Gates(US:GTES)2025-02-06 21:30Financial Performance - Net sales for Fiscal 2024 were $3,408.2 million, a decrease of 4.5% compared to $3,570.2 million in Fiscal 2023[199] - Cost of sales decreased by 7.3% to $2,049.7 million in Fiscal 2024 from $2,211.3 million in the prior year[201] - Gross profit remained relatively stable at $1,358.5 million in Fiscal 2024 compared to $1,358.9 million in Fiscal 2023[199] - Selling, general and administrative expenses decreased to $870.0 million in Fiscal 2024 from $882.2 million in the prior year, a reduction of $12.2 million[203] - Operating income from continuing operations increased to $478.7 million in Fiscal 2024, up from $462.6 million in Fiscal 2023[199] - Net income from continuing operations was $220.5 million in Fiscal 2024, down from $257.0 million in the previous year[199] - Adjusted EBITDA for Fiscal 2024 was $761.1 million, compared to $747.0 million in Fiscal 2023[199] Sales Breakdown - Sales into replacement channels accounted for approximately 68% of total net sales in Fiscal 2024[195] - Power Transmission net sales for Fiscal 2024 decreased by 3.8% to $2,108.1 million, driven by lower volumes and adverse currency exchange rates[218] - Fluid Power net sales for Fiscal 2024 decreased by 5.7% to $1,300.1 million, primarily due to lower volumes and adverse currency exchange rates[221] - Core sales for the year ended December 28, 2024, were $3,444.6 million, reflecting a decline of $125.6 million or 3.5% on a core basis[257] - The impact of currency rate movements on net sales was $36.4 million for the year ended December 28, 2024[257] Tax and Income - The effective tax rate for Fiscal 2024 was 32.8%, significantly higher than 9.9% in Fiscal 2023[211] - The company recognized a deconsolidation loss of $12.7 million related to the suspension of operations in Russia during Fiscal 2024[198] Cash Flow and Investments - Cash provided by operating activities was $379.6 million in Fiscal 2024, down from $481.0 million in the prior year, primarily due to a decrease in trade working capital[228] - Net cash used in investing activities increased to $104.4 million in Fiscal 2024, driven by higher capital expenditures and cash derecognition from the deconsolidation of a subsidiary[229] - Net cash used in financing activities was $286.7 million in Fiscal 2024, including $176.1 million for share repurchases[230] Debt and Liquidity - Long-term debt as of December 28, 2024, was $2,350.6 million, a decrease from $2,451.5 million in the prior year[232] - The company does not anticipate any material long-term deterioration in its overall liquidity position in the foreseeable future[227] - The company expects to finance future cash requirements with cash on hand, cash flows from operations, and borrowings under its secured revolving credit facility[224] - On June 4, 2024, the company issued new Dollar Senior Notes due 2029 amounting to $500.0 million and fully redeemed existing Dollar Senior Notes due 2026 totaling $568.0 million, incurring $13.7 million in accrued interest[235] - A voluntary principal debt repayment of $100.0 million was made against the 2021 Dollar Term Loans in February 2024, resulting in the accelerated recognition of $1.0 million of deferred issuance costs[236] - The company increased borrowing capacity under its revolving credit facility from $250.0 million to $500.0 million on June 4, 2024, extending maturity to June 4, 2029[240] - Total committed borrowing headroom as of December 28, 2024, was $471.8 million, alongside cash balances of $682.0 million[245] Assets and Liabilities - As of December 28, 2024, non-guarantor subsidiaries represented approximately 73% of net sales and 65% of EBITDA, with total assets of approximately 66% and total liabilities of about 25%[244] - The company’s total contractual obligations as of December 28, 2024, amounted to $3,357.8 million, including $2,363.5 million in principal debt and $700.0 million in interest payments[248] Impairment and Tax Assets - The fair value of the reporting units exceeded their carrying values, resulting in no goodwill impairments recognized during Fiscal 2024[272] - The discount rates used in the impairment tests of goodwill were 11.3% and 10.7% for the Power Transmission and Fluid Power reporting units, respectively[271] - The discount rate used in the Fiscal 2024 impairment test for indefinite-lived intangible assets was 12.0%, with no impairment recognized[277] - Deferred income tax assets of $5.5 million in Türkiye, $3.7 million in Poland, and $3.4 million in the U.S. are not realizable due to net operating losses[283] - The company has established valuation allowances against certain deferred income tax assets until sufficient evidence supports their reduction[283] Risk Management - The company maintains a liquidity risk management strategy by diversifying funding sources and staggering debt maturities[295] - Credit ratings are Ba3 Stable with Moody's and BB- Stable with Standard & Poor's, subject to regular review[296] - The company actively monitors third-party depository institutions to mitigate credit risk associated with cash and short-term investments[298] Customer Concentration - Two customers accounted for 13.7% and 6.1% of total trade accounts receivable as of December 28, 2024, compared to 12.5% and 9.6% as of December 30, 2023[301]