fair value measurement A. Fair value hierarchy We account for certain assets and liabilities at fair value. Topic 820 “ Fair Value Measurements and Disclosures ” establishes the following hierarchy for the inputs that are used in fair value measurement: • “Level 1” inputs are unadjusted quoted prices in active markets for identical assets or liabilities; • “Level 2” inputs are those other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and • “Level 3” inputs are not based on observable market data (unobservable inputs). Assets and liabilities that are measured at fair value are categorized in one of the three levels on the basis of the lowest-level input that is significant to its valuation. B. Financial instruments not held at fair value Certain financial assets and liabilities are not measured at fair value; however, items such as cash and cash equivalents, restricted cash, drawings under revolving credit facilities and bank overdrafts generally attract interest at floating rates and accordingly their carrying amounts are considered to approximate fair value. Due to their short maturities, the carrying amounts of accounts receivable and accounts payable are also considered to approximate their fair values. The carrying amount and fair value of our debt are set out below: As of July 1, 2023 As of December 31, 2022 (dollars in millions) Carrying amount Fair value Carrying amount Fair value Current $ 36.7 $ 36.7 $ 36.6 $ 36.2 Non-current 2,520.6 2,534.6 2,426.4 2,408.4 $ 2,557.3 $ 2,571.3 $ 2,463.0 $ 2,444.6 Debt is comprised principally of borrowings under the secured credit facilities and the unsecured senior notes. Loans under the secured credit facilities pay interest at floating rates, subject to a Term SOFR (as defined in the credit agreement) floor of 0.50% on the New Dollar Term Loans, and an Adjusted Term SOFR (defined in the credit agreement as Term SOFR with a credit spread adjustment of 0.10%) floor of 0.75% on the Existing Dollar Term Loans, each as further described in Note 12. The fair values of the term loans are derived from a market price, discounted for illiquidity. The unsecured senior notes have fixed interest rates, are traded by “Qualified Institutional Buyers” and certain other eligible investors, and their fair value is derived from their quoted market price. C. Assets and liabilities measured at fair value on a recurring basis The following table categorizes the assets and liabilities that are measured at fair value on a recurring basis: (dollars in millions) Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Total As of July 1, 2023 Derivative assets $ — $ 81.4 $ 81.4 Derivative liabilities $ — $ (99.4) $ (99.4) As of December 31, 2022 Derivative assets $ — $ 77.5 $ 77.5 Derivative liabilities $ — $ (79.4) $ (79.4) Derivative assets and liabilities included in Level 2 represent foreign currency exchange forward and swap contracts, and interest rate derivative contracts. We value our foreign currency exchange derivatives using models consistent with those used by a market participant that maximize the use of market observable inputs including forward prices for currencies. We value our interest rate derivative contracts using a widely accepted discounted cash flow valuation methodology that reflects the contractual terms of each derivative, including the period to maturity. The methodology derives the fair values of the derivatives using the market standard methodology of netting the discounted future cash payments and the discounted expected receipts. The inputs used in the calculation are based on observable market-based inputs, including interest rate curves, implied volatilities and credit spreads. We incorporate credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. Transfers between levels of the fair value hierarchy During the periods presented, there were no transfers between Levels 1 and 2, and Gates had no assets or liabilities measured at fair value on a recurring basis using Level 3 inputs. D. Assets measured at fair value on a non-recurring basis |
Debt
Debt | 6 Months Ended |
Jul. 01, 2023 | |
Debt Disclosure [Abstract] | |
Debt | Debt (dollars in millions) As of July 1, 2023 As of December 31, 2022 Secured debt: —Dollar Term Loan $ 1,913.6 $ 1,923.4 —Asset-backed revolver 100.0 — Unsecured debt: —6.25% Dollar Senior Notes due 2026 568.0 568.0 Total principal of debt 2,581.6 2,491.4 Deferred issuance costs (41.6) (45.5) Accrued interest 17.3 17.1 Total carrying value of debt 2,557.3 2,463.0 Debt, current portion 36.7 36.6 Debt, less current portion $ 2,520.6 $ 2,426.4 Gates’ secured debt is jointly and severally, irrevocably and fully and unconditionally guaranteed by certain of its subsidiaries and is secured by liens on substantially all of their assets. Gates is subject to covenants, representations and warranties under certain of its debt facilities. During the periods covered by these condensed consolidated financial statements, we were in compliance with the applicable financial covenants. Also under the agreements governing our debt facilities, our ability to engage in activities such as incurring certain additional indebtedness, making certain investments and paying certain dividends is dependent, in part, on our ability to satisfy tests based on measures determined under those agreements. Debt issuances and redemptions During May 2023, we drew $100.0 million under our asset-backed revolving credit facility to partially fund the purchase of shares under our share repurchase program, as discussed further in Note 15 below. As of July 1, 2023, our asset-backed revolver has a balance of $100.0 million. On November 16, 2022, we issued a new $575.0 million tranche of dollar denominated term loans (the “New Dollar Term Loans”) pursuant to an amendment to the credit agreement governing our term loan facilities, using the proceeds to extinguish the entire outstanding principal balance of €563.8 million under our Euro Term Loan facility (the “Euro Term Loan”) plus €1.0 million accrued interest. The New Dollar Term Loans have substantially similar terms as the Existing Dollar Term Loans (as defined below), bearing interest at the borrower’s option at either Term SOFR, subject to a 0.50% per annum Term SOFR floor, plus 3.50% margin per annum, or at the base rate, subject to a 1.50% per annum floor, plus 2.50% per annum. The New Dollar Term Loans require scheduled quarterly amortization payments of 1% per annum based on the initial aggregate principal amount and mature in November 2029. Issuance discount and costs totaling approximately $23.2 million related to the issuance of the New Dollar Term Loans have been deferred and will be amortized to interest expense over the remaining term of the related borrowings using the effective interest method. The repayment of Euro Term Loan resulted in the accelerated recognition of $2.2 million deferred financing costs (recognized in interest expense). During March 2022, we drew $70.0 million under our asset-backed revolving credit facility to partially fund the purchase of shares under our share repurchase program, as discussed further in Note 15 below. During Fiscal 2022, we paid down the borrowings on the asset-backed revolver and had no remaining balance as of December 31, 2022. Dollar and Euro Term Loans Our secured credit facilities consist of two loans (collectively, the “Dollar Term Loans”), one of which was originally drawn on July 3, 2014 and refinanced on February 24, 2021 (the “Existing Dollar Term Loans”), and the New Dollar Term Loans drawn on November 16, 2022 as described above. These term loan facilities bear interest at a floating rate, which for U.S. dollar debt can be either a base rate as defined in the credit agreement plus an applicable margin, or at our option, Term SOFR plus an applicable margin. The New Dollar Term Loans mature on November 16, 2029. The Existing Dollar Term Loans’ interest rate is currently at Adjusted Term SOFR, subject to a floor of 0.75%, plus a margin of 2.50%, and as of July 1, 2023, borrowings under this facility bore interest at a rate of 7.70% per annum. On March 1, 2023, Gates amended the Existing Dollar Term Loans’ reference rate from LIBOR to Term SOFR, with a credit spread adjustment of 0.10%. The Existing Dollar Term Loans interest rate is currently re-set on the last business day of each month based on the election of one month interest periods. The New Dollar Term Loans’ interest rate is currently at Term SOFR, subject to a floor of 0.50%, plus a margin of 3.50%, and as of July 1, 2023, borrowings under this facility bore interest at a rate of 8.60% per annum. The New Dollar Term Loans’ interest rate is currently re-set on the last business day of each month based on the election of one month interest periods. Both Dollar Term Loans are subject to quarterly amortization payments of 0.25%, based on the original principal amount less certain repayments with the balance payable on maturity. During the six months ended July 1, 2023, we made amortization payments against the Existing Dollar Term Loans and New Dollar Term Loans of $6.9 million and $2.9 million, respectively. During the six months ended July 2, 2022, we made amortization payments against the Existing Dollar Term Loans and the Euro Term Loans of $6.9 million and $3.4 million, respectively. Under the terms of the credit agreement, we are obliged to offer annually to the term loan lenders an “excess cash flow” amount as defined under the agreement, based on the preceding year’s final results. Based on our 2022 results, the leverage ratio as defined under the credit agreement was below the threshold above which payments are required, and therefore no excess cash flow payment is required to be made in 2023. During the periods presented, foreign exchange gains were recognized in respect of the Euro Term Loans as summarized in the table below. As of July 2, 2022 a portion of the facility was designated as a net investment hedge of certain of our Euro investments, a corresponding portion of the foreign exchange gain were recognized in OCI. As of July 1, 2023, the Euro Term Loan, and the net investment hedging designation on the Euro Term Loan, no longer exist. Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Gain recognized in statement of operations $ — $ 30.9 $ — $ 45.6 Gain recognized in OCI — 5.6 — 10.7 Total gain $ — $ 36.5 $ — $ 56.3 The above net foreign exchange gain recognized in the other expense line of the condensed consolidated statement of operations have been substantially offset by net foreign exchange movements on Euro-denominated intercompany loans as part of our overall hedging strategy. A wholly-owned U.S. subsidiary of Gates Global LLC (the term loan borrower and an indirect subsidiary of Gates Industrial Corporation plc) is the principal obligor under the term loans for U.S. federal income tax purposes and makes the payments due on this tranche of debt. As a result, interest received by lenders of this tranche of debt is U.S. source income. Unsecured Senior Notes As of July 1, 2023, we had $568.0 million of Dollar Senior Notes outstanding that were issued in November 2019. These notes are scheduled to mature on January 15, 2026 and bear interest at an annual fixed rate of 6.25% with semi-annual interest payments. On and after January 15, 2022, we may redeem the Dollar Senior Notes, at our option, in whole at any time or in part from time to time, at the following redemption prices (expressed as a percentage of the principal amount), plus accrued and unpaid interest to the redemption date: Redemption price During the year commencing: —2023 101.563 % —2024 and thereafter 100.000 % Upon the occurrence of a change of control or a certain qualifying asset sale, the holders of the notes will have the right to require us to make an offer to repurchase each holder’s notes at a price equal to 101% (in the case of a change of control) or 100% (in the case of an asset sale) of their principal amount, plus accrued and unpaid interest. Revolving credit facility We have a secured revolving credit facility that provides for multi-currency revolving loans. As of both July 1, 2023 and December 31, 2022, there were no drawings for cash under the revolving credit facility and there were no letters of credit outstanding. Debt under the revolving credit facility bears interest at a floating rate, which can be either a base rate as defined in the credit agreement plus an applicable margin or, at our option, the reference rate, plus an applicable margin. On March 1, 2023, Gates amended the secured revolving credit facility reference rate for borrowing in dollars from LIBOR to Term SOFR. Asset-backed revolver We also have a revolving credit facility backed by certain of our assets in North America. On November 18, 2021, we amended the credit agreement governing this facility to, among other things, reduce the maximum facility size from $325.0 million to $250.0 million ($250.0 million a s of July 1, 2023, compared to $214.7 million as of December 31, 2022, based on the values of the secured assets on those dates), and extended the maturity date from January 29, 2023 to November 18, 2026 (subject to certain springing maturities related to our Unsecured Senior Notes if more than $500.0 million is outstanding in respect of either such facility 91 days prior to their respective maturities). The facility also allows for a letter of credit sub-facility of $150.0 million within the $250.0 million maximum. In connection with these amendments, we paid fees of $1.3 million, which have been deferred and will, together with existing deferred issuance costs related to this facility, be amortized to interest expense over the new term of the facility on a straight-line basis. As of July 1, 2023, we had a balance of $100.0 million outstanding under the asset-backed revolver following a $100.0 million drawing in May 2023 to facilitate the share repurchase transaction discussed further in Note 15. As of December 31, 2022, there were no drawings for cash under this facility. The letters of credit outstanding under this facility were $32.0 million and $25.8 million as of July 1, 2023 and December 31, 2022, respectively. |
Post-retirement benefits
Post-retirement benefits | 6 Months Ended |
Jul. 01, 2023 | |
Postemployment Benefits [Abstract] | |
Post-retirement benefits | Post-retirement benefits Gates provides defined benefit pension plans in certain of the countries in which it operates, in particular, in the U.S. and U.K. All of the defined benefit pension plans are closed to new entrants. In addition to the funded defined benefit pension plans, Gates has unfunded defined benefit obligations to certain current and former employees. Gates also provides other post-retirement benefits, principally health and life insurance coverage, on an unfunded basis to certain of its employees in the U.S. and Canada. Net periodic benefit income The components of the net periodic benefit cost (income) for pensions and other post-retirement benefits were as follows: Three months ended July 1, 2023 Three months ended July 2, 2022 (dollars in millions) Pensions Other post-retirement benefits Total Pensions Other post-retirement benefits Total Reported in operating income: —Employer service cost $ 0.9 $ — $ 0.9 $ 0.8 $ — $ 0.8 Reported outside of operating income: —Interest cost 6.3 0.3 6.6 3.8 0.3 4.1 —Expected return on plan assets (6.6) — (6.6) (5.4) — (5.4) —Net amortization of prior period (gains) losses (0.1) (0.7) (0.8) 0.3 (0.6) (0.3) Net periodic benefit cost (income) $ 0.5 $ (0.4) $ 0.1 $ (0.5) $ (0.3) $ (0.8) Cash Contributions $ 1.6 $ 0.8 $ 2.4 $ 1.7 $ 0.8 $ 2.5 Six months ended July 1, 2023 Six months ended July 2, 2022 (dollars in millions) Pensions Other post-retirement benefits Total Pensions Other post-retirement benefits Total Reported in operating income: —Employer service cost $ 1.9 $ — $ 1.9 $ 1.7 $ — $ 1.7 Reported outside of operating income: —Interest cost 12.5 0.7 13.2 7.8 0.6 8.4 —Expected return on plan assets (13.0) — (13.0) (11.1) — (11.1) —Net amortization of prior period (gains) losses (0.1) (1.6) (1.7) 0.6 (1.1) (0.5) Net periodic benefit cost (income) $ 1.3 $ (0.9) $ 0.4 $ (1.0) $ (0.5) $ (1.5) Cash Contributions $ 3.7 $ 1.9 $ 5.6 $ 3.7 $ 2.0 $ 5.7 The components of the above net periodic benefit cost (income) for pensions and other post-retirement benefits that are reported outside of operating income are all included in the other expense line in the condensed consolidated statement of operations. For 2023 as a whole, we expect to contribute approximately $9.2 million to our defined benefit pension plans and approximately $3.2 million to our other post-retirement benefit plans. |
Share-based compensation
Share-based compensation | 6 Months Ended |
Jul. 01, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Share-based compensation | Share-based compensation The Company operates a share-based incentive plan over its shares to provide incentives to Gates’ senior executives and other eligible employees. During the three and six months ended July 1, 2023, we recognized a charge of $6.8 million and $16.3 million, respectively, compared to $3.5 million and $27.6 million, respectively, in the three and six months ended July 2, 2022. Awards issued under the 2014 Omaha Topco Ltd. Stock Incentive Plan (the “2014 Plan”) Gates has a number of share-based incentive awards issued under the 2014 Plan, which was assumed by the Company and renamed the Gates Industrial Corporation plc Stock Incentive Plan in connection with our initial public offering in January 2018. No new awards have been granted under this plan since 2017. The options were split equally into four tiers, each with specific vesting conditions. Tier I options vest evenly over 5 years from the grant date, subject to the participant continuing to provide service to Gates on the vesting date. Tier II, III and IV options vest on achievement of specified investment returns by certain investment funds affiliated with Blackstone Inc. (“Blackstone” or our “Sponsor”) at the time of a defined liquidity event, which is also subject to the participant’s continued provision of service to Gates on the vesting date. The performance conditions associated with Tiers II, III and IV must have been achieved on or prior to July 3, 2022 in order for vesting to occur. All the options expire ten years after the date of grant. During March 2022, a liquidity event as defined occurred following the sale by Blackstone of a certain portion of their interest in Gates and the Tier II and IV options vested as the specified investment returns related to these options had been met. In connection with this vesting, a one-time share-based compensation charge of $16.1 million was recognized. On July 3, 2022, the performance period for the Tier III options expired and, as the specified investment returns were not achieved, all Tier III awards expired during Fiscal 2022. Due to Chinese regulatory restrictions on foreign stock ownership, awards granted under this plan to Chinese employees have been issued as stock appreciation rights (“SARs”). The terms of these SARs are identical to those of the options described above with the exception that no share is issued on exercise; instead, cash equivalent to the increase in the value of the shares from the date of grant to the date of exercise is paid to the employee. These awards are therefore treated as liability awards under Topic 718 “ Compensation - Stock Compensation ” and are revalued to their fair value at each period end. The SARs include option awards with the same vesting terms as the Tier II, III and IV option awards described above, and, due to the vesting event described above, the SAR equivalents of the Tier II and IV awards also vested in March 2022, resulting in a share-based compensation charge of $2.6 million. All Tier III SARs expired on July 3, 2022 as the specific performance hurdle was not achieved. Changes in the awards granted under this plan are summarized in the tables below. Awards issued under the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan (the “2018 Plan”) In conjunction with the initial public offering in January 2018, Gates adopted the 2018 Plan, which is a market-based long-term incentive program that allows for the issue of a variety of equity-based and cash-based awards, including stock options, SARs and RSUs. The SARs issued under this plan take the form of options, except that no share is issued on exercise; instead, cash equivalent to the increase in the value of the shares from the date of grant to the date of exercise is paid to the employee. These awards are therefore treated as liability awards under Topic 718 “ Compensation - Stock Compensation ” and are revalued to their fair value at each period end. The SARs and the majority of the share options issued under this plan vest evenly over either three years or four years from the grant date. The remainder of the options, the premium-priced options, vest evenly over a three-year period, starting two years from the grant date. All options vest subject to the participant’s continued employment by Gates on the vesting date and expire ten years after the date of grant. The RSUs issued under the plan consist of time-vesting RSUs and performance-based RSUs (“PRSUs”). The time-vesting RSUs vest evenly over either one New awards and movements in existing awards granted under this plan are summarized in the tables below. Summary of movements in options outstanding Six months ended July 1, 2023 Plan Number of Weighted average exercise price Outstanding at the beginning of the period: —Tier I 2014 Plan 2,521,173 $ 6.89 —Tier II 2014 Plan 2,689,551 $ 6.97 —Tier IV 2014 Plan 2,692,551 $ 10.46 —SARs Both plans 683,087 $ 10.22 —Share options 2018 Plan 2,980,134 $ 14.86 —Premium-priced options 2018 Plan 835,469 $ 18.88 12,401,965 $ 10.59 Granted during the period: —SARs 2018 Plan 38,800 $ 14.04 38,800 $ 14.04 Forfeited during the period: —SARs 2018 Plan (1,001) $ 15.76 —Share options 2018 Plan (39,886) $ 15.00 (40,887) $ 15.02 Expired during the period: —Tier I 2014 Plan (2,000) $ 6.56 —Tier II 2014 Plan (2,000) $ 6.56 —Tier IV 2014 Plan (1,000) $ 9.84 —SARs Both Plans (2,165) $ 13.33 —Share options 2018 Plan (183,964) $ 15.65 (191,129) $ 15.40 Exercised during the period: —Tier I 2014 Plan (655,444) $ 6.66 —Tier II 2014 Plan (627,443) $ 6.84 —Tier IV 2014 Plan (640,384) $ 10.09 —Share options 2018 Plan (181,087) $ 12.56 (2,104,358) $ 8.27 Outstanding at the end of the period: —Tier I 2014 Plan 1,863,729 $ 6.97 —Tier II 2014 Plan 2,060,108 $ 7.01 —Tier IV 2014 Plan 2,051,167 $ 10.58 —SARs Both plans 718,721 $ 10.41 —Share options 2018 Plan 2,575,197 $ 14.96 —Premium-priced options 2018 Plan 835,469 $ 18.88 10,104,391 $ 10.98 Exercisable at the end of the period 9,512,604 $ 10.61 Vested and expected to vest at the end of the period 10,075,787 $ 10.96 As of July 1, 2023, the aggregate intrinsic value of options that were exercisable was $35.1 million, and these options had a weighted average remaining contractual term of 3.5 years. As of July 1, 2023, the aggregate intrinsic value of options that were vested or expected to vest was $35.1 million, and these options had a weighted average remaining contractual term of 3.7 years. As of July 1, 2023, the unrecognized compensation charge relating to the nonvested options was $0.8 million, which is expected to be recognized over a weighted-average period of 0.8 years. During the three and six months ended July 1, 2023, cash of $5.4 million and $16.7 million was received in relation to the exercise of vested options, respectively, compared to $13.7 million and $13.9 million during the three and six months ended July 2, 2022, respectively. The aggregate intrinsic value of options exercised during the three and six months ended July 1, 2023 was $1.0 million and $5.0 million, respectively, compared to $0.5 million and $0.6 million during the three and six months ended July 2, 2022, respectively. Summary of movements in RSUs and PRSUs outstanding Six months ended July 1, 2023 Number of Weighted average Outstanding at the beginning of the period: —RSUs 3,491,259 $ 13.72 —PRSUs 1,076,560 $ 16.53 4,567,819 $ 14.38 Granted during the period: —RSUs 1,194,587 $ 14.06 —PRSUs 405,954 $ 15.88 1,600,541 $ 14.52 Forfeited during the period: —RSUs (187,690) $ 14.26 —PRSUs (288,696) $ 15.49 (476,386) $ 15.01 Vested during the period: —RSUs (917,504) $ 14.37 —PRSUs (143,044) 14.56 (1,060,548) $ 14.39 Outstanding at the end of the period: —RSUs 3,580,652 $ 13.64 —PRSUs 1,050,774 $ 16.83 4,631,426 $ 14.36 As of July 1, 2023, the unrecognized compensation charge relating to nonvested RSUs and PRSUs was $26.2 million, which is expected to be recognized over a weighted average period of 2.0 years, subject, where relevant, to the achievement of the performance conditions described above. The total fair value of RSUs and PRSUs vested during the three and six months ended July 1, 2023 was $0.6 million and $15.3 million, respectively, compared to $0.4 million and $12.1 million during the three and six months ended July 2, 2022, respectively. Valuation of awards granted during the period The grant date fair value of the SARs are measured using a Black-Scholes valuation model. RSUs are valued at the share price on the date of grant. The Relative TSR component of the PRSUs were valued using Monte Carlo simulations. As Gates only has volatility data for its shares for the period since its initial public offering, this volatility has, where necessary, been weighted with the debt-levered volatility of a peer group of public companies in order to determine the expected volatility over the expected option life. The expected option life represents the period of time for which the options are expected to be outstanding and is based on consideration of the contractual life of the option, option vesting period, and historical exercise patterns. The weighted average fair values and relevant assumptions were as follows: Six months ended July 1, July 2, Weighted average grant date fair value: —SARs $ 6.71 $ 6.94 —RSUs $ 14.06 $ 15.72 —PRSUs $ 15.88 $ 17.23 Inputs to the model: —Expected volatility — SARs 43.4 % 43.5 % —Expected volatility — PRSUs 37.7 % 49.1 % —Expected option life for SARs (years) 6.0 6.0 —Risk-free interest rate: SARs 4.13 % 1.91 % PRSUs 4.60 % 1.72 % |
Equity
Equity | 6 Months Ended |
Jul. 01, 2023 | |
Equity [Abstract] | |
Equity | Equity Movements in the Company’s number of shares in issue for the six months ended July 1, 2023 and July 2, 2022, respectively, were as follows: Six months ended (number of shares) July 1, July 2, Balance as of the beginning of the period 282,578,917 291,282,137 Exercise of share options 2,104,358 1,694,968 Vesting of restricted stock units, net of withholding taxes 937,102 775,244 Shares repurchased and cancelled (21,934,634) (11,465,917) Balance as of the end of the period 263,685,743 282,286,432 The Company has one class of authorized and issued shares, with a par value of $0.01, and each share has equal voting rights. In November 2021, the Company established a repurchase program allowing for up to $200 million in authorized share repurchases. On March 24, 2022, the Company, certain selling shareholders affiliated with Blackstone and Citigroup Global Markets Inc. (“Citigroup”) entered into an underwriting agreement pursuant to which the selling shareholders agreed to sell to Citigroup 5,000,000 ordinary shares of the Company at a price of $15.14 per ordinary share (the “2022 Offering”). The selling shareholders also granted to Citigroup an option to purchase up to 750,000 additional ordinary shares of the Company; this option was exercised in full on March 25, 2022. The Company did not receive any proceeds from the sale of ordinary shares in the 2022 Offering, which closed on March 30, 2022. In connection with the 2022 Offering, the Company repurchased 8,000,000 ordinary shares through Citigroup from the same selling shareholders at a price of $15.14 per ordinary share for an aggregate consideration of $121.1 million (the “2022 Repurchase”), plus costs directly related to the transaction of $0.8 million. This repurchase was funded by cash on hand and a borrowing of $70.0 million under Gates’ asset-backed revolving credit facility. All shares repurchased pursuant to the 2022 Repurchase have been cancelled and the original share repurchase program expired on December 31, 2022. |
Analysis of accumulated other c
Analysis of accumulated other comprehensive (loss) income | 6 Months Ended |
Jul. 01, 2023 | |
Equity [Abstract] | |
Analysis of accumulated other comprehensive (loss) income | Analysis of accumulated other comprehensive (loss) income Changes in accumulated other comprehensive (loss) income by component, net of tax, were as follows: (dollars in millions) Post- retirement benefits Cumulative translation adjustment Cash flow hedges Accumulated OCI attributable to shareholders Non-controlling interests Accumulated OCI As of December 31, 2022 $ 0.6 $ (950.0) $ 31.6 $ (917.8) $ (64.6) $ (982.4) Foreign currency translation (3.2) 90.8 — 87.6 (23.6) 64.0 Cash flow hedges movements — — 5.6 5.6 — 5.6 Post-retirement benefit movements (1.3) — — (1.3) — (1.3) Other comprehensive (loss) income (4.5) 90.8 5.6 91.9 (23.6) 68.3 As of July 1, 2023 $ (3.9) $ (859.2) $ 37.2 $ (825.9) $ (88.2) $ (914.1) (dollars in millions) Post- retirement benefits Cumulative translation adjustment Cash flow hedges Accumulated OCI attributable to shareholders Non-controlling interests Accumulated OCI As of January 1, 2022 $ 36.6 $ (836.7) $ (25.1) $ (825.2) $ (23.4) $ (848.6) Foreign currency translation (1.1) (123.1) — (124.2) (34.5) (158.7) Cash flow hedges movements — — 35.0 35.0 — 35.0 Post-retirement benefit movements (0.4) — — (0.4) — (0.4) Other comprehensive (loss) income (1.5) (123.1) 35.0 (89.6) (34.5) (124.1) As of July 2, 2022 $ 35.1 $ (959.8) $ 9.9 $ (914.8) $ (57.9) $ (972.7) |
Related party transactions
Related party transactions | 6 Months Ended |
Jul. 01, 2023 | |
Related Party Transactions [Abstract] | |
Related party transactions | Related party transactions A. Entities affiliated with Blackstone In connection with the initial public offering of Gates, we entered into a Support and Services Agreement with Blackstone Management Partners L.L.C. (“BMP”) under which the Company and certain of its direct and indirect subsidiaries reimburse BMP for customary support services provided by Blackstone’s portfolio operations group to the Company at BMP’s direction. BMP will invoice the Company for such services based on the time spent by the relevant personnel providing such services during the applicable period and Blackstone’s allocated costs of such personnel. During the periods presented, no amounts were paid or were outstanding under this agreement. This agreement terminates on the date our Sponsor beneficially owns less than 5% of our ordinary shares and such shares have a fair market value of less than $25.0 million, or such earlier date as may be chosen by Blackstone. As described in Note 15, in March 2022, the Company repurchased 8,000,000 ordinary shares through Citigroup from certain shareholders affiliated with Blackstone for an aggregate consideration of $121.1 million, plus costs directly related to the transaction of $0.8 million. Additionally, in May 2023, the Company repurchased 21,934,634 ordinary shares through Citigroup from certain shareholders affiliated with Blackstone for an aggregate consideration of approximately $250.0 million, plus costs paid directly related to the transaction of $1.7 million. B. Equity method investees Sales to and purchases from equity method investees were as follows: Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Sales $ — $ — $ — $ — Purchases $ (4.1) $ (4.2) $ (9.2) $ (8.2) Amounts outstanding in respect of these transactions were payables of $0.3 million as of July 1, 2023, compared to $2.4 million as of December 31, 2022. No dividends were received from our equity method investees during the periods presented. C. Non-Gates entities controlled by non-controlling shareholders Sales to and purchases from non-Gates entities controlled by non-controlling shareholders were as follows: Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Sales $ 11.8 $ 15.4 $ 25.1 $ 32.3 Purchases $ (4.0) $ (4.4) $ (8.4) $ (9.9) Amounts outstanding in respect of these transactions were as follows: (dollars in millions) As of July 1, 2023 As of December 31, 2022 Receivables $ 4.1 $ 4.7 Payables $ (2.8) $ (3.2) |
Commitments and contingencies
Commitments and contingencies | 6 Months Ended |
Jul. 01, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and contingencies | Commitments and contingencies A. Performance bonds, letters of credit and bank guarantees As of July 1, 2023, letters of credit totaling $32.0 million were outstanding against the asset-backed revolving facility, compared to $25.8 million as of December 31, 2022. Gates had additional outstanding performance bonds, letters of credit and bank guarantees amounting t o $8.5 million as of July 1, 2023, compared to $8.7 million as of December 31, 2022. B. Contingencies Gates is, from time to time, party to general legal proceedings and claims, which arise in the ordinary course of business. Gates is also, from time to time, party to legal proceedings and claims in respect of environmental obligations, product liability, intellectual property, commercial and contractual disputes, employment matters and other matters which arise in the ordinary course of business and against which management believes Gates has meritorious defenses available. When appropriate, management consults with legal counsel and other appropriate experts to assess claims. If, in management’s opinion, we have incurred a probable loss as set forth by U.S. GAAP, an estimate is made of the loss and the appropriate accrual is reflected in our consolidated financial statements. Currently, there are no material amounts accrued. While it is not possible to quantify the financial impact or predict the outcome of all pending claims and litigation, management does not anticipate that the outcome of any current proceedings or known claims, either individually or in aggregate, will materially affect Gates’ financial position, results of operations or cash flows. C. Warranties The following summarizes the movements in the warranty liability for the six months ended July 1, 2023 and July 2, 2022, respectively: Six months ended (dollars in millions) July 1, July 2, Balance as of the beginning of the period $ 17.6 $ 18.7 Charge for the period 4.0 4.9 Payments made (4.1) (5.3) Released during the period (0.1) — Foreign currency translation (0.3) (0.4) Balance as of the end of the period $ 17.1 $ 17.9 |
Pay vs Performance Disclosure
Pay vs Performance Disclosure - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Pay vs Performance Disclosure | ||||
Net income attributable to shareholders | $ 64.9 | $ 53.1 | $ 91.3 | $ 84 |
Insider Trading Arrangements
Insider Trading Arrangements | 3 Months Ended |
Jul. 01, 2023 | |
Trading Arrangements, by Individual | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
Introduction (Policies)
Introduction (Policies) | 6 Months Ended |
Jul. 01, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Background | Background Gates Industrial Corporation plc (the “Company”) is a public limited company that was registered in England and Wales on September 25, 2017. In these condensed consolidated financial statements and related notes, all references to “Gates,” “we,” “us,” and “our” refer, unless the context requires otherwise, to Gates Industrial Corporation plc and its consolidated subsidiaries. |
Accounting periods | Accounting periodsThe Company prepares its annual consolidated financial statements for the period ending on the Saturday nearest December 31. Accordingly, the condensed consolidated balance sheets as of July 1, 2023 and December 31, 2022, and the related condensed consolidated statements of operations, comprehensive income, cash flows, and shareholders’ equity are presented, where relevant, for the 91-day period from April 2, 2023 to July 1, 2023, with comparative information for the 91-day period from April 3, 2022 to July 2, 2022 and for the 182-day period from January 1, 2023 to July 1, 2023, with comparative information for the 182-day period from January 2, 2022 to July 2, 2022. |
Basis of preparation | Basis of preparation The condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are presented in U.S. dollars unless otherwise indicated. The condensed consolidated financial statements and related notes contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position as of July 1, 2023 and the results of its operations and cash flows for the periods ended July 1, 2023 and July 2, 2022. Interim period results are not necessarily indicative of the results to be expected for the full fiscal year. The preparation of consolidated financial statements under U.S. GAAP requires us to make assumptions and estimates concerning the future that affect the reported amounts of assets, liabilities, revenue and expenses. Estimates and assumptions are particularly important in accounting for items such as revenue, rebates, impairment of long-lived assets, intangible assets and goodwill, inventory valuation, financial instruments, expected credit losses, product warranties, income taxes and post-retirement benefits. Estimates and assumptions used are based on factors such as historical experience, observance of trends in the industries in which we operate and information available from our customers and other outside sources. These condensed consolidated financial statements are unaudited and have been prepared on substantially the same basis as Gates’ audited annual consolidated financial statements and related notes for the year ended December 31, 2022. The condensed consolidated balance sheet as of December 31, 2022 has been derived from those audited financial statements. During 2021, the Company implemented a program with an unrelated third party under which we may periodically sell trade accounts receivable from one of our aftermarket customers with whom we have extended payment terms as part of a commercial agreement. The purpose of using this program is to offset the working capital impact resulting from this terms extension. All eligible accounts receivable from this customer are covered by the program, and any factoring is solely at our option. Following the factoring of a qualifying receivable, because we maintain no continuing involvement in the underlying receivable, and collectability risk is fully transferred to the unrelated third party, we account for these transactions as a sale of a financial asset and derecognize the asset. Cash received under the program is classified as operating cash inflows in the consolidated statement of cash flows. As of July 1, 2023, the collection of $87.5 million of our trade accounts receivable had been accelerated under this program, compared to the accelerated collection of $108.2 million as of December 31, 2022. During the three and six months ended July 1, 2023, we incurred costs in respect of this program of $1.6 million and $3.0 million, respectively, which are recorded under other expense. During the three and six months ended July 2, 2022, we incurred costs in respect of this program of $0.8 million and $1.4 million, respectively. |
New accounting pronouncements adopted and policies not yet adopted | The accounting policies used in preparing these condensed consolidated financial statements are the same as those applied in the prior yearRecent accounting pronouncements not yet adopted |
Segment information (Tables)
Segment information (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Segment Reporting [Abstract] | |
Schedule of Net Sales by Operating Segment | Sales between reporting segments and the impact of such sales on Adjusted EBITDA for each segment are not included in internal reports presented to the CEO and have therefore not been included below. Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Power Transmission $ 573.9 $ 543.0 $ 1,122.0 $ 1,098.6 Fluid Power 362.4 363.8 712.0 701.6 Continuing operations $ 936.3 $ 906.8 $ 1,834.0 $ 1,800.2 Adjusted EBITDA by segment was as follows: Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Power Transmission $ 119.0 $ 102.4 $ 226.7 $ 200.2 Fluid Power 78.3 77.7 145.1 136.7 Continuing operations $ 197.3 $ 180.1 $ 371.8 $ 336.9 |
Schedule of Net sales by Key Geographic Regions and Markets | The following table summarizes our net sales by key geographic region of origin: Three months ended July 1, July 2, (dollars in millions) Power Transmission Fluid Power Power Transmission Fluid Power U.S. $ 155.6 $ 191.1 $ 166.7 $ 196.2 North America, excluding U.S. 56.5 55.9 52.0 54.0 United Kingdom (“U.K.”) 13.8 19.7 10.7 16.9 EMEA (1) , excluding U.K. 168.4 54.1 151.9 53.6 East Asia and India 70.7 20.2 73.9 19.0 Greater China 80.4 10.5 64.8 11.0 South America 28.5 10.9 23.0 13.1 Net sales $ 573.9 $ 362.4 $ 543.0 $ 363.8 Six months ended July 1, July 2, (dollars in millions) Power Transmission Fluid Power Power Transmission Fluid Power U.S. $ 300.4 $ 372.9 $ 325.8 $ 363.7 North America, excluding U.S. 111.3 107.7 101.2 104.9 U.K. 24.3 40.1 22.7 34.3 EMEA (1) , excluding U.K. 336.1 108.0 311.6 109.3 East Asia and India 144.7 40.0 148.3 40.0 Greater China 150.4 21.8 144.8 24.5 South America 54.8 21.5 44.2 24.9 Net sales $ 1,122.0 $ 712.0 $ 1,098.6 $ 701.6 (1) Europe, Middle East and Africa (“EMEA”). The following table summarizes our net sales into emerging and developed markets: Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Developed $ 632.9 $ 587.1 $ 1,214.1 $ 1,160.2 Emerging 303.4 319.7 619.9 640.0 Net sales $ 936.3 $ 906.8 $ 1,834.0 $ 1,800.2 |
Schedule of Reconciliation of Adjusted EBITDA to Net Income from Continuing Operations | Reconciliation of net income from continuing operations to Adjusted EBITDA: Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Net income from continuing operations $ 71.3 $ 59.3 $ 102.2 $ 96.7 Income tax expense 9.6 12.3 24.9 10.1 Income from continuing operations before taxes 80.9 71.6 127.1 106.8 Interest expense 44.5 33.0 85.3 65.6 Other expense 3.7 8.1 4.0 8.7 Operating income from continuing operations 129.1 112.7 216.4 181.1 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 3.2 7.7 3.7 Share-based compensation expense 6.8 3.5 16.3 27.6 Inventory impairments and adjustments (2) (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) (3) 0.7 — 11.4 — Cybersecurity incident expenses (4) — — 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 (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) Inventory impairments and adjustments include the reversal of the adjustment to remeasure certain inventories on a LIFO basis. The recent inflationary environment has caused LIFO values to drop below First-in, First-out (“FIFO”) values because LIFO measurement results in the more recent inflated costs being matched against current sales while historical, lower costs are retained in inventories. (3) 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 a $10.7 million pre-tax charge during the three months ended April 1, 2023 to reflect our estimated recovery. Based on further developments in the bankruptcy proceedings, we recorded an additional $0.7 million pre-tax charge during the three months ended July 1, 2023. We will continue to monitor the circumstances surrounding the bankruptcy in determining whether adjustments to this recovery estimate are necessary. |
Restructuring and other strat_2
Restructuring and other strategic initiatives (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Restructuring and Related Activities [Abstract] | |
Schedule of Restructuring Costs | Overall costs associated with our restructuring and other strategic initiatives have been recognized in the condensed consolidated statements as set forth below. Expenses incurred in relation to certain of these actions qualify as restructuring expenses under U.S. GAAP. Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Restructuring expenses: —Severance expenses $ 0.3 $ 2.3 $ 4.4 $ 2.3 —Non-severance labor and benefit expenses 0.5 0.1 0.8 0.2 —Consulting expenses 0.4 0.4 0.9 0.4 —Other net restructuring expenses 1.0 0.4 1.6 0.8 2.2 3.2 7.7 3.7 Restructuring expenses in asset impairments: —Impairment of fixed and other assets — 0.6 — 0.6 Restructuring expenses in cost of sales: —Impairment of inventory — 0.3 — 0.3 Total restructuring expenses $ 2.2 $ 4.1 $ 7.7 $ 4.6 Expenses related to other strategic initiatives: —Severance expenses included in cost of sales $ — $ — $ 0.5 $ — —Severance expenses included in SG&A 0.3 0.1 0.9 0.4 Total expenses related to other strategic initiatives $ 0.3 $ 0.1 $ 1.4 $ 0.4 Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Power Transmission $ 1.0 $ 3.1 $ 5.7 $ 3.4 Fluid Power 1.2 1.0 2.0 1.2 Continuing operations $ 2.2 $ 4.1 $ 7.7 $ 4.6 |
Schedule of Restructuring Reserves Activity | The following summarizes the reserve for restructuring expenses for the six months ended July 1, 2023 and July 2, 2022, respectively: Six months ended (dollars in millions) July 1, July 2, Balance as of the beginning of the period $ 7.5 $ 6.5 Utilized during the period (8.3) (3.2) Charge for the period 8.1 4.0 Released during the period (0.4) (0.3) Foreign currency translation 0.1 (0.2) Balance as of the end of the period $ 7.0 $ 6.8 |
Earnings per share (Tables)
Earnings per share (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Earnings Per Share [Abstract] | |
Schedule of Computation of Net Income Per Share | The computation of earnings per share is presented below: Three months ended Six months ended (dollars in millions, except share numbers and per share amounts) July 1, July 2, July 1, July 2, Net income attributable to shareholders $ 64.9 $ 53.1 $ 91.3 $ 84.0 Weighted average number of shares outstanding 275,875,426 281,768,945 279,697,864 285,713,321 Dilutive effect of share-based awards 4,040,022 4,269,873 4,255,220 4,837,297 Diluted weighted average number of shares outstanding 279,915,448 286,038,818 283,953,084 290,550,618 Number of anti-dilutive shares excluded from the diluted 3,307,714 5,679,838 4,622,998 4,771,573 Basic earnings per share $ 0.24 $ 0.19 $ 0.33 $ 0.29 Diluted earnings per share $ 0.23 $ 0.19 $ 0.32 $ 0.29 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | (dollars in millions) As of July 1, 2023 As of December 31, 2022 Raw materials and supplies $ 188.5 $ 195.9 Work in progress 44.0 42.3 Finished goods 411.9 418.0 Total inventories $ 644.4 $ 656.2 |
Goodwill (Tables)
Goodwill (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | (dollars in millions) Power Fluid Total Cost and carrying amount As of December 31, 2022 $ 1,315.2 $ 665.9 $ 1,981.1 Foreign currency translation 8.1 28.8 36.9 As of July 1, 2023 $ 1,323.3 $ 694.7 $ 2,018.0 |
Intangible assets (Tables)
Intangible assets (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Finite-Lived Intangible Assets | As of July 1, 2023 As of December 31, 2022 (dollars in millions) Cost Accumulated Net Cost Accumulated Net Finite-lived: —Customer relationships $ 1,988.5 $ (1,059.9) $ 928.6 $ 1,973.7 $ (993.2) $ 980.5 —Technology 90.6 (90.1) 0.5 90.4 (89.6) 0.8 —Capitalized software 110.2 (70.2) 40.0 105.4 (65.7) 39.7 2,189.3 (1,220.2) 969.1 2,169.5 (1,148.5) 1,021.0 Indefinite-lived: —Brands and trade names 513.4 (44.0) 469.4 513.4 (44.0) 469.4 Total intangible assets $ 2,702.7 $ (1,264.2) $ 1,438.5 $ 2,682.9 $ (1,192.5) $ 1,490.4 |
Schedule of Indefinite-Lived Intangible Assets | As of July 1, 2023 As of December 31, 2022 (dollars in millions) Cost Accumulated Net Cost Accumulated Net Finite-lived: —Customer relationships $ 1,988.5 $ (1,059.9) $ 928.6 $ 1,973.7 $ (993.2) $ 980.5 —Technology 90.6 (90.1) 0.5 90.4 (89.6) 0.8 —Capitalized software 110.2 (70.2) 40.0 105.4 (65.7) 39.7 2,189.3 (1,220.2) 969.1 2,169.5 (1,148.5) 1,021.0 Indefinite-lived: —Brands and trade names 513.4 (44.0) 469.4 513.4 (44.0) 469.4 Total intangible assets $ 2,702.7 $ (1,264.2) $ 1,438.5 $ 2,682.9 $ (1,192.5) $ 1,490.4 |
Derivative financial instrume_2
Derivative financial instruments (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Fair Values of Derivative Financial Instruments | The period end fair values of derivative financial instruments were as follows: As of July 1, 2023 As of December 31, 2022 (dollars in millions) Prepaid expenses and other assets Other non- Accrued expenses and other Other Net Prepaid expenses and other assets Other non- Accrued expenses and other Other Net Derivatives designated as hedging instruments: —Currency swaps $ 14.8 $ — $ — $ (72.7) $ (57.9) $ 9.3 $ — $ — $ (45.2) $ (35.9) —Interest rate swaps 38.4 24.4 (10.7) (15.3) 36.8 33.3 32.7 (10.7) (22.1) 33.2 Derivatives not designated as hedging instruments: —Currency forward contracts 3.8 — (0.7) — 3.1 2.2 — (1.4) — 0.8 $ 57.0 $ 24.4 $ (11.4) $ (88.0) $ (18.0) $ 44.8 $ 32.7 $ (12.1) $ (67.3) $ (1.9) |
Schedule of Derivative Effect on OCI | The fair value (losses) gains before tax recognized in OCI in relation to the instruments designated as net investment hedging instruments were as follows: Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Net fair value (losses) gains recognized in OCI in relation to: —Euro-denominated debt $ — $ 5.6 $ — $ 10.7 —Designated cross currency swaps (9.9) 16.3 (22.1) 21.5 Total net fair value (losses) gains $ (9.9) $ 21.9 $ (22.1) $ 32.2 The movements before tax recognized in OCI in relation to our cash flow hedges were as follows: Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Movement recognized in OCI in relation to: —Fair value gain on cash flow hedges $ 23.6 $ 2.2 $ 13.6 $ 35.6 —Amortization to net income of prior period fair value losses 4.4 4.5 8.9 8.9 —Deferred OCI reclassified to net income (8.2) 1.0 (15.1) 2.1 Total movement $ 19.8 $ 7.7 $ 7.4 $ 46.6 |
Schedule of Gain Recognized from Derivative Instruments | The fair value gains recognized in net income in relation to derivative instruments that have not been designated as hedging instruments were as follows: Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Fair value gains recognized in relation to: —Currency forward contracts recognized in SG&A $ 2.9 $ 2.5 $ 4.1 $ 5.0 Total $ 2.9 $ 2.5 $ 4.1 $ 5.0 |
Fair value measurement (Tables)
Fair value measurement (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Fair Value Disclosures [Abstract] | |
Schedule of Carrying Amount and Fair Value of Debt | The carrying amount and fair value of our debt are set out below: As of July 1, 2023 As of December 31, 2022 (dollars in millions) Carrying amount Fair value Carrying amount Fair value Current $ 36.7 $ 36.7 $ 36.6 $ 36.2 Non-current 2,520.6 2,534.6 2,426.4 2,408.4 $ 2,557.3 $ 2,571.3 $ 2,463.0 $ 2,444.6 |
Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis | The following table categorizes the assets and liabilities that are measured at fair value on a recurring basis: (dollars in millions) Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Total As of July 1, 2023 Derivative assets $ — $ 81.4 $ 81.4 Derivative liabilities $ — $ (99.4) $ (99.4) As of December 31, 2022 Derivative assets $ — $ 77.5 $ 77.5 Derivative liabilities $ — $ (79.4) $ (79.4) |
Debt (Tables)
Debt (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt | (dollars in millions) As of July 1, 2023 As of December 31, 2022 Secured debt: —Dollar Term Loan $ 1,913.6 $ 1,923.4 —Asset-backed revolver 100.0 — Unsecured debt: —6.25% Dollar Senior Notes due 2026 568.0 568.0 Total principal of debt 2,581.6 2,491.4 Deferred issuance costs (41.6) (45.5) Accrued interest 17.3 17.1 Total carrying value of debt 2,557.3 2,463.0 Debt, current portion 36.7 36.6 Debt, less current portion $ 2,520.6 $ 2,426.4 |
Schedule of Foreign Exchange Gain | Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Gain recognized in statement of operations $ — $ 30.9 $ — $ 45.6 Gain recognized in OCI — 5.6 — 10.7 Total gain $ — $ 36.5 $ — $ 56.3 |
Schedule of Redemption Prices Plus Accrued and Unpaid Interest | On and after January 15, 2022, we may redeem the Dollar Senior Notes, at our option, in whole at any time or in part from time to time, at the following redemption prices (expressed as a percentage of the principal amount), plus accrued and unpaid interest to the redemption date: Redemption price During the year commencing: —2023 101.563 % —2024 and thereafter 100.000 % |
Post-retirement benefits (Table
Post-retirement benefits (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Postemployment Benefits [Abstract] | |
Schedule of Components of Net Periodic Benefit Income for Pensions and Other Post-Retirement Benefits | The components of the net periodic benefit cost (income) for pensions and other post-retirement benefits were as follows: Three months ended July 1, 2023 Three months ended July 2, 2022 (dollars in millions) Pensions Other post-retirement benefits Total Pensions Other post-retirement benefits Total Reported in operating income: —Employer service cost $ 0.9 $ — $ 0.9 $ 0.8 $ — $ 0.8 Reported outside of operating income: —Interest cost 6.3 0.3 6.6 3.8 0.3 4.1 —Expected return on plan assets (6.6) — (6.6) (5.4) — (5.4) —Net amortization of prior period (gains) losses (0.1) (0.7) (0.8) 0.3 (0.6) (0.3) Net periodic benefit cost (income) $ 0.5 $ (0.4) $ 0.1 $ (0.5) $ (0.3) $ (0.8) Cash Contributions $ 1.6 $ 0.8 $ 2.4 $ 1.7 $ 0.8 $ 2.5 Six months ended July 1, 2023 Six months ended July 2, 2022 (dollars in millions) Pensions Other post-retirement benefits Total Pensions Other post-retirement benefits Total Reported in operating income: —Employer service cost $ 1.9 $ — $ 1.9 $ 1.7 $ — $ 1.7 Reported outside of operating income: —Interest cost 12.5 0.7 13.2 7.8 0.6 8.4 —Expected return on plan assets (13.0) — (13.0) (11.1) — (11.1) —Net amortization of prior period (gains) losses (0.1) (1.6) (1.7) 0.6 (1.1) (0.5) Net periodic benefit cost (income) $ 1.3 $ (0.9) $ 0.4 $ (1.0) $ (0.5) $ (1.5) Cash Contributions $ 3.7 $ 1.9 $ 5.6 $ 3.7 $ 2.0 $ 5.7 |
Share-based compensation (Table
Share-based compensation (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of Stock Option Activity | New awards and movements in existing awards granted under this plan are summarized in the tables below. Summary of movements in options outstanding Six months ended July 1, 2023 Plan Number of Weighted average exercise price Outstanding at the beginning of the period: —Tier I 2014 Plan 2,521,173 $ 6.89 —Tier II 2014 Plan 2,689,551 $ 6.97 —Tier IV 2014 Plan 2,692,551 $ 10.46 —SARs Both plans 683,087 $ 10.22 —Share options 2018 Plan 2,980,134 $ 14.86 —Premium-priced options 2018 Plan 835,469 $ 18.88 12,401,965 $ 10.59 Granted during the period: —SARs 2018 Plan 38,800 $ 14.04 38,800 $ 14.04 Forfeited during the period: —SARs 2018 Plan (1,001) $ 15.76 —Share options 2018 Plan (39,886) $ 15.00 (40,887) $ 15.02 Expired during the period: —Tier I 2014 Plan (2,000) $ 6.56 —Tier II 2014 Plan (2,000) $ 6.56 —Tier IV 2014 Plan (1,000) $ 9.84 —SARs Both Plans (2,165) $ 13.33 —Share options 2018 Plan (183,964) $ 15.65 (191,129) $ 15.40 Exercised during the period: —Tier I 2014 Plan (655,444) $ 6.66 —Tier II 2014 Plan (627,443) $ 6.84 —Tier IV 2014 Plan (640,384) $ 10.09 —Share options 2018 Plan (181,087) $ 12.56 (2,104,358) $ 8.27 Outstanding at the end of the period: —Tier I 2014 Plan 1,863,729 $ 6.97 —Tier II 2014 Plan 2,060,108 $ 7.01 —Tier IV 2014 Plan 2,051,167 $ 10.58 —SARs Both plans 718,721 $ 10.41 —Share options 2018 Plan 2,575,197 $ 14.96 —Premium-priced options 2018 Plan 835,469 $ 18.88 10,104,391 $ 10.98 Exercisable at the end of the period 9,512,604 $ 10.61 Vested and expected to vest at the end of the period 10,075,787 $ 10.96 |
Schedule of RSU and PRSU Activity | Summary of movements in RSUs and PRSUs outstanding Six months ended July 1, 2023 Number of Weighted average Outstanding at the beginning of the period: —RSUs 3,491,259 $ 13.72 —PRSUs 1,076,560 $ 16.53 4,567,819 $ 14.38 Granted during the period: —RSUs 1,194,587 $ 14.06 —PRSUs 405,954 $ 15.88 1,600,541 $ 14.52 Forfeited during the period: —RSUs (187,690) $ 14.26 —PRSUs (288,696) $ 15.49 (476,386) $ 15.01 Vested during the period: —RSUs (917,504) $ 14.37 —PRSUs (143,044) 14.56 (1,060,548) $ 14.39 Outstanding at the end of the period: —RSUs 3,580,652 $ 13.64 —PRSUs 1,050,774 $ 16.83 4,631,426 $ 14.36 |
Schedule of Share Based Compensation Valuation Techniques | The weighted average fair values and relevant assumptions were as follows: Six months ended July 1, July 2, Weighted average grant date fair value: —SARs $ 6.71 $ 6.94 —RSUs $ 14.06 $ 15.72 —PRSUs $ 15.88 $ 17.23 Inputs to the model: —Expected volatility — SARs 43.4 % 43.5 % —Expected volatility — PRSUs 37.7 % 49.1 % —Expected option life for SARs (years) 6.0 6.0 —Risk-free interest rate: SARs 4.13 % 1.91 % PRSUs 4.60 % 1.72 % |
Equity (Tables)
Equity (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Equity [Abstract] | |
Schedule of Movement in Number of Shares in Issue | Movements in the Company’s number of shares in issue for the six months ended July 1, 2023 and July 2, 2022, respectively, were as follows: Six months ended (number of shares) July 1, July 2, Balance as of the beginning of the period 282,578,917 291,282,137 Exercise of share options 2,104,358 1,694,968 Vesting of restricted stock units, net of withholding taxes 937,102 775,244 Shares repurchased and cancelled (21,934,634) (11,465,917) Balance as of the end of the period 263,685,743 282,286,432 |
Analysis of accumulated other_2
Analysis of accumulated other comprehensive (loss) income (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Equity [Abstract] | |
Schedule of Accumulated Other Comprehensive Income (Loss) | Changes in accumulated other comprehensive (loss) income by component, net of tax, were as follows: (dollars in millions) Post- retirement benefits Cumulative translation adjustment Cash flow hedges Accumulated OCI attributable to shareholders Non-controlling interests Accumulated OCI As of December 31, 2022 $ 0.6 $ (950.0) $ 31.6 $ (917.8) $ (64.6) $ (982.4) Foreign currency translation (3.2) 90.8 — 87.6 (23.6) 64.0 Cash flow hedges movements — — 5.6 5.6 — 5.6 Post-retirement benefit movements (1.3) — — (1.3) — (1.3) Other comprehensive (loss) income (4.5) 90.8 5.6 91.9 (23.6) 68.3 As of July 1, 2023 $ (3.9) $ (859.2) $ 37.2 $ (825.9) $ (88.2) $ (914.1) (dollars in millions) Post- retirement benefits Cumulative translation adjustment Cash flow hedges Accumulated OCI attributable to shareholders Non-controlling interests Accumulated OCI As of January 1, 2022 $ 36.6 $ (836.7) $ (25.1) $ (825.2) $ (23.4) $ (848.6) Foreign currency translation (1.1) (123.1) — (124.2) (34.5) (158.7) Cash flow hedges movements — — 35.0 35.0 — 35.0 Post-retirement benefit movements (0.4) — — (0.4) — (0.4) Other comprehensive (loss) income (1.5) (123.1) 35.0 (89.6) (34.5) (124.1) As of July 2, 2022 $ 35.1 $ (959.8) $ 9.9 $ (914.8) $ (57.9) $ (972.7) |
Related party transactions (Tab
Related party transactions (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Transactions | Sales to and purchases from equity method investees were as follows: Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Sales $ — $ — $ — $ — Purchases $ (4.1) $ (4.2) $ (9.2) $ (8.2) Sales to and purchases from non-Gates entities controlled by non-controlling shareholders were as follows: Three months ended Six months ended (dollars in millions) July 1, July 2, July 1, July 2, Sales $ 11.8 $ 15.4 $ 25.1 $ 32.3 Purchases $ (4.0) $ (4.4) $ (8.4) $ (9.9) Amounts outstanding in respect of these transactions were as follows: (dollars in millions) As of July 1, 2023 As of December 31, 2022 Receivables $ 4.1 $ 4.7 Payables $ (2.8) $ (3.2) |
Commitments and contingencies (
Commitments and contingencies (Tables) | 6 Months Ended |
Jul. 01, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Warranty Liabilities | The following summarizes the movements in the warranty liability for the six months ended July 1, 2023 and July 2, 2022, respectively: Six months ended (dollars in millions) July 1, July 2, Balance as of the beginning of the period $ 17.6 $ 18.7 Charge for the period 4.0 4.9 Payments made (4.1) (5.3) Released during the period (0.1) — Foreign currency translation (0.3) (0.4) Balance as of the end of the period $ 17.1 $ 17.9 |
Introduction (Details)
Introduction (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | Dec. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
Trade account receivables held for sale | $ 87.5 | $ 87.5 | $ 108.2 | ||
Expenses related to the reclassification of receivables | $ 1.6 | $ 0.8 | $ 3 | $ 1.4 |
Segment information - Sales and
Segment information - Sales and Adjusted EBITDA by Reporting Segment (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Segment Reporting Information | ||||
Net sales | $ 936.3 | $ 906.8 | $ 1,834 | $ 1,800.2 |
Adjusted EBITDA | 197.3 | 180.1 | 371.8 | 336.9 |
Power Transmission | ||||
Segment Reporting Information | ||||
Net sales | 573.9 | 543 | 1,122 | 1,098.6 |
Adjusted EBITDA | 119 | 102.4 | 226.7 | 200.2 |
Fluid Power | ||||
Segment Reporting Information | ||||
Net sales | 362.4 | 363.8 | 712 | 701.6 |
Adjusted EBITDA | $ 78.3 | $ 77.7 | $ 145.1 | $ 136.7 |
Segment information - Net Sales
Segment information - Net Sales by Geographic Regions and Markets (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | $ 936.3 | $ 906.8 | $ 1,834 | $ 1,800.2 |
Power Transmission | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | 573.9 | 543 | 1,122 | 1,098.6 |
Fluid Power | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | 362.4 | 363.8 | 712 | 701.6 |
U.S. | Power Transmission | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | 155.6 | 166.7 | 300.4 | 325.8 |
U.S. | Fluid Power | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | 191.1 | 196.2 | 372.9 | 363.7 |
North America, excluding U.S. | Power Transmission | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | 56.5 | 52 | 111.3 | 101.2 |
North America, excluding U.S. | Fluid Power | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | 55.9 | 54 | 107.7 | 104.9 |
United Kingdom (“U.K.”) | Power Transmission | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | 13.8 | 10.7 | 24.3 | 22.7 |
United Kingdom (“U.K.”) | Fluid Power | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | 19.7 | 16.9 | 40.1 | 34.3 |
EMEA, excluding U.K. | Power Transmission | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | 168.4 | 151.9 | 336.1 | 311.6 |
EMEA, excluding U.K. | Fluid Power | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | 54.1 | 53.6 | 108 | 109.3 |
East Asia and India | Power Transmission | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | 70.7 | 73.9 | 144.7 | 148.3 |
East Asia and India | Fluid Power | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | 20.2 | 19 | 40 | 40 |
Greater China | Power Transmission | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | 80.4 | 64.8 | 150.4 | 144.8 |
Greater China | Fluid Power | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | 10.5 | 11 | 21.8 | 24.5 |
South America | Power Transmission | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | 28.5 | 23 | 54.8 | 44.2 |
South America | Fluid Power | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | 10.9 | 13.1 | 21.5 | 24.9 |
Developed | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | 632.9 | 587.1 | 1,214.1 | 1,160.2 |
Emerging | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net sales | $ 303.4 | $ 319.7 | $ 619.9 | $ 640 |
Segment information - Reconcili
Segment information - Reconciliation of Adjusted EBITDA to Net Income (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jan. 31, 2023 | Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Segment Reporting Information | |||||
Net income from continuing operations | $ 71.3 | $ 59.3 | $ 102.2 | $ 96.7 | |
Income tax expense | 9.6 | 12.3 | 24.9 | 10.1 | |
Income from continuing operations before taxes | 80.9 | 71.6 | 127.1 | 106.8 | |
Interest expense | 44.5 | 33 | 85.3 | 65.6 | |
Other expense | 3.7 | 8.1 | 4 | 8.7 | |
Operating income from continuing operations | 129.1 | 112.7 | 216.4 | 181.1 | |
Depreciation and amortization | 54 | 55.8 | 108.5 | 110.9 | |
Transaction-related expenses | 0.6 | 0.5 | 0.8 | 1.3 | |
Asset impairments | 0 | 0.6 | 0 | 0.6 | |
Restructuring expenses | 2.2 | 3.2 | 7.7 | 3.7 | |
Share-based compensation expense | 6.8 | 3.5 | 16.3 | 27.6 | |
Inventory impairments and adjustments (included in cost of sales) | 3.5 | 3.6 | 4.1 | 11.2 | |
Credit loss related to customer bankruptcy (included in SG&A) | $ 10.7 | 0.7 | 0 | 11.4 | 0 |
Cybersecurity incident expenses | 0 | 0 | 5.1 | 0 | |
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 | |
—Severance expenses included in cost of sales | |||||
Segment Reporting Information | |||||
Severance expenses | 0 | 0 | 0.5 | 0 | |
SG&A | |||||
Segment Reporting Information | |||||
Severance expenses | $ 0.3 | $ 0.1 | $ 0.9 | $ 0.4 |
Restructuring and other strat_3
Restructuring and other strategic initiatives - Income Statement Location (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Restructuring Cost and Reserve | ||||
Total restructuring expenses | $ 2.2 | $ 4.1 | $ 7.7 | $ 4.6 |
—Impairment of fixed and other assets | 0 | 0.6 | 0 | 0.6 |
Total expenses related to other strategic initiatives | 0.3 | 0.1 | 1.4 | 0.4 |
—Impairment of inventory | ||||
Restructuring Cost and Reserve | ||||
Total restructuring expenses | 0 | 0.3 | 0 | 0.3 |
Restructuring expenses: | ||||
Restructuring Cost and Reserve | ||||
Total restructuring expenses | 2.2 | 3.2 | 7.7 | 3.7 |
Restructuring expenses: | —Severance expenses | ||||
Restructuring Cost and Reserve | ||||
Total restructuring expenses | 0.3 | 2.3 | 4.4 | 2.3 |
Restructuring expenses: | —Non-severance labor and benefit expenses | ||||
Restructuring Cost and Reserve | ||||
Total restructuring expenses | 0.5 | 0.1 | 0.8 | 0.2 |
Restructuring expenses: | —Consulting expenses | ||||
Restructuring Cost and Reserve | ||||
Total restructuring expenses | 0.4 | 0.4 | 0.9 | 0.4 |
Restructuring expenses: | —Other net restructuring expenses | ||||
Restructuring Cost and Reserve | ||||
Total restructuring expenses | 1 | 0.4 | 1.6 | 0.8 |
—Severance expenses included in cost of sales | ||||
Restructuring Cost and Reserve | ||||
Severance expenses | 0 | 0 | 0.5 | 0 |
—Severance expenses included in SG&A | ||||
Restructuring Cost and Reserve | ||||
Severance expenses | $ 0.3 | $ 0.1 | $ 0.9 | $ 0.4 |
Restructuring and other strat_4
Restructuring and other strategic initiatives - Narratives (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Restructuring Cost and Reserve | ||||
Restructuring expenses | $ 2.2 | $ 4.1 | $ 7.7 | $ 4.6 |
—Impairment of fixed and other assets | 0 | 0.6 | $ 0 | 0.6 |
Severance Costs | European Office and Distribution Center | ||||
Restructuring Cost and Reserve | ||||
Severance expenses included in SG&A | 1.9 | $ 1.9 | ||
Other Net Restructuring Expenses | Russian Operations | ||||
Restructuring Cost and Reserve | ||||
Restructuring expenses | 1.3 | |||
Severance expenses included in SG&A | 0.4 | |||
Impairment of inventory | 0.3 | |||
—Impairment of fixed and other assets | $ 0.6 | |||
Employee Relocation | ||||
Restructuring Cost and Reserve | ||||
Restructuring expenses | $ 0.5 |
Restructuring and other strat_5
Restructuring and other strategic initiatives - Restructuring Costs by Segment (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Restructuring Cost and Reserve | ||||
Restructuring expenses | $ 2.2 | $ 4.1 | $ 7.7 | $ 4.6 |
Power Transmission | ||||
Restructuring Cost and Reserve | ||||
Restructuring expenses | 1 | 3.1 | 5.7 | 3.4 |
Fluid Power | ||||
Restructuring Cost and Reserve | ||||
Restructuring expenses | $ 1.2 | $ 1 | $ 2 | $ 1.2 |
Restructuring and other strat_6
Restructuring and other strategic initiatives - Restructuring Reserve Activity (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jul. 01, 2023 | Jul. 02, 2022 | |
Restructuring reserves | ||
Balance as of the beginning of the period | $ 7.5 | $ 6.5 |
Utilized during the period | (8.3) | (3.2) |
Charge for the period | 8.1 | 4 |
Released during the period | (0.4) | (0.3) |
Foreign currency translation | 0.1 | (0.2) |
Balance as of the end of the period | $ 7 | $ 6.8 |
Income taxes - Narratives (Deta
Income taxes - Narratives (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Operating Loss Carryforwards | ||||
Income tax expense (benefit) | $ 9.6 | $ 12.3 | $ 24.9 | $ 10.1 |
Income from continuing operations before taxes | $ 80.9 | $ 71.6 | $ 127.1 | $ 106.8 |
Reported effective income tax rate ( as a percent) | 11.90% | 17.20% | 19.60% | 9.50% |
Discrete tax benefit | $ 6.4 | $ 11.7 | ||
Unrecognized tax benefits | 1.8 | $ 1.8 | ||
Deferred tax asset, net | 5.3 | $ 5.3 | ||
United Kingdom (“U.K.”) | ||||
Operating Loss Carryforwards | ||||
Effective income tax rate reconciliation, tax credit, foreign, amount | $ 4.3 | $ 3.5 | ||
Effective income tax rate reconciliation, change in enacted tax law, amount | $ (1.9) |
Earnings per share (Details)
Earnings per share (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Earnings Per Share [Abstract] | ||||
Net income attributable to shareholders | $ 64.9 | $ 53.1 | $ 91.3 | $ 84 |
Weighted average number of shares outstanding (in shares) | 275,875,426 | 281,768,945 | 279,697,864 | 285,713,321 |
Dilutive effect of share-based awards (in shares) | 4,040,022 | 4,269,873 | 4,255,220 | 4,837,297 |
Diluted weighted average number of shares outstanding (in shares) | 279,915,448 | 286,038,818 | 283,953,084 | 290,550,618 |
Number of anti-dilutive shares excluded from diluted earnings per share calculation (in shares) | 3,307,714 | 5,679,838 | 4,622,998 | 4,771,573 |
Basic earnings per share (in usd per share) | $ 0.24 | $ 0.19 | $ 0.33 | $ 0.29 |
Diluted earnings per share (in usd per share) | $ 0.23 | $ 0.19 | $ 0.32 | $ 0.29 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Millions | Jul. 01, 2023 | Dec. 31, 2022 |
Inventory Disclosure [Abstract] | ||
Raw materials and supplies | $ 188.5 | $ 195.9 |
Work in progress | 44 | 42.3 |
Finished goods | 411.9 | 418 |
Total inventories | $ 644.4 | $ 656.2 |
Goodwill (Details)
Goodwill (Details) $ in Millions | 6 Months Ended |
Jul. 01, 2023 USD ($) | |
Cost and carrying amount | |
Beginning balance | $ 1,981.1 |
Foreign currency translation | 36.9 |
Ending balance | 2,018 |
Power Transmission | |
Cost and carrying amount | |
Beginning balance | 1,315.2 |
Foreign currency translation | 8.1 |
Ending balance | 1,323.3 |
Fluid Power | |
Cost and carrying amount | |
Beginning balance | 665.9 |
Foreign currency translation | 28.8 |
Ending balance | $ 694.7 |
Intangible assets - Finite-Live
Intangible assets - Finite-Lived and Indefinite-Lived Intangible Assets (Details) - USD ($) $ in Millions | Jul. 01, 2023 | Dec. 31, 2022 |
Finite-Lived Intangible Assets | ||
Finite-lived, cost | $ 2,189.3 | $ 2,169.5 |
Finite-lived, accumulated amortization and impairment | (1,220.2) | (1,148.5) |
Finite-lived, net | 969.1 | 1,021 |
Indefinite-lived, cost | 513.4 | 513.4 |
Indefinite-lived, accumulated amortization and impairment | (44) | (44) |
Indefinite-lived, net | 469.4 | 469.4 |
Cost | 2,702.7 | 2,682.9 |
Accumulated amortization and impairment | (1,264.2) | (1,192.5) |
Net | 1,438.5 | 1,490.4 |
—Customer relationships | ||
Finite-Lived Intangible Assets | ||
Finite-lived, cost | 1,988.5 | 1,973.7 |
Finite-lived, accumulated amortization and impairment | (1,059.9) | (993.2) |
Finite-lived, net | 928.6 | 980.5 |
—Technology | ||
Finite-Lived Intangible Assets | ||
Finite-lived, cost | 90.6 | 90.4 |
Finite-lived, accumulated amortization and impairment | (90.1) | (89.6) |
Finite-lived, net | 0.5 | 0.8 |
—Capitalized software | ||
Finite-Lived Intangible Assets | ||
Finite-lived, cost | 110.2 | 105.4 |
Finite-lived, accumulated amortization and impairment | (70.2) | (65.7) |
Finite-lived, net | $ 40 | $ 39.7 |
Intangible assets - Narrative (
Intangible assets - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization expense | $ 32.2 | $ 32.3 | $ 64.3 | $ 65.3 |
Intangible assets, foreign currency translation gain (loss) | $ (1.9) | $ (28.3) | $ 7.3 | $ (34.8) |
Derivative financial instrume_3
Derivative financial instruments - Fair Values of Derivative Instruments (Details) - USD ($) $ in Millions | Jul. 01, 2023 | Dec. 31, 2022 |
Derivatives, Fair Value | ||
Net | $ (18) | $ (1.9) |
—Currency swaps recognized in other expenses | Derivatives designated as hedging instruments: | ||
Derivatives, Fair Value | ||
Net | (57.9) | (35.9) |
—Interest rate swaps | Derivatives designated as hedging instruments: | ||
Derivatives, Fair Value | ||
Net | 36.8 | 33.2 |
—Currency forward contracts | Derivatives not designated as hedging instruments: | ||
Derivatives, Fair Value | ||
Net | 3.1 | 0.8 |
Prepaid expenses and other assets | ||
Derivatives, Fair Value | ||
Derivative assets | $ 57 | $ 44.8 |
Derivative Asset, Statement of Financial Position [Extensible Enumeration] | Prepaid expenses and other assets | Prepaid expenses and other assets |
Prepaid expenses and other assets | —Currency swaps recognized in other expenses | Derivatives designated as hedging instruments: | ||
Derivatives, Fair Value | ||
Derivative assets | $ 14.8 | $ 9.3 |
Prepaid expenses and other assets | —Interest rate swaps | Derivatives designated as hedging instruments: | ||
Derivatives, Fair Value | ||
Derivative assets | 38.4 | 33.3 |
Prepaid expenses and other assets | —Currency forward contracts | Derivatives not designated as hedging instruments: | ||
Derivatives, Fair Value | ||
Derivative assets | 3.8 | 2.2 |
Other non- current assets | ||
Derivatives, Fair Value | ||
Derivative assets | $ 24.4 | $ 32.7 |
Derivative Asset, Statement of Financial Position [Extensible Enumeration] | Other non-current assets | Other non-current assets |
Other non- current assets | —Currency swaps recognized in other expenses | Derivatives designated as hedging instruments: | ||
Derivatives, Fair Value | ||
Derivative assets | $ 0 | $ 0 |
Other non- current assets | —Interest rate swaps | Derivatives designated as hedging instruments: | ||
Derivatives, Fair Value | ||
Derivative assets | 24.4 | 32.7 |
Other non- current assets | —Currency forward contracts | Derivatives not designated as hedging instruments: | ||
Derivatives, Fair Value | ||
Derivative assets | 0 | 0 |
Accrued expenses and other current liabilities | ||
Derivatives, Fair Value | ||
Derivative liabilities | $ (11.4) | $ (12.1) |
Derivative Liability, Statement of Financial Position [Extensible Enumeration] | Accrued expenses and other current liabilities | Accrued expenses and other current liabilities |
Accrued expenses and other current liabilities | —Currency swaps recognized in other expenses | Derivatives designated as hedging instruments: | ||
Derivatives, Fair Value | ||
Derivative liabilities | $ 0 | $ 0 |
Accrued expenses and other current liabilities | —Interest rate swaps | Derivatives designated as hedging instruments: | ||
Derivatives, Fair Value | ||
Derivative liabilities | (10.7) | (10.7) |
Accrued expenses and other current liabilities | —Currency forward contracts | Derivatives not designated as hedging instruments: | ||
Derivatives, Fair Value | ||
Derivative liabilities | (0.7) | (1.4) |
Other non- current liabilities | ||
Derivatives, Fair Value | ||
Derivative liabilities | $ (88) | $ (67.3) |
Derivative Liability, Statement of Financial Position [Extensible Enumeration] | Other non-current liabilities | Other non-current liabilities |
Other non- current liabilities | —Currency swaps recognized in other expenses | Derivatives designated as hedging instruments: | ||
Derivatives, Fair Value | ||
Derivative liabilities | $ (72.7) | $ (45.2) |
Other non- current liabilities | —Interest rate swaps | Derivatives designated as hedging instruments: | ||
Derivatives, Fair Value | ||
Derivative liabilities | (15.3) | (22.1) |
Other non- current liabilities | —Currency forward contracts | Derivatives not designated as hedging instruments: | ||
Derivatives, Fair Value | ||
Derivative liabilities | $ 0 | $ 0 |
Derivative financial instrume_4
Derivative financial instruments - Narratives (Details) € in Millions | 3 Months Ended | 6 Months Ended | ||||||
Jul. 01, 2023 USD ($) | Jul. 02, 2022 USD ($) | Jul. 01, 2023 USD ($) | Jul. 02, 2022 USD ($) | May 31, 2023 USD ($) | Dec. 31, 2022 USD ($) | Jul. 02, 2022 EUR (€) | Jan. 01, 2022 USD ($) | |
Derivatives not designated as hedging instruments: | ||||||||
Derivative | ||||||||
Gains on derivative, recognized in the income statement | $ 2,900,000 | $ 2,500,000 | $ 4,100,000 | $ 5,000,000 | ||||
—Currency swaps recognized in other expenses | Net Investment Hedges | Derivatives designated as hedging instruments: | ||||||||
Derivative | ||||||||
Notional amount of derivative contracts | 756,100,000 | 756,100,000 | $ 756,100,000 | |||||
Gains on derivative, recognized in the income statement | 2,500,000 | 1,000,000 | 5,500,000 | 1,600,000 | ||||
—Interest rate swaps | Cash Flow Hedging | ||||||||
Derivative | ||||||||
Notional amount of derivative contracts | 1,255,000,000 | 1,255,000,000 | 1,255,000,000 | |||||
Interest rate swaps due June 30, 2020 through June 30, 2025 | Cash Flow Hedging | ||||||||
Derivative | ||||||||
Notional amount of derivative contracts | 870,000,000 | 870,000,000 | $ 870,000,000 | |||||
Interest rate swaps due November 16, 2022 through November 16, 2027 | Cash Flow Hedging | ||||||||
Derivative | ||||||||
Notional amount of derivative contracts | 385,000,000 | 385,000,000 | ||||||
July 1, 2019 to June 30, 2023 | Cash Flow Hedging | ||||||||
Derivative | ||||||||
Notional amount of derivative contracts | € | € 425 | |||||||
Forward contracts | Derivatives not designated as hedging instruments: | ||||||||
Derivative | ||||||||
Notional amount of derivative contracts | 144,800,000 | 144,800,000 | $ 150,500,000 | |||||
Euro Term Loan | Net Investment Hedges | Derivatives designated as hedging instruments: | Secured Debt | ||||||||
Derivative | ||||||||
Notional amount of derivative contracts | $ 25,000,000 | $ 25,000,000 | $ 147,000,000 | |||||
Euro Term Loan | —Currency swaps recognized in other expenses | Net Investment Hedges | Derivatives designated as hedging instruments: | ||||||||
Derivative | ||||||||
Notional amount of derivative contracts | $ 501,600,000 | $ 501,600,000 |
Derivative financial instrume_5
Derivative financial instruments - Net Investment Hedging Instruments in OCI (Details) - Net Investment Hedges - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Derivative Instruments, Gain (Loss) | ||||
Total net fair value (loss) gain | $ (9.9) | $ 21.9 | $ (22.1) | $ 32.2 |
—Euro-denominated debt | ||||
Derivative Instruments, Gain (Loss) | ||||
Total net fair value (loss) gain | 0 | 5.6 | 0 | 10.7 |
—Designated cross currency swaps | ||||
Derivative Instruments, Gain (Loss) | ||||
Total net fair value (loss) gain | $ (9.9) | $ 16.3 | $ (22.1) | $ 21.5 |
Derivative financial instrume_6
Derivative financial instruments - OCI Movement (Details) - Interest Rate Contract - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Movement recognized in OCI in relation to: | ||||
—Fair value gain on cash flow hedges | $ 23.6 | $ 2.2 | $ 13.6 | $ 35.6 |
—Amortization to net income of prior period fair value losses | 4.4 | 4.5 | 8.9 | 8.9 |
—Reclassification from OCI to net income | (8.2) | 1 | (15.1) | 2.1 |
Total movement | $ 19.8 | $ 7.7 | $ 7.4 | $ 46.6 |
Derivative financial instrume_7
Derivative financial instruments - Gains From Derivative Instruments Not Designated As Hedging Instruments (Details) - Derivatives not designated as hedging instruments: - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Derivative Instruments, Gain (Loss) | ||||
Gains on derivative, recognized in the income statement | $ 2.9 | $ 2.5 | $ 4.1 | $ 5 |
—Currency forward contracts recognized in SG&A | ||||
Derivative Instruments, Gain (Loss) | ||||
Gains on derivative, recognized in the income statement | $ 2.9 | $ 2.5 | $ 4.1 | $ 5 |
Fair value measurement - Carryi
Fair value measurement - Carrying Amount and Fair Value of Debt (Details) - USD ($) $ in Millions | Jul. 01, 2023 | Dec. 31, 2022 |
Carrying amount | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Current | $ 36.7 | $ 36.6 |
Non-current | 2,520.6 | 2,426.4 |
Fair value of debt | 2,557.3 | 2,463 |
Fair value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Current | 36.7 | 36.2 |
Non-current | 2,534.6 | 2,408.4 |
Fair value of debt | $ 2,571.3 | $ 2,444.6 |
Fair value measurement - Narrat
Fair value measurement - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Debt Instrument | ||||
—Impairment of fixed and other assets | $ 0 | $ 0.6 | $ 0 | $ 0.6 |
Two Dollar Term Loan | Term loan | SOFR | ||||
Debt Instrument | ||||
Variable rate (as a percent) | 0.50% | |||
Secured Credit Facilities | Secured Debt | SOFR | ||||
Debt Instrument | ||||
Variable rate (as a percent) | 0.75% | |||
Credit spread adjustment (as a percent) | 0.10% | 0.10% |
Fair value measurement - Assets
Fair value measurement - Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Millions | Jul. 01, 2023 | Dec. 31, 2022 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Derivative assets | $ 81.4 | $ 77.5 |
Derivative liabilities | (99.4) | (79.4) |
Quoted prices in active markets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Derivative assets | 0 | 0 |
Derivative liabilities | 0 | 0 |
Significant observable inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Derivative assets | 81.4 | 77.5 |
Derivative liabilities | $ (99.4) | $ (79.4) |
Debt - Long-term debt (Details)
Debt - Long-term debt (Details) - USD ($) $ in Millions | Jul. 01, 2023 | Dec. 31, 2022 |
Debt Instrument | ||
Total principal of debt | $ 2,581.6 | $ 2,491.4 |
Deferred issuance costs | (41.6) | (45.5) |
Accrued interest | 17.3 | 17.1 |
Total carrying value of debt | 2,557.3 | 2,463 |
Debt, current portion | 36.7 | 36.6 |
Debt, less current portion | 2,520.6 | 2,426.4 |
—Dollar Term Loans | Secured debt: | ||
Debt Instrument | ||
Total principal of debt | 1,913.6 | 1,923.4 |
—Asset-backed revolver | Secured debt: | ||
Debt Instrument | ||
Total principal of debt | 100 | 0 |
—6.25% Dollar Senior Notes due 2026 | Unsecured debt: | ||
Debt Instrument | ||
Total principal of debt | $ 568 | $ 568 |
Debt - Debt issuances and redem
Debt - Debt issuances and redemptions Narratives (Details) € in Millions | 1 Months Ended | 6 Months Ended | |||||
Nov. 16, 2022 USD ($) | Nov. 16, 2022 EUR (€) | Nov. 18, 2021 USD ($) | May 31, 2023 USD ($) | Mar. 31, 2022 USD ($) | Jul. 01, 2023 USD ($) | Jul. 02, 2022 USD ($) | |
Debt Instrument | |||||||
Proceeds from long-term debt | $ 100,000,000 | $ 70,000,000 | |||||
Repayments of debt | $ 9,800,000 | $ 10,300,000 | |||||
New Dollar Term Loan | Secured debt: | |||||||
Debt Instrument | |||||||
Debt instrument principal amount | $ 575,000,000 | ||||||
Stated interest rate on debt (as a percent) | 8.60% | ||||||
Quarterly amortization payment rate (as a percent) | 1% | 1% | |||||
Deferred financing cost recognized | $ 23,200,000 | ||||||
New Dollar Term Loan | Secured debt: | Option Two | |||||||
Debt Instrument | |||||||
Stated interest rate on debt (as a percent) | 2.50% | ||||||
New Dollar Term Loan | Secured debt: | Option Two | Minimum | |||||||
Debt Instrument | |||||||
Stated interest rate on debt (as a percent) | 1.50% | ||||||
New Dollar Term Loan | Secured debt: | SOFR | Option One | |||||||
Debt Instrument | |||||||
Variable rate (as a percent) | 3.50% | 3.50% | 3.50% | ||||
New Dollar Term Loan | Secured debt: | SOFR | Option One | Minimum | |||||||
Debt Instrument | |||||||
Variable rate (as a percent) | 0.50% | 0.50% | 0.50% | ||||
—Euro Term Loan | Secured debt: | |||||||
Debt Instrument | |||||||
Repayments of debt | € | € 563.8 | ||||||
Accrued and unpaid interest rate | € | € 1 | ||||||
Deferred financing cost recognized | $ 2,200,000 | ||||||
—Asset-backed revolver | |||||||
Debt Instrument | |||||||
Deferred financing cost recognized | $ 1,300,000 | ||||||
Revolving Credit Facility | —Asset-backed revolver | |||||||
Debt Instrument | |||||||
Proceeds from long-term debt | $ 100,000,000 | $ 70,000,000 |
Debt - Dollar and Euro Term Loa
Debt - Dollar and Euro Term Loans Narratives (Details) - Secured Debt $ in Millions | 6 Months Ended | ||||
Nov. 16, 2022 | Jul. 01, 2023 USD ($) | Jul. 02, 2022 USD ($) | Mar. 01, 2023 | Feb. 24, 2021 loan | |
New Dollar Term Loan | |||||
Debt Instrument | |||||
Number of loans (loan) | loan | 2 | ||||
Stated interest rate on debt (as a percent) | 8.60% | ||||
Quarterly amortization payment rate (as a percent) | 1% | ||||
Quarterly amortization payment on debt | $ 2.9 | ||||
New Dollar Term Loan | SOFR | Option One | |||||
Debt Instrument | |||||
Variable rate (as a percent) | 3.50% | 3.50% | |||
New Dollar Term Loan | SOFR | Option One | Minimum | |||||
Debt Instrument | |||||
Variable rate (as a percent) | 0.50% | 0.50% | |||
Existing DollarTerm Loans | |||||
Debt Instrument | |||||
Stated interest rate on debt (as a percent) | 2.50% | ||||
Credit spread adjustment (as a percent) | 0.10% | ||||
Quarterly amortization payment on debt | $ 6.9 | ||||
Existing DollarTerm Loans | SOFR | |||||
Debt Instrument | |||||
Variable rate (as a percent) | 0.75% | ||||
Dollar Term Loan | |||||
Debt Instrument | |||||
Interest rate during period on debt (as a percent) | 7.70% | ||||
Quarterly amortization payment rate (as a percent) | 0.25% | ||||
Quarterly amortization payment on debt | $ 6.9 | ||||
Euro Term Loan | |||||
Debt Instrument | |||||
Quarterly amortization payment on debt | $ 3.4 |
Debt - Foreign Exchange Gain (D
Debt - Foreign Exchange Gain (Details) - Euro Term Loan - Secured Debt - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Debt Instrument | ||||
Gain recognized in statement of operations | $ 0 | $ 30.9 | $ 0 | $ 45.6 |
Gain recognized in OCI | 0 | 5.6 | 0 | 10.7 |
Total gain | $ 0 | $ 36.5 | $ 0 | $ 56.3 |
Debt - Unsecured Senior Notes N
Debt - Unsecured Senior Notes Narratives (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jul. 01, 2023 | Dec. 31, 2022 | |
Debt Instrument | ||
Principal amount of debt outstanding | $ 2,581.6 | $ 2,491.4 |
Unsecured Debt | ||
Debt Instrument | ||
Redemption price in the event of change in control (as a percent) | 101% | |
Redemption price in the event of sale (as a percent) | 100% | |
Unsecured Debt | —6.25% Dollar Senior Notes due 2026 | ||
Debt Instrument | ||
Principal amount of debt outstanding | $ 568 | $ 568 |
Stated interest rate on debt (as a percent) | 6.25% |
Debt - Redemption Prices Plus A
Debt - Redemption Prices Plus Accrued and Unpaid Interest (Details) - —6.25% Dollar Senior Notes due 2026 - Unsecured Debt | 6 Months Ended |
Jul. 01, 2023 | |
—2023 | |
Debt Instrument, Redemption | |
Redemption price (as a percent) | 101.563% |
—2024 and thereafter | |
Debt Instrument, Redemption | |
Redemption price (as a percent) | 100% |
Debt - Revolving Credit Facilit
Debt - Revolving Credit Facility Narratives (Details) - USD ($) | Jul. 01, 2023 | Dec. 31, 2022 | Nov. 18, 2021 | Nov. 17, 2021 |
Line of Credit Facility | ||||
Debt issuance costs, net | $ 41,600,000 | $ 45,500,000 | ||
Secured Multi-Currency Facility | ||||
Line of Credit Facility | ||||
Outstanding debt trigger | $ 500,000,000 | |||
Revolving Credit Facility | Secured Multi-Currency Facility | ||||
Line of Credit Facility | ||||
Maximum borrowing capacity of credit facility | 250,000,000 | $ 185,000,000 | ||
Line of credit carrying value | 0 | 0 | ||
Letter of Credit Sub-Facility | Secured Multi-Currency Facility | ||||
Line of Credit Facility | ||||
Maximum borrowing capacity of credit facility | $ 75,000,000 | $ 20,000,000 | ||
Line of credit carrying value | $ 0 | $ 0 |
Debt - Asset-Backed Revolver Na
Debt - Asset-Backed Revolver Narratives (Details) - —Asset-backed revolver - USD ($) | Nov. 18, 2021 | Jul. 01, 2023 | Dec. 31, 2022 | Nov. 17, 2021 |
Line of Credit Facility | ||||
Outstanding debt trigger | $ 500,000,000 | |||
Deferred financing cost recognized | 1,300,000 | |||
Revolving Credit Facility | ||||
Line of Credit Facility | ||||
Maximum borrowing capacity of credit facility | 250,000,000 | $ 250,000,000 | $ 214,700,000 | $ 325,000,000 |
Line of credit carrying value | 0 | |||
Letter of Credit Sub-Facility | ||||
Line of Credit Facility | ||||
Maximum borrowing capacity of credit facility | $ 150,000,000 | |||
Line of credit carrying value | $ 32,000,000 | $ 25,800,000 |
Post-retirement benefits - Comp
Post-retirement benefits - Components of Net Periodic Benefit (Income) Cost (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Defined Benefit Plans and Other Postretirement Benefit Plans | ||||
—Employer service cost | $ 0.9 | $ 0.8 | $ 1.9 | $ 1.7 |
—Interest cost | 6.6 | 4.1 | 13.2 | 8.4 |
—Expected return on plan assets | (6.6) | (5.4) | (13) | (11.1) |
—Net amortization of prior period (gains) losses | (0.8) | (0.3) | (1.7) | (0.5) |
Net periodic benefit cost (income) | 0.1 | (0.8) | 0.4 | (1.5) |
Cash Contributions | 2.4 | 2.5 | 5.6 | 5.7 |
Pensions | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans | ||||
—Employer service cost | 0.9 | 0.8 | 1.9 | 1.7 |
—Interest cost | 6.3 | 3.8 | 12.5 | 7.8 |
—Expected return on plan assets | (6.6) | (5.4) | (13) | (11.1) |
—Net amortization of prior period (gains) losses | (0.1) | 0.3 | (0.1) | 0.6 |
Net periodic benefit cost (income) | 0.5 | (0.5) | 1.3 | (1) |
Cash Contributions | 1.6 | 1.7 | 3.7 | 3.7 |
Other post-retirement benefits | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans | ||||
—Employer service cost | 0 | 0 | 0 | 0 |
—Interest cost | 0.3 | 0.3 | 0.7 | 0.6 |
—Expected return on plan assets | 0 | 0 | 0 | 0 |
—Net amortization of prior period (gains) losses | (0.7) | (0.6) | (1.6) | (1.1) |
Net periodic benefit cost (income) | (0.4) | (0.3) | (0.9) | (0.5) |
Cash Contributions | $ 0.8 | $ 0.8 | $ 1.9 | $ 2 |
Post-retirement benefits - Narr
Post-retirement benefits - Narratives (Details) $ in Millions | Jul. 01, 2023 USD ($) |
Pensions | |
Defined Benefit Plan Disclosure | |
Expected future employer contributions in current fiscal year | $ 9.2 |
Other post-retirement benefits | |
Defined Benefit Plan Disclosure | |
Expected future employer contributions in current fiscal year | $ 3.2 |
Share-based compensation - Narr
Share-based compensation - Narratives (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||||
Mar. 31, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | Dec. 31, 2022 | Jan. 01, 2022 | |
Share-based Compensation Arrangement by Share-based Payment Award | |||||||
Share based compensation expense recognized | $ 6.8 | $ 3.5 | $ 16.3 | $ 27.6 | |||
Share-based compensation expense | 6.8 | 3.5 | 16.3 | 27.6 | |||
Proceeds from stock options exercised | 5.4 | 13.7 | 16.7 | 13.9 | |||
—Share options | |||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||
Aggregate intrinsic value of options exercisable | 35.1 | $ 35.1 | |||||
Contractual term of options exercisable (in years) | 3 years 6 months | ||||||
Aggregate intrinsic value of options that were vested or expected to vest | 35.1 | $ 35.1 | |||||
Contractual term of options that were vested or expect to vest (in years) | 3 years 8 months 12 days | ||||||
Unrecognized compensation relating to non-vested awards | 0.8 | $ 0.8 | |||||
Unrecognized compensation relating to non-vested awards, recognition period (in years) | 9 months 18 days | ||||||
Aggregate intrinsic value of options exercised | 1 | 0.5 | $ 5 | 0.6 | |||
—Share options | Omaha Topco Ltd. Stock Incentive Plan | |||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||
Share-based compensation expense | $ 16.1 | ||||||
—Share options | Omaha Topco Ltd. Stock Incentive Plan | —Tier I | |||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||
Vesting period (in years) | 5 years | ||||||
Term of award (in years) | 10 years | ||||||
—Share options | Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | Minimum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||
Vesting period (in years) | 3 years | ||||||
—Share options | Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | Maximum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||
Vesting period (in years) | 4 years | ||||||
—Premium-priced options | Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | |||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||
Vesting period (in years) | 3 years | ||||||
Term of award (in years) | 10 years | ||||||
—RSUs | Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | Minimum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||
Vesting period (in years) | 1 year | ||||||
—RSUs | Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | Maximum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||
Vesting period (in years) | 3 years | ||||||
—PRSUs | |||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||
Unrecognized compensation relating to non-vested awards other than option | 26.2 | $ 26.2 | |||||
—PRSUs | Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | |||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||
Percentage of shares expected to vest upon achievement of average annual adjusted return on invested capital (as a percent) | 75% | 50% | |||||
Percentage of shares expected to vest upon achievement of certain relative shareholders return (as a percent) | 25% | 50% | |||||
Performance period (in years) | 3 years | ||||||
—PRSUs | Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | Minimum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||
Vesting period (in years) | 1 year | ||||||
Total number of shares expected to vest at term of award arrangement (as a percent) | 0% | ||||||
—PRSUs | Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | Maximum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||
Vesting period (in years) | 3 years | ||||||
Total number of shares expected to vest at term of award arrangement (as a percent) | 200% | ||||||
RSU's and PRSU's | |||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||
Unrecognized compensation relating to non-vested awards, recognition period (in years) | 2 years | ||||||
Unrecognized compensation relating to non-vested awards other than option | 26.2 | $ 26.2 | |||||
Aggregate intrinsic value of non options vested | $ 0.6 | $ 0.4 | $ 15.3 | $ 12.1 | |||
—SARs | Omaha Topco Ltd. Stock Incentive Plan | |||||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||||
Share-based compensation expense | $ 2.6 |
Share-based compensation - Stoc
Share-based compensation - Stock Option and SAR Rollforward (Details) | 6 Months Ended |
Jul. 01, 2023 $ / shares shares | |
Number of options | |
Beginning balance (in shares) | shares | 12,401,965 |
Granted (in shares) | shares | 38,800 |
Forfeited (in shares) | shares | (40,887) |
Expired (in shares) | shares | (191,129) |
Exercised (in shares) | shares | (2,104,358) |
Ending balance (in shares) | shares | 10,104,391 |
Weighted average exercise price $ | |
Beginning balance (in usd per share) | $ / shares | $ 10.59 |
Granted (in usd per share) | $ / shares | 14.04 |
Forfeited (in usd per share) | $ / shares | 15.02 |
Expired (in usd per share) | $ / shares | 15.40 |
Exercised (in usd per share) | $ / shares | 8.27 |
Ending balance (in usd per share) | $ / shares | $ 10.98 |
—Share options | |
Number of options | |
Beginning balance (in shares) | shares | 2,980,134 |
Forfeited (in shares) | shares | (39,886) |
Expired (in shares) | shares | (183,964) |
Exercised (in shares) | shares | (181,087) |
Ending balance (in shares) | shares | 2,575,197 |
Weighted average exercise price $ | |
Beginning balance (in usd per share) | $ / shares | $ 14.86 |
Forfeited (in usd per share) | $ / shares | 15 |
Expired (in usd per share) | $ / shares | 15.65 |
Exercised (in usd per share) | $ / shares | 12.56 |
Ending balance (in usd per share) | $ / shares | $ 14.96 |
Exercisable at the end of the period (in shares) | shares | 9,512,604 |
Exercisable at the end of the period (in usd per share) | $ / shares | $ 10.61 |
Vested and expected to vest at the end of the period (in shares) | shares | 10,075,787 |
Vested and expected to vest at the end of the period (in usd per share) | $ / shares | $ 10.96 |
—Share options | —Tier I | |
Number of options | |
Beginning balance (in shares) | shares | 2,521,173 |
Expired (in shares) | shares | (2,000) |
Exercised (in shares) | shares | (655,444) |
Ending balance (in shares) | shares | 1,863,729 |
Weighted average exercise price $ | |
Beginning balance (in usd per share) | $ / shares | $ 6.89 |
Expired (in usd per share) | $ / shares | 6.56 |
Exercised (in usd per share) | $ / shares | 6.66 |
Ending balance (in usd per share) | $ / shares | $ 6.97 |
—Share options | —Tier II | |
Number of options | |
Beginning balance (in shares) | shares | 2,689,551 |
Expired (in shares) | shares | (2,000) |
Exercised (in shares) | shares | (627,443) |
Ending balance (in shares) | shares | 2,060,108 |
Weighted average exercise price $ | |
Beginning balance (in usd per share) | $ / shares | $ 6.97 |
Expired (in usd per share) | $ / shares | 6.56 |
Exercised (in usd per share) | $ / shares | 6.84 |
Ending balance (in usd per share) | $ / shares | $ 7.01 |
—Share options | —Tier IV | |
Number of options | |
Beginning balance (in shares) | shares | 2,692,551 |
Expired (in shares) | shares | (1,000) |
Exercised (in shares) | shares | (640,384) |
Ending balance (in shares) | shares | 2,051,167 |
Weighted average exercise price $ | |
Beginning balance (in usd per share) | $ / shares | $ 10.46 |
Expired (in usd per share) | $ / shares | 9.84 |
Exercised (in usd per share) | $ / shares | 10.09 |
Ending balance (in usd per share) | $ / shares | $ 10.58 |
—SARs | |
Number of options | |
Beginning balance (in shares) | shares | 683,087 |
Granted (in shares) | shares | 38,800 |
Forfeited (in shares) | shares | (1,001) |
Expired (in shares) | shares | (2,165) |
Ending balance (in shares) | shares | 718,721 |
Weighted average exercise price $ | |
Beginning balance (in usd per share) | $ / shares | $ 10.22 |
Granted (in usd per share) | $ / shares | 14.04 |
Forfeited (in usd per share) | $ / shares | 15.76 |
Expired (in usd per share) | $ / shares | 13.33 |
Ending balance (in usd per share) | $ / shares | $ 10.41 |
—Premium-priced options | |
Number of options | |
Beginning balance (in shares) | shares | 835,469 |
Ending balance (in shares) | shares | 835,469 |
Weighted average exercise price $ | |
Beginning balance (in usd per share) | $ / shares | $ 18.88 |
Ending balance (in usd per share) | $ / shares | $ 18.88 |
Share-based compensation - RSU
Share-based compensation - RSU and PRSU Rollforward (Details) | 6 Months Ended |
Jul. 01, 2023 $ / shares shares | |
Number of awards | |
Beginning balance (in shares) | shares | 4,567,819 |
Granted (in shares) | shares | 1,600,541 |
Forfeited (in shares) | shares | (476,386) |
Vested (in shares) | shares | (1,060,548) |
Ending balance (in shares) | shares | 4,631,426 |
Weighted average grant date fair value $ | |
Beginning balance (in usd per share) | $ / shares | $ 14.38 |
Granted (in usd per share) | $ / shares | 14.52 |
Forfeited (in usd per share) | $ / shares | 15.01 |
Vested (in usd per share) | $ / shares | 14.39 |
Ending balance (in usd per share) | $ / shares | $ 14.36 |
—RSUs | |
Number of awards | |
Beginning balance (in shares) | shares | 3,491,259 |
Granted (in shares) | shares | 1,194,587 |
Forfeited (in shares) | shares | (187,690) |
Vested (in shares) | shares | (917,504) |
Ending balance (in shares) | shares | 3,580,652 |
Weighted average grant date fair value $ | |
Beginning balance (in usd per share) | $ / shares | $ 13.72 |
Granted (in usd per share) | $ / shares | 14.06 |
Forfeited (in usd per share) | $ / shares | 14.26 |
Vested (in usd per share) | $ / shares | 14.37 |
Ending balance (in usd per share) | $ / shares | $ 13.64 |
—PRSUs | |
Number of awards | |
Beginning balance (in shares) | shares | 1,076,560 |
Granted (in shares) | shares | 405,954 |
Forfeited (in shares) | shares | (288,696) |
Vested (in shares) | shares | (143,044) |
Ending balance (in shares) | shares | 1,050,774 |
Weighted average grant date fair value $ | |
Beginning balance (in usd per share) | $ / shares | $ 16.53 |
Granted (in usd per share) | $ / shares | 15.88 |
Forfeited (in usd per share) | $ / shares | 15.49 |
Vested (in usd per share) | $ / shares | 14.56 |
Ending balance (in usd per share) | $ / shares | $ 16.83 |
Share-based compensation - Fair
Share-based compensation - Fair Value and Valuation Assumptions (Details) - $ / shares | 6 Months Ended | |
Jul. 01, 2023 | Jul. 02, 2022 | |
—SARs | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Assumed fair value exercise price (in usd per share) | $ 6.71 | $ 6.94 |
Expected volatility (as a percent) | 43.40% | 43.50% |
Expected option life (in years) | 6 years | 6 years |
Risk-free interest rate (as a percent) | 4.13% | 1.91% |
—RSUs | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Assumed fair value exercise price (in usd per share) | $ 14.06 | $ 15.72 |
—PRSUs | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Assumed fair value exercise price (in usd per share) | $ 15.88 | $ 17.23 |
Expected volatility (as a percent) | 37.70% | 49.10% |
Risk-free interest rate (as a percent) | 4.60% | 1.72% |
Equity - Movement in Number of
Equity - Movement in Number of Shares in Issue (Details) - shares | 6 Months Ended | |
Jul. 01, 2023 | Jul. 02, 2022 | |
Increase (Decrease) in Stockholders' Equity | ||
Balance as of the beginning of the period (in shares) | 282,578,917 | 291,282,137 |
Exercise of share options (in shares) | 2,104,358 | 1,694,968 |
Vesting of restricted stock units, net of withholding taxes (in shares) | 937,102 | 775,244 |
Shares repurchased and cancelled (in shares) | (21,934,634) | (11,465,917) |
Balance as of the end of the period (in shares) | 263,685,743 | 282,286,432 |
Equity - Narrative (Details)
Equity - Narrative (Details) | 1 Months Ended | 6 Months Ended | ||||||||||
May 23, 2023 USD ($) $ / shares shares | May 18, 2023 shares | May 17, 2023 shares | Mar. 30, 2022 USD ($) $ / shares shares | Mar. 24, 2022 $ / shares shares | May 31, 2023 USD ($) shares | Mar. 30, 2022 USD ($) $ / shares shares | Jul. 01, 2023 USD ($) class $ / shares shares | Jul. 02, 2022 USD ($) shares | Apr. 28, 2023 USD ($) | Dec. 31, 2022 $ / shares | Nov. 30, 2021 USD ($) | |
Equity | ||||||||||||
Number of classes of stock (class) | class | 1 | |||||||||||
Par value (in usd per share) | $ / shares | $ 0.01 | $ 0.01 | ||||||||||
Repurchase program, authorized amount | $ | $ 250,000,000 | $ 200,000,000 | ||||||||||
Shares repurchased and cancelled (in shares) | 21,934,634 | 11,465,917 | ||||||||||
Payments for repurchase of common stock | $ | $ 251,700,000 | $ 175,800,000 | ||||||||||
Citigroup | —Asset-backed revolver | ||||||||||||
Equity | ||||||||||||
Maximum borrowing capacity of credit facility | $ | $ 70,000,000 | $ 70,000,000 | ||||||||||
Citigroup | Affiliated Entity | ||||||||||||
Equity | ||||||||||||
Shares exercisable (in shares) | 750,000 | |||||||||||
Shares repurchased and cancelled (in shares) | 21,934,634 | 8,000,000 | 21,934,634 | 8,000,000 | ||||||||
Share price (in usd per share) | $ / shares | $ 11.3975 | $ 15.14 | $ 15.14 | |||||||||
Payments for repurchase of common stock | $ | $ 250,000,000 | $ 121,100,000 | $ 250,000,000 | $ 121,100,000 | ||||||||
Debt instrument, cost related transaction amount | $ | $ 1,700,000 | $ 800,000 | $ 1,700,000 | $ 800,000 | ||||||||
Private Placement | ||||||||||||
Equity | ||||||||||||
Issuance of shares (in shares) | 3,375,000 | |||||||||||
Scenario, Plan | Private Placement | ||||||||||||
Equity | ||||||||||||
Issuance of shares (in shares) | 22,500,000 | |||||||||||
Scenario, Plan | Private Placement | Citigroup | Affiliated Entity | ||||||||||||
Equity | ||||||||||||
Issuance of shares (in shares) | 5,000,000 | |||||||||||
Offering price (in usd per share) | $ / shares | $ 15.14 |
Analysis of accumulated other_3
Analysis of accumulated other comprehensive (loss) income (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax | ||||
Beginning balance | $ 3,553.6 | $ 3,376.2 | $ 3,443.6 | $ 3,481.4 |
Other comprehensive (loss) income, net of tax, attributable to parent | 87.6 | (124.2) | ||
Other comprehensive income (loss) | 6.7 | (136.9) | 68.3 | (124.1) |
Ending balance | 3,391 | 3,303.3 | 3,391 | 3,303.3 |
Accumulated OCI | ||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax | ||||
Beginning balance | (982.4) | (848.6) | ||
Ending balance | (914.1) | (972.7) | (914.1) | (972.7) |
Accumulated OCI attributable to shareholders | ||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax | ||||
Beginning balance | (857) | (805.4) | (917.8) | (825.2) |
Other comprehensive (loss) income, net of tax, attributable to parent | 91.9 | (89.6) | ||
Other comprehensive income (loss) | 31.1 | (109.4) | 91.9 | (89.6) |
Ending balance | (825.9) | (914.8) | (825.9) | (914.8) |
Post- retirement benefits | ||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax | ||||
Beginning balance | 0.6 | 36.6 | ||
Other comprehensive (loss) income, net of tax, attributable to parent | (4.5) | (1.5) | ||
Other comprehensive income (loss) | (1.3) | (0.4) | ||
Ending balance | (3.9) | 35.1 | (3.9) | 35.1 |
Foreign currency translation | ||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax | ||||
Other comprehensive (loss) income, net of tax, attributable to parent | (3.2) | (1.1) | ||
Post-retirement benefit movements | ||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax | ||||
Other comprehensive (loss) income, net of tax, attributable to parent | (1.3) | (0.4) | ||
Cumulative translation adjustment | ||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax | ||||
Beginning balance | (950) | (836.7) | ||
Other comprehensive (loss) income, net of tax, attributable to parent | 90.8 | (123.1) | ||
Other comprehensive (loss) income, net of tax, attributable to noncontrolling interest | (23.6) | (34.5) | ||
Other comprehensive income (loss) | 64 | (158.7) | ||
Ending balance | (859.2) | (959.8) | (859.2) | (959.8) |
Cash flow hedges | ||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax | ||||
Beginning balance | 31.6 | (25.1) | ||
Other comprehensive (loss) income, net of tax, attributable to parent | 5.6 | 35 | ||
Ending balance | 37.2 | 9.9 | 37.2 | 9.9 |
Non-controlling interests | ||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax | ||||
Beginning balance | (64.6) | (23.4) | ||
Other comprehensive (loss) income, net of tax, attributable to noncontrolling interest | (23.6) | (34.5) | ||
Ending balance | $ (88.2) | $ (57.9) | $ (88.2) | $ (57.9) |
Related party transactions - Na
Related party transactions - Narrative (Details) - USD ($) $ in Millions | 1 Months Ended | 6 Months Ended | |||||
May 23, 2023 | Mar. 30, 2022 | May 31, 2023 | Mar. 30, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | Dec. 31, 2022 | |
Related Party Transaction | |||||||
Shares repurchased and cancelled (in shares) | 21,934,634 | 11,465,917 | |||||
Payments for repurchase of common stock | $ 251.7 | $ 175.8 | |||||
Affiliated Entity | |||||||
Related Party Transaction | |||||||
Payables to related parties | 2.8 | $ 3.2 | |||||
Affiliated Entity | Citigroup | |||||||
Related Party Transaction | |||||||
Shares repurchased and cancelled (in shares) | 21,934,634 | 8,000,000 | 21,934,634 | 8,000,000 | |||
Payments for repurchase of common stock | $ 250 | $ 121.1 | $ 250 | $ 121.1 | |||
Debt instrument, cost related transaction amount | $ 1.7 | $ 0.8 | $ 1.7 | $ 0.8 | |||
Equity Method Investees | |||||||
Related Party Transaction | |||||||
Payables to related parties | $ 0.3 | $ 2.4 | |||||
Support and Services Agreement | Sponsor | |||||||
Related Party Transaction | |||||||
Related party transaction, ownership percentage threshold which terminates milestone payment (as a percent) | 5% | ||||||
Related party transaction, fair value of equity threshold which terminates milestone payment | $ 25 |
Related party transactions - Sa
Related party transactions - Sales and Purchases with Equity Method Investees (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | |
Related Party Transaction | ||||
Net sales | $ 936.3 | $ 906.8 | $ 1,834 | $ 1,800.2 |
Equity Method Investees | ||||
Related Party Transaction | ||||
Net sales | 0 | 0 | 0 | 0 |
Purchases | $ (4.1) | $ (4.2) | $ (9.2) | $ (8.2) |
Related party transactions - Tr
Related party transactions - Transactions with Non-Gates Entities (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jul. 01, 2023 | Jul. 02, 2022 | Jul. 01, 2023 | Jul. 02, 2022 | Dec. 31, 2022 | |
Related Party Transaction | |||||
Net sales | $ 936.3 | $ 906.8 | $ 1,834 | $ 1,800.2 | |
Affiliated Entity | |||||
Related Party Transaction | |||||
Net sales | 11.8 | 15.4 | 25.1 | 32.3 | |
Purchases | (4) | $ (4.4) | (8.4) | $ (9.9) | |
Receivables | 4.1 | 4.1 | $ 4.7 | ||
Payables | $ (2.8) | $ (2.8) | $ (3.2) |
Commitments and contingencies -
Commitments and contingencies - Narratives (Details) - USD ($) $ in Millions | Jul. 01, 2023 | Dec. 31, 2022 |
Commitments and Contingencies Disclosure [Abstract] | ||
Letters of credit outstanding | $ 32 | $ 25.8 |
Bonds, letters of credit, and bank guarantees | $ 8.5 | $ 8.7 |
Commitments and contingencies_2
Commitments and contingencies - Warranty Liability (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jul. 01, 2023 | Jul. 02, 2022 | |
Warranty reserves | ||
Balance as of the beginning of the period | $ 17.6 | $ 18.7 |
Charge for the period | 4 | 4.9 |
Payments made | (4.1) | (5.3) |
Released during the period | (0.1) | 0 |
Foreign currency translation | (0.3) | (0.4) |
Balance as of the end of the period | $ 17.1 | $ 17.9 |