DRIVEN BY POSSIBILITY AUGUST 2020
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DRIVEN BY POSSIBILITY AUGUST 2020
LEGAL DISCLAIMERS 2
FORWARD-LOOKING STATEMENTS
This presentation contains, and management may make on our call today, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. In some cases, you can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "could,"
"seeks," "predicts," "intends,“ “trends” "plans," "estimates," "anticipates" or the negative version of these words or other comparable words. These statements include, but are not limited to, statements related to
expectations regarding the performance of the Company’s business, financial results, liquidity and capital resources, product introductions and growth initiatives, restructuring activities, end market conditions, right-
sizing cost structure and statements regarding the impact of the COVID-19 pandemic and our 2020 framework. Such forward-looking statements are subject to various risks and uncertainties, including, among others,
the uncertainties relating to the impact of and recovery from the COVID-19 pandemic and associated governmental measures on the company’s business, operations, employees, financial condition and results of
operations, risks inherent to the manufacturing industry, macroeconomic factors beyond the Company’s control, continued operation of our manufacturing facilities make our ability to forecast and meet demand, market
acceptance of new products, and the significant influence of the Company’s majority shareholders, investment funds affiliated with The Blackstone Group Inc. Additional factors that could cause the Company’s results to
differ materially from those described in the forward-looking statements can be found under the section entitled "Risk Factors" of the Company’s Annual Report on Form 10-K for the fiscal year ended December 28,
2019, filed with the Securities and Exchange Commission ("SEC") as supplemented by the risks and uncertainties set forth in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2020, as
such factors may be further updated from time to time in the Company’s periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that
could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary
statements that are included in the Company’s filings with the SEC. The Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future
developments or otherwise, except as required by law.
NON-GAAP FINANCIAL INFORMATION
This presentation includes certain non-GAAP financial measures, which management believes are useful to investors. Non-GAAP financial measures should be considered only as supplemental to, and not as superior to,
financial measures prepared in accordance with GAAP. Please refer to the Appendix of this presentation and our earnings release filed with the SEC and posted on our website at investors.gates.com for a reconciliation
of historical non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP.
Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without unreasonable effort, we have not provided reconciliations for forward-looking non-
GAAP measures. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results.
ROUNDING ADJUSTMENTS
Certain monetary amounts, percentages and other figures included in this presentation have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables or charts may not be the
arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated, may not be the arithmetic aggregation of the
percentages that precede them.
©2020 Gates Corporation. All rights reserved.
GATES OVERVIEW 3
OUR BUSINESS MODEL IS FUNDAMENTALLY
FOCUSED ON REPLACEMENT CHANNELS
WE ARE HIGHLY DIVERSIFIED – ACROSS
PRODUCTS, END MARKETS, APPLICATIONS
AND GEOGRAPHIES
WE ARE A MARKET LEADER, BUT HAVE A
SIGNIFICANT RUNWAY OF ORGANIC GROWTH
OPPORTUNITIES
WE HAVE THE OPPORTUNITY TO EXPAND
MARGINS
THE CHARACTERISTICS OF OUR BUSINESS RESULT IN A COMPELLING FINANCIAL PROFILE
©2020 Gates Corporation. All rights reserved.
GATES VISION 4
ACHIEVE GLOBAL PRODUCT INNOVATION LEADERSHIP
AND EXPAND OUR PREMIER POSITION IN OUR CORE POWER
TRANSMISSION AND FLUID POWER MARKETS,
WHILE DELIVERING ABOVE-MARKET GROWTH,
SUPERIOR PROFITABILITY AND STRONG CASH FLOW GENERATION
TO PROVIDE SHAREHOLDERS WITH ATTRACTIVE RETURNS
©2020 Gates Corporation. All rights reserved.GATES AT A GLANCE 5
COMPANY STATS
Founded 1911
Countries 30
Locations 120+
Employees 14,000+
2019 FINANCIAL STATS 2019 SEGMENT DATA REVENUE % REPL.
Revenue $3.1B Power Transmission $2.0B 62%
Adjusted EBITDA $0.6B | 20% Margin Fluid Power $1.1B 63%
1
TWO SCALED, LEADING PRODUCT SEGMENTS WITH SIMILAR BUSINESS CHARACTERISTICS, CUSTOMERS AND END MARKETS
©2020 Gates Corporation. All rights reserved. 1 Reconciliations of non-GAAP measures used throughout this presentation can be found in the AppendixPOWER TRANSMISSION – SEGMENT OVERVIEW 6
2019 PT REVENUE: $1,946M SUMMARY
BY REGION BY CHANNEL Leading Global Belt Provider
IND. FIRST-FIT
EA&I • Gen. Industrial REPLACEMENT Broadest Catalog of Mission-Critical Components
IR
15% NA 13%
•
•
HD Truck
Agriculture
• Automotive Replacement Market Focus
37% • General Industrial
CHINA 15% • Construction
24% 63% • HD Truck Diverse Customers, Applications and End Markets
AFF
•
•
Energy
Agriculture
Global Footprint and Channel IFF
Coverage
28%
EMEA
5%
SA • Construction Unique Belt Drive System Value Propositions
PRODUCT PORTFOLIO MARKET OPPORTUNITY
One of Few Scaled Players in a
Gates
Large, Fragmented $30B
Addressable Market1
Micro-V Timing Engine Water Kits
2x
Belts Belts Metals Pumps
$20B
$10B Gates
Industrial Industrial Industrial Industrial
Synchronous Belts Asynchronous Belts TPU Belts Metals Automotive End Market Industrial End Markets
SIGNIFICANT GROWTH OPPORTUNITIES IN EXISTING MARKETS
©2020 Gates Corporation. All rights reserved. 1 Market sizes referred to throughout this presentation are based on management estimatesKEY POWER TRANSMISSION OPPORTUNITIES 7
CHAIN-TO-BELT BELT-TO-BELT
INDUSTRIAL PERSONAL PRECISION MOTION INDUSTRIAL
CHAIN-TO-BELT MOBILITY CONTROL BELT-TO-BELT
Gates Gates Gates
Gates
Poly Chain CVT Thermoplastic V-Belts
Polyurethane
~$6B Rubber Sync ~$1B Carbon Drive ~$1B (TPU) Sync ~$2B CVT
Metals Rubber Sync TPU Flat Metals
Metals Metals
Diversified End Markets Bicycles, eBikes, Scooters & Warehousing & Logistics Established Channels & Customers
Industrial Drives Across Numerous Motorcycles Robotics & Industrial Automation Wide Variety of Mobile and
Applications Emerging Market Mobility Food Processing & Light Stationary Drives
Mobile & Stationary Mature Market Recreation Manufacturing Ag, Construction, Gen. Industrial
ESTABLISHED BASE BUSINESS PROVIDES PLATFORM TO PENETRATE LARGE, FRAGMENTED CORE MARKETS
©2020 Gates Corporation. All rights reserved.FLUID POWER – SEGMENT OVERVIEW 8
2019 FP REVENUE: $1,141M SUMMARY
Mission-Critical Components for Hydraulic and
BY REGION BY CHANNEL Fluid Conveyance Applications
CHINA EA&I
IR
5% 7%
NA REPLACEMENT Core Market with Several Avenues for Growth
• General Industrial
EMEA IND. FIRST-FIT
37%
• Agriculture Favorable Replacement Dynamics
18% • Construction • Construction
• HD Truck 63% • Energy
Heritage of Product Innovation
66%
SA • Agriculture • Automotive Extending Premium Product Line within Existing
4% • General Industrial • HD Truck IFF
Applications AR
PRODUCTS 0%
MARKET OPPORTUNITY
One of Few Scaled Players in a Large, Fragmented
$29B Addressable Market Gates
Gates
$15B
Hydraulic Hose
and Couplings
Hydraulic
Tubing
Industrial Hose
and Couplings
Engine
Hose
Oil & Gas
Drilling Hose
$14B 1.1x
Automotive End Market Industrial End Markets
LEADER IN HIGHLY FRAGMENTED MARKET WITH OPPORTUNITY TO GROW ACROSS PRODUCT LINES, REGIONS AND END MARKETS
©2020 Gates Corporation. All rights reserved.KEY HYDRAULICS OPPORTUNITIES 9
GEOGRAPHIC EXTEND PREMIUM BROADEN APPLICATION
EXPANSION PERFORMANCE COVERAGE
Gates Gates Gates
Hydraulic Hoses MEGASys® Hoses PROTM Series Hoses
Hydraulic Couplings MegaCrimp® Couplings PROTM Series
~$3B1 ~$3B ~$3B
Couplings
PRO™ Series
MEGASys®
Reinforcing In-Region, For-Region Launching “X” Series Products with Application-Specific Products
Strategy in Europe and China with Further Performance Differentiation More than Doubles Addressable Market
Recent Investments • Weight
• Flexibility
Opportunity
• Size
SIGNIFICANT RUNWAY TO EXPAND SHARE IN UNDERPENETRATED REGIONS AND
EXTEND PRODUCT PORTFOLIO TO COVER BROADER APPLICATION REQUIREMENTS
©2020 Gates Corporation. All rights reserved.STRONG REPLACEMENT CHANNEL PRESENCE 10
PORTFOLIO UNITED BY COMMON BUSINESS MODEL
Mission-Critical Products
• Cost of Gates’ products insignificant vs. cost of application downtime
37%
Replacement-Driven Revenue Stream $3.1B
• Normal wear and tear results in natural, often preventive, FY2019
maintenance intervals
Revenue
Difficult to Replicate 63%
• Extensive, longstanding global channel presence
• Broad product coverage across wide range of applications Replacement
First-Fit
BENEFITS
Lower Revenue Volatility through the Cycle
Well-Positioned to Offset Inflation
Higher Margins Enable Reinvestment
MISSION-CRITICAL, ENGINEERED WEAR PARTS WHOSE COST IS INSIGNIFICANT RELATIVE TO COST OF DOWNTIME
©2020 Gates Corporation. All rights reserved.DIVERSIFIED END MARKETS 11
Largest END MARKET EXPOSURE Smallest
Industrial End
Industrial & Mfg.
Markets Activity
35% Construction
Commodities
General Ind. / Mfg. Construction Agriculture Oil & Gas HD Truck Mining
REPLACEMENT
CHANNELS
Age of Fleet (7-12 yrs)
Automotive
End Market
Miles Driven
27%
Developed Emerging
Construction, Ag
Commodities
Industrial End
Markets Freight
23% Industrial Activity
Construction General Ind. HD Truck Agriculture
FIRST-FIT
China US
Automotive Production
End Market ~4% ~1%
15%
Selective Participation
Total Sales Total Sales
FY2019 Revenue Emerging Developed
WELL-BALANCED, DIVERSIFIED BUSINESS ACROSS CHANNELS, END MARKETS AND APPLICATIONS
©2020 Gates Corporation. All rights reserved.DIVERSIFIED GEOGRAPHIES 12
GEOGRAPHIC DIVERSITY GLOBAL PRESENCE
Administrative
Manufacturing
Sales
Major R&D Centers
Warehouse
Regional Headquarters
4% 48%
$3.1B
11%
FY2019
12% Revenue
25%
North America Europe, Middle East & Africa
East Asia & India Greater China Over 120 Locations Globally
South America
Strong Regional Teams in Place
In-Region, For-Region Operating Strategy
HIGHLY DIVERSIFIED BUSINESS ACROSS GEOGRAPHIES WITH WELL-ESTABLISHED LOCAL FOOTPRINT AND CHANNEL PRESENCE
©2020 Gates Corporation. All rights reserved.WINNING THROUGH INNOVATION 13
SHARE GAINS IN EXISTING MARKETS
PRODUCT Commercial Excellence │ Geographic Expansion
DESIGN
MATERIALS TECHNOLOGICAL DISRUPTION
SCIENCE Chain-to-Belt │ Hydraulics Innovations │ Belt-to-Belt
PROCESS INCREASE OPERATIONAL EFFICIENCY
ENGINEERING Process Innovation │ Gates Operating System │ Digital Front End
Deep Understanding of Customer Applications
Revitalized Innovation and R&D Capabilities
Product Roadmaps in Place to Refresh Entire Portfolio
Targeting 25%+ New Product Vitality
1
NEW PRODUCT INNOVATION FOCUSED ON BRINGING DISRUPTIVE TECHNOLOGIES TO MARKET
©2020 Gates Corporation. All rights reserved. 1 New Product Vitality = % of total revenues from products launched within the past 5 yearsGATES VALUE CREATION PLAYBOOK 14
CORE EPS GROWTH
GROWTH
R&D,
SALES &
CASH GENERATION
MKTG
G&A ACCELERATE COMPOUNDING
REINVEST FOR GROWTH RETURNS
IMPROVE COST GROWTH
STRUCTURE
Principles of Gates Operating System are foundational across the organization
• Efficiency improvements across functions
• Gates Production System driving manufacturing productivity
Inorganic opportunities to accelerate growth
EXPANDING MARGINS TO REINVEST IN THE BUSINESS AND CREATE VALUE FOR SHAREHOLDERS
©2020 Gates Corporation. All rights reserved.H1 2020 FINANCIAL PERFORMANCE 15
USD in millions
NET SALES ADJUSTED EBITDA ADJUSTED EPS (1)
$1,615
$331 $0.54
$1,287
$204
(18.2%) $0.24
Core
20.5% 15.9%
(2.1%) Margin Margin
FX
H1 2019 H1 2020 H1 2019 H1 2020 H1 2019 H1 2020
China returned to growth in Q2, 460 bps decline, driven by lower Adjusted EPS decline driven by lower
other regions improving volumes operating income
IMPROVED DECREMENTALS ON HISTORIC REVENUE DECLINE
(1) Adjusted Net Income per diluted share
©2020 Gates Corporation. All rights reserved.BALANCE SHEET AND CASH FLOW 16
USD in millions, except multiple data
TRADE WORKING CAPITAL FREE CASH FLOW ROIC
$288 150%
Conversion
$943 20.7%
$836 62% $219
Conversion
New Capacity
Capex
14.6%
49%
Conversion
$173
29.2% 30.3%
Q2 2019 LTM Q2 2020 LTM Q2 2019 LTM Q2 2020 LTM Q2 2019 LTM Q2 2020 LTM
Significant reductions in Strong Free Cash Flow ROIC impacted by lower
receivables and inventory Conversion operating results
STRONG CASH FLOW DESPITE CHALLENGING ENVIRONMENT
Notes: Trade Working Capital: Trade Accounts Receivable plus Inventory minus Trade Accounts Payable; Trade Working Capital is also shown as % of LTM Revenues
LTM Free Cash Flow: Net Cash Provided by Operations minus capital expenditures; Free Cash Flow Conversion shown as % of Adjusted Net Income
ROIC: Tax-effected LTM Adjusted EBIT divided by total assets minus cash, accounts payable, deferred tax assets, taxes receivable and intangibles related to 2014 acquisition of Gates
©2020 Gates Corporation. All rights reserved.LIQUIDITY 17
USD in millions
$1,055
FINANCIAL COVENANTS
RCF $185 Revolving credit facility (RCF)
• Can be drawn up to 30% with no financial covenants
• > 30% draw requires senior secured net leverage < 7.15x credit facility EBITDA (3.5x as of Q2 2020)
ABL $230
1
Asset-backed loan (ABL)
• Can be drawn up to 90% with no financial covenants
• > 90% draw requires fixed charge coverage > 1.0x (2.4x as of Q2 2020)
MATURITY SCHEDULE2 $2,315
Cash $640
Term
Loans
$568
$31 $25 $25 $25 $0 Bonds
Total Liquidity – 6/27/20 2020 2021 2022 2023 2024 2025 2026
3
SOLID FINANCIAL POSITION ENABLES INVESTMENT FOR THE LONG TERM
(1) ABLnet borrowing capacity as of 6/27/20
(2) RCFand ABL mature in 2023, if drawn
©2020 Gates Corporation. All rights reserved.
(3) Remaining portion of required 2020 principal payments is $19M2020 FRAMEWORK 18
Q3 and Q4 expected to reflect sequential Cost actions
improvement • Previously initiated $40M restructuring program
• Absent broad re-implementation of movement progressing as planned
restrictions, Q3 core revenue anticipated to • Compressible/discretionary spend reductions of
decline in the range of 10%–15% year-over-year ~$50M are on track
Improved full-year decremental margin Robust cash flow generation
• Second half decrementals of ~35% • Focused management of working capital
• Cost structure actions expected to drive elevated • Expected capex ~$70M for the full year
incrementals when the business returns to • Free Cash Flow Conversion expected to be > 100%
growth of Adjusted Net Income
COST ACTIONS MITIGATING IMPACT OF REVENUE DECLINE, WHILE PRESERVING OPERATIONAL AGILITY
©2020 Gates Corporation. All rights reserved.CORE GROWTH PERFORMANCE 19
TRACK RECORD
Solid performance through 2015-16 industrial downturn, LONG-TERM PLAN TARGETS
with sales into replacement channels less impacted
Maintain > 60% replacement channel mix
Growth in 2017 and 2018 led by industrial end markets
Continued growth in larger industrial end markets
2019 impacted by trade uncertainty and resulting
destocking
KEY INITIATIVES
REVENUE $3,348M
Chain-to-belt
$3,042M $3,087M • Industrial chain-to-belt conversion
$2,745M $2,747M
• Focused TPU commercial execution
• Personal mobility market penetration
+5.9% (5.7)%
CORE +9.0%
GROWTH
(1.4)% +2.5% Hydraulics expansion
Emerging markets
2015A 2016A 2017A 2018A 2019A
MAINTAIN SUSTAINABLE AND PROFITABLE LONG-TERM GROWTH PROFILE
©2020 Gates Corporation. All rights reserved.INVESTING IN ORGANIC GROWTH WITH ATTRACTIVE RETURNS 20
TRACK RECORD LONG-TERM PLAN TARGETS
Maintenance capex consistently ~1.5% of sales Prioritization of investment in largest end markets
Large growth investment recently completed – elevated ROIC > 20%
capex in 2017 & 2018 reflects construction of new plants
Returns on invested capital typically > 20% KEY INITIATIVES
Support rollout of new technologies
CAPEX 5.5% Upgrading manufacturing processes
Digital capabilities to support growth
3.6% 3.0%
3.1% 0.8%
ROIC1
2.7%
2.5% 30%
1.4% 25.4% 25.2% 25.4%
1.0% 1.3% 1.0% 1.2% 25%
20.6%
20% 19.2%
1.7% 1.5% 1.5% 1.5% 1.5% 15%
10%
2015A 2016A 2017A 2018A ~1.5%
2019A 5%
New Plant Other Growth Maintenance 0%
2015A 2016A 2017A 2018A 2019A
REINVESTMENT IN DIVERSE SET OF INITIATIVES TO DRIVE ORGANIC GROWTH
©2020 Gates Corporation. All rights reserved. 1ROIC: Tax-effected Adjusted EBIT divided by total assets minus cash, accounts payable, deferred tax assets, taxes receivable and intangibles related to 2014 acquisition of GatesHISTORY OF MARGIN EXPANSION 21
TRACK RECORD
Demonstrated ability to expand margins LONG-TERM PLAN TARGETS
2018 margin impacted by costs associated with supply-
24% Adjusted EBITDA margin
constrained market
2019 margin headwinds from significant shift in demand
and new plants being online KEY INITIATIVES
ADJUSTED EBITDA VA/VE initiatives to optimize performance
$756M and cost
$669M
$595M $611M New products with more efficient
$547M 22.6% manufacturing processes
22.0% 19.8%
19.9% 21.7% Pricing actions to offset inflation
$610M Capitalize on operating leverage
TO
$640M Continued focus on manufacturing initiatives
2015A 2016A 2017A 2018A 2019A
DEMONSTRATED ABILITY TO EXPAND ADJUSTED EBITDA MARGIN
©2020 Gates Corporation. All rights reserved.STRONG CASH GENERATION 22
TRACK RECORD
Significant Free Cash Flow generation LONG-TERM PLAN TARGETS
Demonstrated through periods of significant growth, 100%+ Free Cash Flow conversion
as well as downturns
Consistent working capital improvement
FREE CASH FLOW
FCF Tax Refund New Plants Capex
$309M
$278M
167%
100% KEY INITIATIVES
$234M $230M
$193M 112% Operating efficiency to reduce working capital
61% > 80%
requirements
145% CASH
$267M
$266M CONV Tax efficiency
144% $209M $131M 95%
100% 35%
2015A 2016A 2017A 2018A 2019A
CHARACTERISTICS OF BUSINESS RESULT IN STRONG THROUGH-THE-CYCLE CASH GENERATION
©2020 Gates Corporation. All rights reserved.DISCIPLINED CAPITAL DEPLOYMENT 23
Achieve net leverage of < 3.0x
DELEVERAGING Flexibility on continued debt paydown
Continue to fund key initiatives
ORGANIC GROWTH Prioritize capital projects with high return on invested capital
Utilize M&A to accelerate organic strategies
M&A Focus on deals with high value creation
DIVIDENDS / Near-term focus on deleveraging, organic growth and M&A
SHARE BUYBACK $ Optionality increases once leverage falls < 3.0x
BALANCING DEBT REDUCTION WHILE INVESTING FOR GROWTH
©2020 Gates Corporation. All rights reserved.GATES INVESTMENT HIGHLIGHTS 24
Business on Trajectory of Recovery from COVID-19 Impact
Replacement Market Focus with Mission-Critical Products
Large, Diverse End Markets
Market Leader with Broad Footprint, Product Portfolio and Channel Coverage
Disruptive Innovation Drives Above-Market Growth
Continued Opportunity for Margin Expansion
Attractive Financial Profile
Short-Cycle Business that has Historically Rebounded Quickly
Strong Team in Place with Track Record of Execution
ORGANIC PORTFOLIO TRANSFORMATION IN LARGE, UNDERPENETRATED CORE MARKETS DRIVEN BY INNOVATION
©2020 Gates Corporation. All rights reserved.APPENDIX
RECONCILIATIONS – ADJUSTED EBITDA AND ADJUSTED 26
EBITDA MARGIN
(USD in millions) H1 2020 H1 2019 FY2019 FY2018 FY2017 FY2016 FY2015
Reconciliation to Adjusted EBITDA
Net Income from Continuing Operations $ 12.1 $ 631.8 $ 694.7 $ 271.7 $ 182.0 $ 71.9 $ 50.9
Adjusted for:
Income tax (benefit) expense (15.5) (502.2) (495.9) 31.8 (72.5) 21.1 (9.2)
Net interest and other expenses 65.2 72.5 148.0 193.3 293.4 212.3 147.7
Depreciation and amortization 109.6 112.3 222.2 218.5 212.2 240.8 269.9
Transaction-related (income) expenses (0.2) (0.3) 2.6 6.7 18.1 0.4 0.7
Asset impairments 3.7 - 0.7 0.6 2.8 3.2 51.1
Restructuring expenses 19.1 3.6 6.0 6.4 17.4 11.4 15.6
Share-based compensation expense 8.6 6.4 15.0 6.0 5.4 4.2 4.3
Sponsor fees (included in other operating expenses) 1.7 3.8 6.5 8.0 6.7 6.1 7.0
Inventory impairments and adjustments (included in cost of sales) 1.4 0.3 1.2 1.5 3.2 20.7 9.6
Duplicate expenses incurred on facility relocation - - - 5.2 - - -
Severance expenses (included in cost of sales) 0.6 0.5 4.0 1.7 - - -
Other primarily severance-related expenses (included in SG&A) 0.8 1.2 3.4 4.4 - - -
Other adjustments (3.1) 1.0 2.6 - 0.4 2.8 (0.4)
Adjusted EBITDA $ 204.0 $ 330.9 $ 611.0 $ 755.8 $ 669.1 $ 594.9 $ 547.2
Adjusted EBITDA margin
Net Sales $ 1,286.6 $ 1,614.8 $ 3,087.1 $ 3,347.6 $ 3,041.7 $ 2,747.0 $ 2,745.1
Adjusted EBITDA $ 204.0 $ 330.9 $ 611.0 $ 755.8 $ 669.1 $ 594.9 $ 547.2
Adjusted EBITDA margin 15.9% 20.5% 19.8% 22.6% 22.0% 21.7% 19.9%
©2020 Gates Corporation. All rights reserved.RECONCILIATIONS – ADJUSTED NET INCOME 27
(USD in millions, except share numbers and per share amounts) H1 2020 H1 2019 FY 2019 FY2018 FY2017 FY2016 FY2015
Reconciliation to Adjusted Net Income
Net Income Attributable to Shareholders $ 13.2 $ 635.2 $ 690.1 $ 245.3 $ 151.3 $ 57.7 $ 24.9
Adjusted for:
Loss (gain) on disposal of discontinued operations 0.2 0.5 0.6 0.6 (0.7) (12.4) -
Amortization of intangible assets arising from the 2014 acquisition of Gates 58.1 59.3 118.2 120.3 124.2 141.9 158.5
Transaction-related (income) expenses (0.2) (0.3) 2.6 6.7 18.1 0.4 0.7
Asset impairments 3.7 - 0.7 0.6 2.8 3.2 51.1
Restructuring expenses 19.1 3.6 6.0 6.4 17.4 11.4 15.6
Share-based compensation expense 8.6 6.4 15.0 6.0 5.4 4.2 4.3
Sponsor fees (included in other operating expenses) 1.7 3.8 6.5 8.0 6.7 6.1 7.0
Inventory impairments and adjustments (included in cost of sales) 1.4 0.3 1.2 1.5 3.2 20.7 9.6
Adjustments relating to post-retirement benefits (1.2) (1.9) (3.2) 3.1 2.5 6.4 4.8
Premium on redemption of long-term debt - - - 27.0 - - -
Financing-related FX (gains) losses (1.9) (0.6) (0.8) (8.8) 61.2 (7.6) (62.8)
One-time deferred tax benefit from U.S. tax reform - - - - (118.2) - -
One-time net tax expense (benefit) - (513.0) (513.0) - - - -
One-time non-controlling interest adjustment - (15.0) (15.0) - - - -
Other adjustments (1) (15.0) (1.1) 1.6 0.8 (10.5) (8.1) (10.9)
Estimated tax effect of the above adjustments (16.7) (19.6) (31.2) (38.3) (53.9) (38.9) (70.0)
Adjusted Net Income $ 71.0 $ 157.6 $ 279.3 $ 379.2 $ 209.5 $ 185.0 $ 132.8
Diluted weighted average number of shares outstanding 291,716,507 291,863,973 291,627,461 291,698,273 250,490,828 248,360,187 247,674,034
Adjusted Net Income per diluted share $ 0.24 $ 0.54 $ 0.96 $ 1.30 $ 0.84 $ 0.74 $ 0.54
(1) During the six months ended June 27, 2020, other adjustments included $13.3 million in relation to the non-controlling interest share of the adjustments above, primarily restructuring expenses
©2020 Gates Corporation. All rights reserved.
incurred in relation to the closure of our manufacturing facility in Korea.RECONCILIATIONS – FREE CASH FLOW AND FREE CASH 28
FLOW CONVERSION
(USD in millions) LTM Q2 2020 LTM Q2 2019 FY2019 FY2018 FY2017 FY2016 FY2015
Reconciliation of Free Cash Flow
Net Cash Provided by Operations $ 356.7 $ 283.4 $ 348.9 $ 313.5 $ 319.9 $ 376.7 $ 278.6
Capital Expenditures (1) $ (68.6) $ (110.6) (83.1) (182.7) (111.1) (68.1) (85.8)
Free Cash Flow $ 288.1 $ 172.8 $ 265.8 $ 130.8 $ 208.8 $ 308.6 $ 192.8
Adjusted Net Income $ 192.7 $ 353.1 $ 279.3 $ 379.2 $ 209.5 $ 185.0 $ 132.8
Free Cash Flow Conversion 149.5% 48.9% 95.2% 34.5% 99.7% 166.8% 145.2%
©2020 Gates Corporation. All rights reserved. (1) Capital expenditures represent purchases of property, plant and equipment and purchases of intangible assets.RECONCILIATIONS – RETURN ON INVESTED CAPITAL (ROIC) 29
(USD in millions) Q2 2020 Q2 2019 FY 2019 FY 2018 FY 2017 FY 2016 FY 2015
Return On Invested Capital (ROIC)
LTM Adjusted EBITDA $ 484.1 $ 697.9 $ 611.0 $ 755.8 $ 669.1 $ 594.9 $ 547.2
LTM Total depreciation and amortization (219.5) (221.2) (222.2) (218.5) (212.2) (240.8) (269.9)
LTM Amortization of intangible assets arising from the 2014 acquisition of Gates 117.0 118.7 118.2 120.3 124.2 141.9 158.5
LTM Adjusted EBIT 381.6 595.4 507.0 657.6 581.1 496.0 435.8
Notional tax at 25% (95.4) (148.8) (126.8) (164.4) (145.3) (124.0) (109.0)
LTM Tax-effected Adjusted EBIT $ 286.2 $ 446.6 $ 380.2 $ 493.2 $ 435.8 $ 372.0 $ 326.8
Total Assets $ 7,176.3 $ 7,430.1 $ 7,411.3 $ 6,722.6 $ 6,853.7 $ 6,383.3 $ 6,565.6
Adjusted for:
Cash (639.7) (411.0) (635.3) (423.4) (564.4) (527.2) (340.2)
Taxes receivable (54.4) (45.0) (45.1) (35.1) (46.8) (41.0) (44.1)
Deferred tax assets (575.7) (576.0) (587.1) (5.1) (5.8) (2.4) (3.1)
Accounts payable (317.8) (378.3) (374.7) (424.0) (392.0) (313.1) (274.0)
Intangibles arising from the acquisition of Gates (3,628.2) (3,867.2) (3,788.8) (3,890.4) (4,114.5) (4,034.2) (4,318.0)
Invested Capital $ 1,960.5 $ 2,152.6 $ 1,980.3 $ 1,944.6 $ 1,730.2 $ 1,465.4 $ 1,586.2
Return On Invested Capital 14.6% 20.7% 19.2% 25.4% 25.2% 25.4% 20.6%
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