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Informational only - not investment advice.

Gates Industrial Corp plc (GTES)

CIK: 0001718512. SIC: 3560 General Industrial Machinery & Equipment. Latest 10-K as of: 2026-02-12.

SIC breadcrumb: Manufacturing > Industrial And Commercial Machinery And Computer Equipment > SIC 3560 General Industrial Machinery & Equipment

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1718512. Latest filing source: 0001628280-26-007719.

Selected Fundamentals

MetricValueUnitFYFiled
Revenue3,443,200,000USD20252026-02-12
Net income251,400,000USD20252026-02-12
Assets7,151,400,000USD20252026-02-12

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-12. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001718512.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Metric2018201920212022202320242025
Revenue3,347,600,0003,087,100,0002,793,000,0003,554,200,0003,570,200,0003,408,200,0003,443,200,000
Net income245,300,000690,100,00079,400,000220,800,000232,900,000194,900,000251,400,000
Operating income496,800,000346,800,000211,100,000384,000,000460,100,000472,200,000465,300,000
Gross profit1,330,600,0001,142,500,0001,034,700,0001,250,600,0001,358,900,0001,358,500,0001,371,700,000
Diluted EPS0.842.370.270.770.840.740.96
Assets7,411,300,0007,426,300,0007,191,600,0007,254,500,0006,786,300,0007,151,400,000
Liabilities4,400,600,0004,241,300,0003,748,000,0003,710,600,0003,446,000,0003,462,200,000
Stockholders' equity2,651,000,0002,805,700,0003,110,000,0003,220,200,0003,023,600,0003,334,000,000
Cash and cash equivalents635,300,000521,400,000578,400,000720,600,000682,000,000812,100,000
Net margin7.33%22.35%2.84%6.21%6.52%5.72%7.30%
Operating margin14.84%11.23%7.56%10.80%12.89%13.85%13.51%

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-01. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001718512.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

QuarterEnd DateRevenueNet IncomeDiluted EPSMethod
2022-Q22022-07-020.19reported discrete quarter
2022-Q32022-10-010.18reported discrete quarter
2023-Q12023-04-010.09reported discrete quarter
2023-Q22023-07-01936,300,00064,900,0000.23reported discrete quarter
2023-Q32023-09-30872,900,00078,700,0000.29reported discrete quarter
2023-Q42023-12-30863,300,00062,900,000derived Q4 = FY annual - nine-month YTD
2024-Q12024-03-30862,600,00040,000,0000.15reported discrete quarter
2024-Q22024-06-29885,500,00070,700,0000.26reported discrete quarter
2024-Q32024-09-28830,700,00047,600,0000.18reported discrete quarter
2024-Q42024-12-28829,400,00036,600,000derived Q4 = FY annual - nine-month YTD
2025-Q12025-03-29847,600,00062,000,0000.24reported discrete quarter
2025-Q22025-06-28883,700,00056,500,0000.22reported discrete quarter
2025-Q32025-09-27855,700,00081,600,0000.31reported discrete quarter
2025-Q42025-12-31856,200,00051,300,000derived Q4 = FY annual - nine-month YTD
2026-Q12026-03-28851,100,00059,700,0000.23reported discrete quarter

Quarterly Charts

Macro Cross-References

Latest quarter (10-Q)

Latest 10-Q source: 0001628280-26-029351.

Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization. Confidence: high. Filing date: 2026-05-01. Report date: 2026-03-28.

Item 2: Management’s Discussion and Analysis

of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and related notes thereto included elsewhere in this quarterly report. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in “Cautionary Note Regarding Forward-Looking Statements” above and Part I, Item 1A. “Risk Factors” in our annual report.

Our Company

We are a global manufacturer of innovative, highly engineered power transmission and fluid power solutions. We offer a broad portfolio of products to diverse aftermarket channel customers, and to original equipment manufacturers (“OEM”) as specified components, with the majority of our revenue coming from aftermarket channels. Our products are used in applications across numerous end markets, including: automotive aftermarket, automotive OEM, diversified industrial, industrial off-highway, industrial on-highway, energy and resources and personal mobility. Our net sales have historically been, and remain, highly correlated with industrial activity and utilization, and not with any single end market given the diversification of our business and high exposure to the aftermarket channel. We sell our products globally under the Gates brand, which is recognized by distributors, equipment manufacturers, installers and end users as a premium brand for quality and technological innovation; this reputation has been built over more than 110 years since Gates’ founding in 1911.

Within the diverse end markets we serve, our highly engineered products are often critical components in applications for which the cost of downtime is high relative to the cost of our products, resulting in the willingness of end users to pay a premium for superior performance and availability. These applications subject our products to normal wear and tear, resulting in natural, and often preventative, aftermarket cycles that drive high-margin, recurring revenue. Our product portfolio represents one of the broadest ranges of power transmission and fluid power products in the markets we serve, and we maintain long-standing relationships with a diversified group of well-known customers throughout the world. As a leading designer, manufacturer and marketer of highly engineered, mission-critical products, we have become an industry leader across most of our end markets and the regions in which we operate.

Business Trends

The diversification of our business limits our exposure to trends in any given end market. In addition, a majority of our sales are generated from customers in aftermarket channels, who serve primarily a large base of installed equipment that follows a natural maintenance cycle that is somewhat less susceptible to various trends that affect our end markets. Such trends include infrastructure investment and construction activity, agricultural production and related commodity prices, commercial and passenger vehicle production, miles driven and fleet age, evolving regulatory requirements related to emissions and fuel economy and oil and gas prices and production. Key indicators of our performance include industrial production, industrial sales and manufacturer shipments.

During the three months ended March 28, 2026, sales into aftermarket channels accounted for approximately 68% of our total net sales. Our aftermarket sales cover a very broad range of applications and industries and, accordingly, are highly correlated with industrial activity and utilization and not a single end market. Aftermarket products are principally sold through distribution partners that may carry a very broad line of products or may specialize in products associated with a smaller set of end market applications.

During the three months ended March 28, 2026, sales into OEM channels accounted for approximately 32% of our total net sales. First-fit sales are to a variety of industrial and automotive customers. Our industrial OEM customers cover a diverse range of industries and applications and many of our largest first-fit customers manufacture construction and agricultural equipment.

During the three months ended March 28, 2026, sales in the personal mobility end market continued to experience strong growth, and our aftermarket channel sales grew modestly, including positive core growth in the industrial aftermarket channel. We continue to focus on managing our business through current economic uncertainties, improving our gross margins through our efforts of material cost savings, footprint optimization and productivity. In the first half of 2026, we expect certain one-time footprint optimization, restructuring, and system implementation costs. We anticipate these and other investments and product development in personal mobility and data center opportunities will position us to drive long term growth and margin expansion.

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Our global operating footprint and worldwide sales reach expose us to risks associated with geopolitical tensions and trade conflicts. Global trade conflicts due to recent U.S. and retaliatory tariffs and geopolitical tensions, including the conflict in the Middle East, have led to, and may continue to lead to, inflationary pressures, supply chain disruptions, uncertainty, and volatility in the market and, therefore, could impact our operations and financial performance. As the geopolitical climate continues to evolve, we could have additional exposures in the future. We will continue to monitor and evaluate risks related to geopolitical tensions and trade conflicts and any resulting impact on macroeconomic conditions and our business.

Results for the three months ended March 28, 2026 compared to the results for the three months ended March 29, 2025

Summary Gates Performance

Three months ended

(dollars in millions)

March 28,

2026

March 29,

2025

Net sales

$

851.1 

$

847.6 

Cost of sales

513.1 

503.0 

Gross profit

338.0 

344.6 

Selling, general and administrative expenses

226.9 

216.2 

Transaction-related expenses

0.5 

0.4 

Asset impairments

— 

0.6 

Restructuring expenses

0.7 

1.6 

Operating income from continuing operations

109.9 

125.8 

Interest expense

29.9 

29.6 

Other expense

2.1 

2.4 

Income from continuing operations before taxes

77.9 

93.8 

Income tax expense

11.5 

25.2 

Net income from continuing operations

$

66.4 

$

68.6 

Adjusted EBITDA(1)

$

177.4 

$

187.3 

(1)    See “—Non-GAAP Measures” for a reconciliation of Adjusted EBITDA to net income, the closest comparable GAAP measure, for each of the periods presented.

Net sales

Net sales during the three months ended March 28, 2026 were $851.1 million, compared to $847.6 million during the prior year period, an increase of 0.4%, or $3.5 million. The following table lists the primary drivers behind the change in net sales (amounts in millions):

Power Transmission

Fluid Power

Total Company

Three months ended March 29, 2025

$

527.2 

$

320.4 

$

847.6 

Currency translation

19.2 

8.7 

27.9 

Volume

(24.5)

(20.2)

(44.7)

Pricing

11.3 

9.0 

20.3 

Three months ended March 28, 2026

$

533.2 

$

317.9 

$

851.1 

Cost of sales for the three months ended March 28, 2026 was $513.1 million, compared to $503.0 million for the prior year period, an increase of 2.0%, or $10.1 million. The following table lists the primary drivers behind the change in cost of sales (amounts in millions):

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Three months ended March 29, 2025

$

503.0 

Currency translation

15.0 

Volume

(18.7)

Manufacturing performance

(0.6)

Mix

(1.8)

Inflation

7.3 

Tariff

8.7 

Inventory impairments and adjustments

5.0 

Inbound Freight

(4.9)

Other

0.1 

Three months ended March 28, 2026

$

513.1 

Selling, general and administrative expenses

Selling, general and administrative (“SG&A”) expenses for the three months ended March 28, 2026 were $226.9 million compared to $216.2 million for the prior year period. This increase of $10.7 million was driven primarily by higher labor and benefits expense of $4.3 million, unfavorable impacts of exchange rates of $4.8 million, and higher consulting and professional fees of $2.5 million. This increase was partially offset by lower corporate owned life insurance expense of $2.2 million.

Transaction-related expenses

Transaction-related expenses for the three months ended March 28, 2026 were $0.5 million compared to $0.4 million for the prior year period. Transaction-related expenses incurred during the three months ended March 28, 2026 were primarily related to certain corporate transactions. Transaction-related expenses incurred during the three months ended March 29, 2025 were primarily related to certain non-recurring debt related costs.

Restructuring expenses

Restructuring expenses during the three months ended March 28, 2026 included $0.7 million of costs related to a global cost reduction effort and reorganization of our operations in Mexico. Restructuring related expenses during the three months ended March 28, 2026 included $2.4 million of costs related to the relocation of certain production activities and reorganization of our operations in Mexico and $1.4 million of costs related to professional service fees and general severance.

Restructuring expenses during the three months ended March 29, 2025 primarily included $1.3 million of costs related to the relocation of certain production activities and reorganization of our operations in Mexico, as well as severance and professional service fees. Restructuring related expenses during the three months ended March 29, 2025 primarily included $1.0 million of costs related to the relocation of certain production activities and reorganization of our operations in Mexico, as well as severance and professional service fees.

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Interest expense

Our interest expense was as follows:

Three months ended

(dollars in millions)

March 28,

2026

March 29,

2025

Debt:

Dollar Term Loans

$

17.3 

$

16.7 

Dollar Senior Notes

8.4 

8.7 

25.7 

25.4 

Amortization of deferred issuance costs

1.5 

1.5 

Other interest expense

2.7 

2.7 

$

29.9 

$

29.6 

Details of our long-term debt are presented in Note 12 to the condensed consolidated financial statements included elsewhere in this report. Interest expense increased by $0.3 million during the three months ended March 28, 2026, respectively, when compared to the equivalent prior year period, primarily due to a less favorable impact from derivatives, partially offset by lower applicable interest rates on the Dollar Term Loans.

Other expense

Our other expense was as follows:

Three months ended

(dollars in millions)

March 28,

2026

March 29,

2025

Interest income on bank deposits

$

(2.2)

$

(2.2)

Foreign currency transaction loss (gain), net

2.8 

1.1 

Net adjustments related to post-retirement benefits

5.4 

0.4 

Foreign currency loss on hyperinflation remeasurement

0.2 

1.0 

Other

(4.1)

2.1 

$

2.1 

$

2.4 

Other expense for the three months ended March 28, 2026 was $2.1 million compared to $2.4 million of expense, for the three months ended March 29, 2025. These changes were primarily driven by a financing related gain primarily due to foreign currency exchange rate movement on intercompany loans and hedging instruments. This was partially offset by a pension settlement loss of $5.2 million in March 2026.

Income tax expense

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 March 28, 2026

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-02-12. Report date: 2025-12-31.

Item 7: Management’s Discussion and Analysis

of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and related notes thereto included elsewhere in this annual report. This discussion and analysis addresses Fiscal 2025 compared to Fiscal 2024. For discussion and analysis of our financial condition and results of operations for Fiscal 2024 compared to Fiscal 2023, see Management's Discussion and Analysis of Financial Condition and Results of Operations, in Part II, Item 7 of our Annual Report on Form 10-K for Fiscal 2024, which is incorporated herein by reference. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in “Forward-Looking Statements” and “Risk Factors” above.

Our Company

We are a global manufacturer of innovative, highly engineered power transmission and fluid power solutions. We offer a broad portfolio of products to diverse aftermarket channel customers, and to original equipment manufacturers (“OEM”) as specified components, with the majority of our revenue coming from aftermarket channels. Our products are used in applications across numerous end markets, including automotive aftermarket, automotive OEM, diversified industrial, industrial off-highway, industrial on-highway, energy and resources, and personal mobility. Our net sales have historically been, and remain, highly correlated with industrial activity and utilization, and not with any single end market given the diversification of our business and high exposure to the aftermarket channel. We sell our products globally under the Gates brand, which is recognized by distributors, equipment manufacturers, installers and end users as a premium brand for quality and technological innovation; this reputation has been built over more than 110 years since Gates’ founding in 1911.

Within the diverse end markets we serve, our highly engineered products are often critical components in applications for which the cost of downtime is high relative to the cost of our products, resulting in the willingness of end users to pay a premium for superior performance and availability. These applications subject our products to normal wear and tear, resulting in natural, and often preventative, aftermarket cycles that drive high-margin, recurring revenue. Our product portfolio represents one of the broadest ranges of power transmission and fluid power products in the markets we serve, and we maintain long-standing relationships with a diversified group of well-known customers throughout the world. As a leading designer, manufacturer and marketer of highly engineered, mission-critical products, we have become an industry leader across most of our end markets and the regions in which we operate.

Business Trends

The diversification of our business limits our exposure to trends in any given end market. In addition, a majority of our sales are generated from customers in aftermarket channels, who serve primarily a large base of installed equipment that follows a natural maintenance cycle that is somewhat less susceptible to various trends that affect our end markets. Such trends include infrastructure investment and construction activity, agricultural production and related commodity prices, commercial and passenger vehicle production, miles driven and fleet age, evolving regulatory requirements related to emissions and fuel economy and oil and gas prices and production. Key indicators of our performance include industrial production, industrial sales and manufacturer shipments.

During Fiscal 2025, sales into aftermarket channels accounted for approximately 68% of our total net sales. Our aftermarket sales cover a very broad range of applications and industries and, accordingly, are highly correlated with industrial activity and utilization and not a single end market. Aftermarket products are principally sold through distribution partners that may carry a very broad line of products or may specialize in products associated with a smaller set of end market applications.

During Fiscal 2025, sales into OEM channels accounted for approximately 32% of our total net sales. OEM sales are to a variety of industrial and automotive customers. Our industrial OEM customers cover a diverse range of industries and applications and many of our largest OEM customers manufacture construction and agricultural equipment.

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During Fiscal 2025, we realized modest growth in our aftermarket channel led by the automotive aftermarket partially offset by a decline in our OEM channel, which was primarily impacted by Automotive. Our profitability improved supported by solid cost management and favorable channel mix. We anticipate demand in several of our industrial end markets to improve in 2026. In the first half of 2026, we expect certain one-time costs associated with system implementation and footprint optimization. As the industrial markets stabilize, we expect that our ongoing execution of these and other enterprise initiatives and incremental new business investments will enable us to enhance our profitability and drive higher organic growth over the long term.

Our global operating footprint and worldwide sales reach expose us to risks associated with geopolitical tensions and trade conflicts. Global trade conflicts due to recent U.S. and retaliatory tariffs and geopolitical tensions have led to, and may continue to lead to, inflationary pressures, uncertainty, and volatility in the market and, therefore, could impact our operations, supply chain and financial performance. While we have not experienced significant disruptions to our supply chain, we have experienced some slower than expected demand recovery and cost increases, primarily for our businesses in North America. The global tariff regime continues to evolve and we could have additional exposures in the future. We will continue to monitor and evaluate risks related to geopolitical tensions and trade conflicts and any resulting impact on macroeconomic conditions and our business.

Results for the year ended December 31, 2025 compared to the results for the year ended December 28, 2024

Summary Gates Performance

For the year ended

(dollars in millions)

December 31,

2025

December 28,

2024

Net sales

$

3,443.2 

$

3,408.2 

Cost of sales

2,071.5 

2,049.7 

Gross profit

1,371.7 

1,358.5 

Selling, general and administrative expenses

876.1 

876.5 

Transaction-related expenses

0.5 

3.3 

Asset impairments

3.5 

— 

Restructuring expenses

26.3 

6.5 

Other operating expenses

— 

— 

Operating income from continuing operations

465.3 

472.2 

Interest expense

125.9 

155.8 

Loss on deconsolidation of Russian subsidiary

— 

12.7 

Other (income) expense

(0.8)

(24.3)

Income from continuing operations before taxes

340.2 

328.0 

Income tax expense

63.1 

107.5 

Net income from continuing operations

$

277.1 

$

220.5 

Adjusted EBITDA(1)

$

770.1 

$

761.1 

(1)    See “—Non-GAAP Financial Measures” for a reconciliation of Adjusted EBITDA to Net Income, the closest comparable GAAP measure, for each of the periods presented.

Net sales

Net sales during Fiscal 2025 were $3,443.2 million, compared to $3,408.2 million during the prior year, an increase of 1.0%, or $35.0 million. The following table lists the primary drivers behind the change in net sales (amounts in millions):

Power Transmission

Fluid Power

Total Company

Year ended December 30, 2024

$

2,108.1 

$

1,300.1 

$

3,408.2 

Currency translation

12.1 

(1.9)

10.2 

Volume

(9.8)

(30.7)

(40.5)

Pricing

36.7 

28.6 

65.3 

Year ended December 28, 2025

$

2,147.1 

$

1,296.1 

$

3,443.2 

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Cost of sales

Cost of sales for Fiscal 2025 was $2,071.5 million, compared to $2,049.7 million for the prior year, an increase of 1.1%, or $21.8 million. The following table lists the primary drivers behind the change in cost of sales (amounts in millions):

Year ended December 28, 2024

$

2,049.7 

Currency translation

3.2 

Volume

(8.8)

Manufacturing performance

32.9 

Mix

(9.9)

Other

4.4 

Year ended December 31, 2025

$

2,071.5 

Selling, general and administrative (“SG&A”) expenses

SG&A expenses for Fiscal 2025 were $876.1 million compared to $876.5 million for the prior year. This decrease of $0.4 million was primarily attributable to favorable labor and benefits expense and decreased outbound freight costs. The decrease was partially offset by higher restructuring-related costs and unfavorable movements in average currency exchange rates during the year.

Transaction-related expenses

Transaction-related expenses of $0.5 million were incurred during Fiscal 2025, related primarily to debt restructuring costs and certain other corporate transactions. Transaction-related expenses of $3.3 million were incurred during the prior year, related primarily to the debt agreement amendments and refinancings that occurred in June 2024 and December 2024, the four secondary offerings completed in 2024, and certain other corporate transactions.

Restructuring expenses

Restructuring expenses during Fiscal 2025 included $14.3 million of severance and related benefits expense related to a global cost reduction effort. In addition, during Fiscal 2025, we incurred $5.7 million of costs related to the relocation of certain production activities and reorganization of our operations in Mexico and $3.6 million of costs related to a manufacturing reduction in force in the Americas. Additional restructuring expenses during Fiscal 2025 were related to professional service fees and severance.

Restructuring expenses during Fiscal 2024 included $2.1 million of costs related to the relocation of certain production activities and reorganization of our operations in Mexico. Additionally, we incurred $1.6 million in severance and other costs in Fiscal 2024 related to the consolidation of production activities across certain North American plants. Additional costs related to restructuring incurred during Fiscal 2024 included professional service fees, and costs associated with prior period facility closures or relocations in several countries.

Interest expense

For the year ended

(dollars in millions)

December 31,

2025

December 28,

2024

Debt:

—Dollar Term Loans

$

70.8 

$

88.8 

—Dollar Senior Notes

34.6 

34.7 

—Revolving credit facility

— 

0.4 

105.4 

123.9 

Amortization of deferred issuance costs

9.0 

23.1 

Other interest expense

11.5 

8.8 

$

125.9 

$

155.8 

Details of our long-term debt are presented in Note 15 to the consolidated financial statements included elsewhere in this report.

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Interest on debt for Fiscal 2025 decreased by $18.5 million when compared to the prior year, primarily due to lower interest rates applicable on the floating rate Dollar Term Loans and the favorable impact of derivatives.

Amortization of deferred issuance costs during Fiscal 2025 decreased by $14.1 million, primarily due to the accelerated amortization of $14.8 million of deferred issuance costs related to the debt refinancing that occurred in June 2024 and the accelerated amortization of $1.0 million due to the $100.0 million repayment against our 2021 Dollar Term Loans (as defined below) in February 2024.

Other (income) expenses

For the year ended

(dollars in millions)

December 31,

2025

December 28,

2024

Interest on bank deposits

$

(9.6)

$

(13.7)

Foreign currency transaction loss (gain), net

5.2 

(6.5)

Financing related loss (income)

6.0 

(13.7)

Net interest related to postretirement benefits

1.3 

(2.6)

Foreign currency loss (gain) on hyperinflation remeasurement

6.5 

6.7 

Insurance recoveries

(10.0)

— 

Other

(0.2)

5.5 

$

(0.8)

$

(24.3)

Other (income) expenses for Fiscal 2025 was an income of $0.8 million, compared to income of $24.3 million in the prior year. The decrease of other income was primarily driven by financing related loss of $6.0 million during Fiscal 2025 compared to financing related income of $13.7 million during Fiscal 2024. Additionally, Fiscal 2025 had foreign currency transaction losses of $5.2 million compared to foreign currency transaction gains of $6.5 million in the prior year. This was partially offset by insurance recoveries of $10.0 million received during Fiscal 2025.

Income tax expense

For Fiscal 2025, we had an income tax expense of $63.1 million on pre-tax income of $340.2 million, which resulted in an effective tax rate of 18.5% compared to an income tax expense of $107.5 million on pre-tax income of $328.0 million, which resulted in an effective tax rate of 32.8% for Fiscal 2024.

The effective tax rate for Fiscal 2025 was driven by a $21.9 million benefit on net book-tax differences required to reconcile income tax expense of $85.0 million, computed at the U.K. statutory rate of 25%, to the Company’s total income tax provision of $63.1 million. The reconciling items include benefits related to unrecognized tax benefits primarily due to audit settlement, company-owned life insurance deductions, excess tax benefits on stock option exercises, tax rate differential and other net benefits, offset by expenses related to withholding taxes and other U.S. tax on international operations.

The effective tax rate for Fiscal 2024 was primarily driven by a $25.5 million expense on net book-tax differences required to reconcile income tax expense of $82.0 million, computed at the U.K. statutory rate of 25%, to the Company’s total income tax provision of $107.5 million. The reconciling items include expenses related to change in deferred tax assets for Luxembourg net operating losses related to a reduction in the Luxembourg corporate income tax rate enacted in 2024, withholding taxes and other U.S. tax on international operations, currency exchange rate movements primarily related to Luxembourg currency revaluation on indefinite-lived net operating losses, and net other expense, offset by benefits related to change in valuation allowance primarily related to a reduction in the Luxembourg corporate income tax rate enacted in 2024, company-owned life insurance deductions, and unrecognized tax benefits primarily due to audit settlement.

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On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. Effective in 2025, OBBBA reinstates the immediate deduction for domestic research and development expenditures, made permanent the 100% bonus depreciation for domestic fixed assets, and modifies the business interest limitation calculation to exclude the effects of foreign earnings and domestic depreciation and amortization. Beginning in 2026, OBBBA also implements significant changes to the U.S. international tax regime. As of December 31, 2025, these modifications to tax law provisions impacted the timing of recognition of deferred tax assets, generating a nominal impact to the overall income tax provision. The Company is currently evaluating the impact of OBBBA on 2026 and future periods.

Numerous foreign jurisdictions, including the U.K., have enacted or are in the process of enacting legislation to adopt a minimum effective tax rate described in the Global Anti-Base Erosion, or Pillar Two, model rules issued by the Organization for Economic Co-operation and Development, or OECD. Under such rules, a minimum effective tax rate of 15% would apply to multinational companies with consolidated revenue above €750 million. Under the Pillar Two rules, a company would be required to determine a combined effective tax rate for all entities located in a jurisdiction. If the jurisdictional effective tax rate determined under the Pillar Two rules is less than 15%, a top-up tax will be due to bring the jurisdictional effective tax rate up to 15%. These legislative changes did not have a material impact in fiscal year 2025 and we do not expect a material impact in future years.

Deferred Income 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 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 materially impact our financial statements.

After weighing all of the evidence, giving more weight to the evidence that was objectively verifiable, we determined in Fiscal 2025 that it was more likely than not that deferred income tax assets of $2.4 million primarily in Türkiye related to other deferred tax assets and net operating losses are not realizable.

In Fiscal 2024, we determined that it was more likely than not that deferred income tax assets of $5.5 million in Türkiye related to net operating losses, $3.7 million in Poland related to special economic zone business credits, and $3.4 million in the U.S. related to net operating losses, are not realizable. Similarly, we determined in Fiscal 2024 that it is more likely than not that deferred income tax assets in the U.S. related to foreign tax credits totaling $3.2 million are realizable as a result of changes in estimates of taxable profits against which these credits can be utilized.

Analysis by Operating Segment

Power Transmission (62.4% of Gates’ net sales for the year ended December 31, 2025)

For the year ended

(dollars in millions)

December 31,

2025

December 28,

2024

Period over period change

Net sales

$

2,147.1 

$

2,108.1 

1.9

%

Adjusted EBITDA

$

479.6 

$

468.7 

2.3

%

Adjusted EBITDA margin

22.3 

%

22.2 

%

Net sales in Power Transmission for Fiscal 2025 increased by 1.9%, or $39.0 million, driven by a $36.7 million benefit from pricing and favorable movements in average currency exchange rates of $12.1 million. The increase was offset by lower volumes. As such, core sales increased by 1.3%, or $26.9 million, compared to the prior year.

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Power Transmission’s overall core sales to our industrial channel customers had a core sales increase of 5.0% during Fiscal 2025, compared to the prior year periods. Personal mobility, agriculture, and industrial on-highway experienced growth of 28.7%, 14.6%, and 13.5%, respectively, compared to the prior year period, primarily in North America and EMEA. Automotive channel sales were relatively consistent compared to the prior year periods, declining by 0.8% during Fiscal 2025. The decline in the automotive channel during Fiscal 2025 was focused in Greater China and EMEA, which experienced core sales declines of 5.4% and 3.0%, respectively, compared to the prior year period. This was partially offset by core sales growth in the automotive channel in North America.

Power Transmission Adjusted EBITDA for Fiscal 2025 increased by 2.3%, or $10.9 million compared to the prior year, driven primarily by benefits from pricing, partially offset by lower manufacturing performance and volumes. As a result, the Adjusted EBITDA margin for Fiscal 2025 was 22.3%, a 10 basis point increase from the prior year.

Fluid Power (37.6% of Gates’ net sales for the year ended December 31, 2025)

For the year ended

(dollars in millions)

December 31,

2025

December 28,

2024

Period over period change

Net sales

$

1,296.1 

$

1,300.1 

(0.3

%)

Adjusted EBITDA

$

290.5 

$

292.4 

(0.6

%)

Adjusted EBITDA margin

22.4 

%

22.5 

%

Net sales in Fluid Power for Fiscal 2025 decreased by 0.3%, or $4.0 million, driven by lower volumes of $30.7 million and adverse movements in average currency exchange rates of $1.9 million. The decrease was offset by a $28.6 million benefit from pricing. As such, core sales decreased by 0.2%, or $2.1 million, compared to the prior year.

Fluid Power’s sales decline in Fiscal 2025 was driven by decreased core sales to industrial channel customers of 3.1% compared to the prior year period. The decline of industrial sales were primarily in North America and EMEA, which had declines of 6.6% and 1.6%, respectively, compared to the prior year period. Industrial on-highway and diversified industrial end markets drove most of the decline, with core sales that decreased by 12.3% and 3.5%, respectively, during Fiscal 2025 as compared to the prior year period. The decline in industrial sales was partially offset by core sales growth in the automotive channel of 8.4% compared to the prior year period. Growth of automotive channel sales was primarily contributed by North America and EMEA.

Fluid Power Adjusted EBITDA for Fiscal 2025 decreased by 0.6%, or $1.9 million, compared to the prior year period, driven primarily by unfavorable manufacturing performance, lower volumes and the impact of adverse movements in currency exchange rates. This decrease was partially offset by a benefit from pricing activities and lower SG&A spend during the year. As a result, the Adjusted EBITDA margin was 22.4%, a 10 basis point decrease from the prior year.

Liquidity and Capital Resources

Treasury Responsibilities and Philosophy

Our primary liquidity and capital resource needs are for working capital, debt service requirements, capital expenditures, share repurchases, facility expansions and acquisitions. We expect to finance our future cash requirements with cash on hand, cash flows from operations and, where necessary, borrowings under our secured revolving credit facility. We have historically relied on our cash flow from operations and various debt and equity financings for liquidity.

From time to time, we enter into currency derivative contracts to manage currency transaction exposures. Similarly, from time to time, we may enter into interest rate derivatives to maintain the desired mix of floating and fixed rate debt.

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As market conditions warrant, we may from time to time seek to repurchase securities that we have issued or loans that we have borrowed in privately negotiated or open market transactions, by tender offer or otherwise. Subject to any applicable limitations contained in the agreements governing our indebtedness, any such purchases of ordinary shares or other securities or loans may be funded by existing cash or by incurring new secured or unsecured debt, including borrowings under our credit facilities. The amounts involved in any such purchase transactions, individually or in the aggregate, may be material. Any such purchases of debt securities or loans may relate to a substantial amount of a particular tranche of debt, with a corresponding reduction, where relevant, in the trading liquidity of that debt. In addition, any such purchases of debt made at prices below the “adjusted issue price” (as defined for U.S. federal income tax purposes) may result in taxable cancellation of indebtedness income to us, which may be material, and result in related adverse tax consequences to us.

It is our policy to retain sufficient liquidity throughout the capital expenditure cycle to maintain our financial flexibility. We do not have any meaningful debt maturities until 2029; however, we regularly evaluate market conditions, our liquidity profile, and various financing alternatives for opportunities to enhance our capital structure, and may refinance all or a portion of our indebtedness on or before maturity. We do not anticipate any material long-term deterioration in our overall liquidity position in the foreseeable future, and believe that we have adequate liquidity and capital resources for the next twelve months.

Cash Flow

Year Ended December 31, 2025 compared to the year ended December 28, 2024

Cash provided by operating activities was $478.1 million during Fiscal 2025 compared to cash provided by operating activities of $379.6 million during the prior year period, driven primarily by a $56.4 million increase in net income, an increase of $120.2 million in trade working capital movement, a decrease of $10.8 million in taxes paid and a decrease of $11.9 million cash paid for interest in the current year period. This increase was partially offset by an unfavorable movement of $47.6 million in other liabilities, a $17.7 million increase in taxes payable, a $13.9 million increase in deferred income taxes, an $8.4 million incremental decrease in postretirement benefit obligations (net), and a $12.7 million loss on the deconsolidation of a Russian subsidiary during the prior year period.

Net cash used in investing activities during Fiscal 2025 was $119.0 million, compared to $104.4 million in the prior year period. The increase of cash used in investing activities was primarily driven by increased capital expenditures of $7.2 million, a $15.7 million increase in net cash paid under company-owned life insurance policies and fewer proceeds from the net purchases of investments in Fiscal 2025 compared to the prior year period. This increase was partially offset by a $12.5 million cash derecognition from the deconsolidation of our Russian subsidiary that occurred during the prior year period.

Net cash used in financing activities was $251.1 million during Fiscal 2025, compared to $286.7 million in the prior year period. The decrease of cash used in financing activities was primarily driven by a decrease in repurchases of shares of $56.8 million, a decrease in payments of long-term debt of $1,825.0 million and a decrease in debt issuance costs paid of $21.6 million. This was primarily offset by an increase in employee taxes paid from shares withheld of $16.3 million as well as proceeds from long-term debt of $1,840.0 million that occurred in Fiscal 2024.

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Indebtedness

Our long-term debt, consisting principally of two secured term loans and the U.S. dollar-denominated unsecured notes, was as follows:

Carrying amount

Principal amount

(dollars in millions)

As of

December 31, 2025

As of

December 28, 2024

As of

December 31, 2025

As of

December 28, 2024

Debt:

—Secured

—2024 Dollar Term Loans due June 4, 2031

$

1,276.2

$

1,290.0

$

1,283.8

$

1,300.0

—2022 Dollar Term Loans due November 16, 2029

444.7

548.0

456.3

563.5

—Unsecured

—6.875% Dollar Senior Notes due July 1, 2029

511.6

512.6

500.0

500.0

$

2,232.5

$

2,350.6

$

2,240.1

$

2,363.5

We refer to the term loans denominated in U.S. dollars as the “Dollar Term Loans” and the unsecured senior notes denominated in U.S. dollars as the “Dollar Senior Notes”. The Dollar Term Loans that were issued on February 24, 2021 and extinguished on June 4, 2024 are referred to as the “2021 Dollar Term Loans”. The Dollar Term Loans that were issued on June 4, 2024 and repriced on December 10, 2024 are referred to as the “2024 Dollar Term Loans”, and the Dollar Term Loans that were issued on November 16, 2022 and repriced on June 4, 2024 and December 10, 2024 are referred to as the “2022 Dollar Term Loans.” Details of our long-term debt are presented in Note 15 to the consolidated financial statements included elsewhere in this annual report.

Debt issuances and redemptions

On June 4, 2024, we entered into an amendment to our credit agreement governing our term loans and our secured revolving credit facility. As part of this amendment, we upsized the revolving credit commitments and issued the 2024 Dollar Term Loans. The proceeds of the 2024 Dollar Term Loans were used to extinguish the entire outstanding principal balance of the 2021 Dollar Term Loans plus $1.1 million of accrued interest and to redeem a portion of the Dollar Senior Notes due 2026 (as defined below). We issued the 2024 Dollar Term Loans with no discount and incurred third party costs totaling approximately $9.5 million, which 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 our 2021 Dollar Term Loans resulted in the accelerated recognition of $11.2 million of deferred issuance costs (recognized in interest expense).

On June 4, 2024, we also issued new Dollar Senior Notes due 2029 of $500.0 million (the “Dollar Senior Notes due 2029”), and fully redeemed our existing Dollar Senior Notes due 2026 of $568.0 million aggregate principal amount (the “Dollar Senior Notes due 2026”), which included the payment of $13.7 million of accrued interest thereon. We issued the Dollar Senior Notes due 2029 with no discount and incurred third party costs of approximately $7.6 million, which have been deferred and will be amortized to interest expense over the remaining term of the Dollar Senior Notes due 2029 using the effective interest method. The redemption of our Dollar Senior Notes due 2026 resulted in the accelerated recognition of $2.6 million of deferred issuance costs (recognized in interest expense).

In July 2025, we made a voluntary principal debt repayment of $100.0 million against our 2022 Dollar Term Loans. As a result of this repayment, we accelerated the recognition of $2.8 million of deferred issuance costs (recognized in interest expense).

Amendments to credit agreements

On January 21, 2025, we amended our credit agreement to lower the margin with respect to the Revolving Credit Loans by 50 basis points compared to the previous term. The Revolving Credit Loans bear interest at our option either at Term SOFR (subject to a floor of 0%) plus a margin of 1.75% per annum or the base rate plus 0.75% per annum. The applicable margin for the Revolving Credit Facility borrowings will be subject to one 25 basis point step down determined in accordance with Gates Industrial Holdco Limited achieving a certain consolidated first lien net leverage level.

On December 10, 2024, we amended our credit agreement to lower the margin with respect to the 2022 Dollar Term Loans and 2024 Dollar Term Loans by 50 basis points compared to the previous term. The 2022 Dollar Term Loans and 2024 Dollar Term Loans bear interest, at our option at, either Term SOFR (subject to a floor of 0.50%), plus a margin of 1.75% per annum, or the base rate (subject to a floor of 1.50%) plus 0.75% per annum.

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On June 4, 2024, we amended the 2022 Dollar Term Loans’ interest rate to be, at our option, either Term SOFR (subject to a floor of 0.50%), plus a margin of 2.25% per annum or the base rate (subject to a 1.50% per annum floor), plus 1.25% per annum.

On June 4, 2024, as part of an amendment to our credit agreement, we increased borrowing capacity under our revolving credit facility from $250.0 million to $500.0 million and extended the maturity from November 18, 2026 to the date that is the earliest of (x) June 4, 2029 and (y) April 1, 2029, if greater than $500.0 million in aggregate principal amount of the Dollar Senior Notes due 2029 are outstanding. We incurred associated third party costs of approximately $2.5 million, which have been deferred and will be amortized to interest expense over the remaining term of the revolving credit facility. Concurrently with this amendment, we terminated the $250.0 million asset-backed revolving credit facility governed by the second amended and restated credit agreement dated as of July 3, 2014 (as amended and restated).

Non-guarantor subsidiaries

The majority of the Company’s U.S. subsidiaries are guarantors of the senior secured credit facilities.

For the twelve months ended December 31, 2025, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 71% of our net sales and 55% of our EBITDA as defined in the financial covenants attaching to the senior secured credit facilities. As of December 31, 2025, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 87% of our total assets and approximately 29% of our total liabilities.

Borrowing Headroom

On June 4, 2024, we extinguished our asset-backed revolving credit facility as discussed further in Note 15 to the consolidated financial statements included elsewhere in this annual report. As part of an amendment to our credit agreement, we increased borrowing capacity under our secured revolving credit facility that provides for multi-currency revolving loans from $250.0 million to $500.0 million and extended the maturity from November 18, 2026 to the date that is the earliest of (x) June 4, 2029 and (y) April 1, 2029, if greater than $500.0 million in aggregate principal amount of the Dollar Senior Notes due 2029 are outstanding. As of December 31, 2025, there were letters of credit outstanding against the facility amounting to $29.0 million and no drawings on the revolving credit facility. As of December 31, 2025, our total committed borrowing headroom was $471.0 million, in addition to cash balances of $812.1 million.

Tabular Disclosure of Contractual Obligations

Our consolidated contractual obligations and commercial commitments are summarized in the following table which includes aggregate information about our contractual obligations as of December 31, 2025 and the periods in which payments are due, based on the earliest date on which we could be required to settle the liabilities. The table below excludes our gross liability for uncertain tax positions of $62.1 million because the timing of cash settlement, if any, is unknown at this time.

Floating interest payments and payments and receipts on interest rate derivatives are estimated based on market interest rates prevailing at the balance sheet date. Amounts in respect of purchase obligations are items that we are obligated to pay in the future, but they are not required to be included on the consolidated balance sheet.

Earliest period in which payments are due

(dollars in millions)

Total

2026

2027 and 2028

2029 and 2030

2031 and beyond

Debt:

—Principal

$

2,240.1 

$

18.8 

$

37.6 

$

965.0 

$

1,218.7 

—Interest payments(1)

609.7 

129.7 

256.7 

194.3 

29.0 

Finance leases

3.6 

2.0 

1.1 

0.5 

— 

Operating leases

198.6 

34.0 

57.8 

38.7 

68.1 

Defined benefit pension(2)

10.6 

10.6 

— 

— 

— 

Other postretirement benefit plans(2)

20.3 

2.6 

4.8 

4.3 

8.6 

Purchase obligations(3)

64.5 

44.2 

19.3 

1.0 

— 

Total

$

3,147.4 

$

241.9 

$

377.3 

$

1,203.8 

$

1,324.4 

(1)    Future interest payments include payments on fixed and floating rate debt. Floating rate interest payments are estimated based on forward market interest rates and terms prevailing as of December 31, 2025.

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(2)    Postretirement benefit obligations represent our expected cash contributions to defined benefit pension and other postretirement benefit plans in Fiscal 2026. It is not practicable to present expected cash contributions for subsequent years because they are determined annually on an actuarial basis to provide for current and future benefits in accordance with federal law and other regulations.

(3)    A purchase obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding on us and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction.                        

Non-GAAP Financial Measures

Adjusted EBITDA

Management uses “Adjusted EBITDA” as its key profitability measure. Adjusted EBITDA is a non-GAAP measure that represents Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”), adjusted for certain items that are considered to hinder comparison of the performance of our businesses on a period-over-period basis or with other businesses. We use Adjusted EBITDA as our measure of segment profitability to assess the performance of our businesses, and it is used for total Gates as well because we believe it is important to consider our profitability on a basis that is consistent with that of our operating segments, as well as that of certain of our peer companies. We believe that Adjusted EBITDA should, therefore, be made available to securities analysts, investors and other interested parties to assist in their assessment of the performance of our businesses.

Differences exist among our businesses and from period to period in the extent to which their respective employees receive share-based compensation or a charge for such compensation is recognized. We therefore exclude from Adjusted EBITDA the non-cash charges in relation to share-based compensation in order to assess the relative performance of our businesses.

We exclude from Adjusted EBITDA acquisition-related costs that are required to be expensed in accordance with U.S. GAAP. We also exclude costs associated with major corporate transactions because we do not believe that they relate to our performance. Other items are excluded from Adjusted EBITDA because they are individually or collectively significant items that are not considered to be representative of the underlying performance of our businesses.

During the periods presented, the items excluded from EBITDA in computing Adjusted EBITDA primarily included:

•transaction-related expenses incurred in relation to major corporate transactions, including the acquisition of businesses and related integration activities, and equity and debt transactions;

•non-cash charges in relation to share-based compensation;

•inventory adjustments related to certain inventories accounted for on a LIFO basis;

•asset impairments;

•restructuring expenses, including severance and restructuring-related expenses;

•loss on deconsolidation of Russian subsidiary;

•credit (gain) loss related to a customer bankruptcy; and

•other expenses (income), excluding foreign currency transaction gain or loss and insurance recoveries.

We excluded changes in the LIFO inventory reserve recognized in cost of sales for certain inventories that are valued on a LIFO basis. During inflationary or deflationary pricing environments, LIFO adjustments can result in variability of the cost of sales recognized each period as the most recent costs are matched against current sales, while historical, typically lower, costs are retained in inventory. LIFO adjustments are determined based on published pricing indices, which often are not representative of the actual flow of product and costs as experienced by our business. Excluding the impact from the application of LIFO therefore improves the comparability of our financial performance from period to period and with the Company’s peers, and more closely represents the physical flow of our inventory and how we manage the business.

Adjusted EBITDA excludes items that can have a significant effect on our profit or loss and should, therefore, be used in conjunction with, not as substitutes for, profit or loss for the period. Management compensates for these limitations by separately monitoring net income from continuing operations for the period.

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The following table reconciles net income, the most directly comparable GAAP measure, to Adjusted EBITDA:

For the year ended

(dollars in millions)

December 31,

2025

December 28,

2024

December 30,

2023

Net income

$

276.3 

$

219.9 

$

256.4 

Loss on disposal of discontinued operations

0.8 

0.6 

0.6 

Income tax expense

63.1 

107.5 

28.3 

Interest expense

125.9 

155.8 

163.2 

Loss on deconsolidation of Russian Subsidiary (1)

— 

12.7 

— 

Depreciation and amortization

213.8 

216.9 

217.5 

Transaction-related expenses (2)

0.5 

3.3 

2.2 

Asset impairments

3.5 

— 

0.1 

Restructuring expenses

26.3 

6.5 

11.6 

Share-based compensation expense

27.2 

28.8 

27.4 

Inventory adjustments (3) (included in cost of sales)

15.6 

22.3 

7.4 

Restructuring related expenses (included in cost of sales)

6.9 

1.8 

0.4 

Restructuring related expenses (included in SG&A)

11.4 

2.9 

1.0 

Credit (gain) loss related to customer bankruptcy (included in SG&A)

— 

(0.1)

11.4 

Other expenses (income), excluding foreign currency transaction gain or loss and insurance recoveries (4)

4.0 

(17.8)

14.1 

Cybersecurity incident insurance recovery and expenses (5)

(5.2)

— 

5.2 

Other items not directly related to current operations

— 

— 

0.2 

Adjusted EBITDA

$

770.1 

$

761.1 

$

747.0 

(1)    In July 2022, as a result of the conflict between Russia and Ukraine, Gates suspended our operations in Russia. As of September 28, 2024, we deconsolidated the Russian subsidiary upon loss of control and recognized a deconsolidation loss.

(2)    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.

(3)    Inventory adjustments include the reversal of the adjustment to remeasure certain inventories on a LIFO basis.

(4)    Other expenses (income) excludes foreign currency transaction losses and insurance recoveries of $4.8 million for the year ended December 31, 2025; foreign currency transaction gain of $6.5 million for the year ended December 28, 2024; and foreign currency transaction gain of $2.5 million for the year ended December 30, 2023.

(5)    In July 2025, we received insurance recoveries related to a previously disclosed cybersecurity incident that occurred in February 2023 for which we previously excluded $5.2 million of expenses from Adjusted EBITDA.

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Core sales and core sales growth reconciliations

Core sales is a non-GAAP measure that represents net sales for the period excluding the impacts of movements in average currency exchange rates and the first-year impacts of acquisitions and disposals, when applicable. Core sales growth is the change in core sales expressed as a percentage of prior period net sales. We present core sales growth because it allows for a meaningful comparison of year-over-year performance without the volatility caused by foreign currency gains or losses or the incomparability that would be caused by impacts of acquisitions or disposals. Management believes that this measure is therefore useful for securities analysts, investors and other interested parties to assist in their assessment of the operating performance of our businesses. The closest GAAP measure is net sales.

For the year ended December 31, 2025

(dollars in millions)

Power Transmission

Fluid Power

Total

Net sales for the year ended December 31, 2025

$

2,147.1 

$

1,296.1 

$

3,443.2 

Impact on net sales of movements in currency rates

(12.1)

1.9 

(10.2)

Core sales for the year ended December 31, 2025

$

2,135.0 

$

1,298.0 

$

3,433.0 

Net sales for the year ended December 28, 2024

$

2,108.1 

$

1,300.1 

$

3,408.2 

Increase (decrease) in net sales

$

39.0 

$

(4.0)

$

35.0 

Increase (decrease) in net sales on a core basis (core sales)

$

26.9 

$

(2.1)

$

24.8 

Net sales increase (decrease)

1.9 

%

(0.3)

%

1.0 

%

Core sales increase (decrease)

1.3 

%

(0.2)

%

0.7 

%

For the year ended December 28, 2024

(dollars in millions)

Power Transmission

Fluid Power

Total

Net sales for the year ended December 28, 2024

$

2,108.1 

$

1,300.1 

$

3,408.2 

Impact on net sales of movements in currency rates

31.7 

4.7 

36.4 

Core sales for the year ended December 28, 2024

$

2,139.8 

$

1,304.8 

$

3,444.6 

Net sales for the year ended December 30, 2023

$

2,191.2 

$

1,379.0 

$

3,570.2 

Decrease in net sales

$

(83.1)

$

(78.9)

$

(162.0)

Decrease in net sales on a core basis (core sales)

$

(51.4)

$

(74.2)

$

(125.6)

Net sales growth (decline)

(3.8)

%

(5.7)

%

(4.5)

%

Core sales growth (decline)

(2.3)

%

(5.4)

%

(3.5)

%

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Adjusted EBITDA adjustments for ratio calculation purposes

The financial maintenance ratio in our credit agreement and other ratios related to incurrence-based covenants (measured only upon the taking of certain actions, including the incurrence of additional indebtedness) under our credit agreement governing our revolving credit facility and our term loan facility and the indenture governing our outstanding notes are calculated in part based on financial measures similar to Adjusted EBITDA as presented elsewhere in this report, which financial measures are determined at the Gates Industrial Holdco Limited level and adjust for certain additional items such as severance costs, the pro forma impacts of acquisitions and the pro forma impacts of cost-saving initiatives. These additional adjustments during the last 12 months, as calculated pursuant to such agreements, resulted in a net benefit to Adjusted EBITDA for ratio calculation purposes of $10.1 million as of December 31, 2025. Pursuant to the terms of the credit agreement governing our revolving credit facility and term loans, the Company may not, subject to certain exceptions, permit its Consolidated First Lien Net Leverage Ratio (as defined in the credit agreement) to exceed 4.50 to 1.00 as of the end of the test period if borrowings under the revolving credit facility exceed a certain threshold. Pursuant to the credit agreement, this ratio is defined as Consolidated First Lien Net Debt (as defined in the credit agreement) divided by Consolidated EBITDA (as defined in the credit agreement). For a description of the other material terms related to our debt agreements, please refer to Note 15 to the consolidated financial statements included elsewhere in this report, and for a discussion of risks related to the compliance or non-compliance with the covenants described herein on the Company’s financial condition and liquidity, please refer to the factors described in Item 1A. “Risk Factors—Risks Related to Our Indebtedness” in Part I of this annual report. During the periods covered by the consolidated financial statements included in this report, we were in compliance with the financial covenant and had no borrowing on the revolving credit facility.

Gates Industrial Corporation plc is not an obligor under our revolving credit facility, our term loans or the indenture governing our outstanding notes. Gates Industrial Holdco Limited, a direct wholly-owned subsidiary of Gates Industrial Corporation plc, is the parent guarantor under our revolving credit facility, our term loans, and our outstanding notes. The only significant differences between the results of operations and net assets that would be shown in the consolidated financial statements of Gates Industrial Holdco Limited and those for the Company that are included elsewhere in this report are (i) additional net intercompany loan payable due to Gates Industrial Holdco Limited and its subsidiaries from the Company, which was $226.4 million and $258.4 million as of December 31, 2025 and December 28, 2024, respectively, (ii) additional intercompany payables due to Gates Industrial Holdco Limited and its subsidiaries from the Company attributable to UK tax group relief of $7.5 million and $6.6 million as of December 31, 2025 and December 28, 2024, respectively, and (iii) additional cash and cash equivalents held by the Company, which was $7.4 million and $10.6 million as of December 31, 2025 and December 28, 2024, respectively.

Critical Accounting Estimates and Judgments

Details of our significant accounting policies are set out in Note 2 to our audited consolidated financial statements included elsewhere in this annual report.

When applying our accounting policies, we must make assumptions, judgments and estimates concerning the future that affect the reported amounts of assets, liabilities, revenue and expenses. We make these assumptions, estimates and judgments based on factors such as historical experience, the observance of trends in the industries in which we operate and information available from our customers and other outside sources. Due to the inherent uncertainty involved in making assumptions, estimates and judgments, the actual outcomes could be different. The policies discussed below are considered by management to be more critical than other policies because their application involves a significant amount of estimation uncertainty that increases the risk of a material adjustment to the carrying amounts of our assets and liabilities.

Net Sales

We derive our net sales primarily from the sale of 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 OEM channels, throughout the world.

In most of our agreements with customers, we consider accepted customer purchase orders, which in some cases are governed by master sales agreements, to represent the contracts with our customers. Revenue from the sale of goods under these contracts is measured at the invoiced amount, net of estimated returns, early settlement discounts and rebates. Taxes collected from customers relating to product sales and remitted to government authorities are excluded from revenues. Where a customer has the right to return goods, future returns are estimated based on historical returns profiles. Settlement discounts that may apply to unpaid invoices are estimated based on the settlement histories of the relevant customers.

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Our transaction prices often include variable consideration, usually in the form of discounts and rebates that may apply to issued invoices. The reduction in the transaction price for variable consideration requires that we make estimations of the expected total qualifying sales to the relevant customers. These estimates, including an analysis for potential constraint on variable consideration, take into account factors such as the nature of the rebate program, historical information and expectations of customer and consumer behavior. Overall, the transaction price is reduced to reflect our estimate of the amount of consideration that is not probable of significant reversal.

We allocate the transaction price to each distinct performance obligation based on their relative standalone selling price. The product price as specified on the accepted purchase order or similar binding contract is considered to be the standalone selling price. In substantially all of our contracts with customers, our performance obligations are satisfied at a point in time, rather than over a period of time, when control of the product is transferred to the customer. This occurs typically at shipment. In determining whether control has transferred and the customer is consequently able to control the use of the product for their own benefit, we consider if there is a present right to payment, legal title and physical possession has been transferred, whether the risks and rewards of ownership have transferred to the customer, and if acceptance of the asset by the customer is more than perfunctory.

Impairment of Goodwill and Other Indefinite-Lived Assets

Goodwill and other indefinite-lived intangible assets are subject to an annual impairment test but are also tested for impairment if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount.

Goodwill

Goodwill arising in a business combination is allocated to the reporting unit that is expected to benefit from the synergies of the acquisition. Where goodwill is attributable to more than one reporting unit, the goodwill is determined by allocating the purchase consideration in proportion to their respective business enterprise values and comparing the allocated purchase consideration with the fair value of the identifiable assets and liabilities of the reporting unit.

Goodwill is not amortized but is tested for impairment on the first day of the fourth quarter or more frequently whenever events or changes in circumstances indicate that the carrying value may not be recoverable and is carried at cost less any recognized impairment.

To identify a potential impairment of goodwill, the fair value of the reporting unit to which the goodwill is allocated is compared to its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, the goodwill of the reporting unit is not considered impaired. If the fair value is lower than the carrying amount, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, limited to the amount of goodwill allocated to that reporting unit.

Management based the fair value calculations on a weighted blend of the income and market approaches. The income approach was based on cash flow forecasts derived from the most recent financial plans approved by the Board, in which the principal assumptions were those regarding sales growth rates, selling prices and changes in direct costs. Forecasts for the future years were based on region-specific growth or decline assumptions determined by management, taking into account market trends and strategic initiatives. The terminal growth rate for the Power Transmission and Fluid Power reporting units was set at 1.5% and 3.5%, respectively, which do not exceed the expected long-term growth rates in the respective principal end markets. Under the market approach, fair value was determined using EBITDA multiples of peer companies.

Management applied discount rates to the resulting cash flow projections that reflect current market assessments of the time value of money and the risks specific to each reporting unit. In each case, the discount rate was determined using a capital asset pricing model. The discount rates used in the impairment tests of goodwill during Fiscal 2025 were 10.7% and 10.2% for the Power Transmission and Fluid Power reporting units, respectively.

For both reporting units, the fair values exceeded the carrying values and no goodwill impairments were therefore recognized during Fiscal 2025.

We base our fair value estimates on assumptions we believe to be reasonable at the time but that are unpredictable and inherently uncertain. In addition, we make certain judgments and assumptions in allocating goodwill between reporting units and in allocating shared assets and liabilities to determine the carrying values for each of our reporting units tested. Changes in assumptions or circumstances could result in an additional impairment in the period in which the change occurs and in future years.

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Indefinite-Lived Assets Other than Goodwill

To identify a potential impairment of indefinite-lived assets other than goodwill, the fair value of the asset is compared to its carrying amount. If the fair value of the indefinite-lived asset exceeds its carrying amount, it is not considered impaired. Fair value is calculated based on the anticipated net cash inflows and outflows related to the indefinite-lived asset.

During the periods covered by this annual report, we held an indefinite-lived brand and trade name intangible asset. We test the intangible for impairment on the first day of the fourth quarter or more frequently whenever events or changes in circumstances indicate that the carrying value may not be recoverable and is carried at cost less any recognized impairment.

The fair value for our indefinite-lived brand and trade name intangible asset was determined using a relief from royalty valuation methodology in which the key assumptions included sales growth rates and an estimated royalty rate. Sales forecasts were determined on the same basis as those used for the annual impairment testing of goodwill (as described above).

Management applied discount rates to the calculated royalty savings that reflect current market assessments of the time value of money and the risks specific to each region in which those royalty savings arose. In each case, the discount rate was determined using a capital asset pricing model adjusted for a premium to reflect the higher risk specific to the nature of the intangible asset. The discount rate used in Fiscal 2025 impairment test was 11.5%. As a result of the impairment testing, no impairment was recognized during Fiscal 2025.

We base our fair value estimates on assumptions we believe to be reasonable at the time but that are unpredictable and inherently uncertain. Changes in assumptions or circumstances could result in an additional impairment in the period in which the change occurs and in future years.

Taxation

We are subject to income tax in most of the jurisdictions in which we operate. Management is required to exercise significant judgment in determining our provision for income taxes. Management’s judgment is required in relation to unrecognized income tax benefits whereby additional current tax may become payable in the future following the audit by tax authorities of previously-filed tax returns. It is possible that the final outcome of these unrecognized income tax benefits may differ from management’s estimates.

Management assesses unrecognized income tax benefits based upon an evaluation of the facts, circumstances and information available at the balance sheet date. Provision is made for unrecognized tax benefits to the extent that the amounts previously taken or expected to be taken in tax returns exceeds the tax benefits that are recognized in the consolidated financial statements in respect of the tax positions. A tax benefit is recognized in the consolidated financial statements only if management considers that it is more likely than not that the tax position will be sustained on examination by the relevant tax authority solely on the technical merits of the position and is measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement assuming that the tax authority has full knowledge of all relevant information. Provisions for unrecognized income tax benefits are reviewed regularly and are adjusted to reflect events such as the expiration of limitation periods for assessing tax, guidance given by the tax authorities and court decisions.

Deferred income tax assets and liabilities are recognized based on the expected future tax consequences of the difference between the financial statement carrying amount and the respective tax basis. Deferred income taxes are measured on the enacted rates expected to apply to taxable income at the time the difference is anticipated to reverse. Deferred income tax assets are reduced through the establishment of a valuation allowance if it is more likely than not that the deferred income tax asset will not be realized taking into account the timing and amount of the reversal of taxable temporary differences, expected future taxable income and tax planning strategies.

Deferred income tax is provided on certain taxable temporary differences arising on investments in foreign subsidiaries, except where we intend, and are able, to reinvest such amounts on a permanent basis or to remit such amounts in a tax-free manner.

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We have recorded valuation allowances against certain of our deferred income tax assets and we intend to continue maintaining such valuation allowances until there is sufficient evidence to support the reduction of all or some portion of these allowances. During Fiscal 2025, we determined that it was more likely than not that deferred income tax assets of $2.4 million primarily in Türkiye related to other deferred tax assets and net operating losses are not realizable. During Fiscal 2024, we determined that it was more likely than not that deferred income tax assets of $5.5 million in Türkiye related to net operating losses, $3.7 million in Poland related to special economic zone business credits, and $3.4 million in the U.S. related to net operating losses, are not realizable. Similarly, we determined in Fiscal 2024 that it is more likely than not that deferred income tax assets in the U.S. related to foreign tax credits totaling $3.2 million are realizable as a result of changes in estimates of taxable profits against which these credits can be utilized.

Accounting Pronouncements Not Yet Adopted

Recently issued accounting pronouncements that may be relevant to our operations but have not yet been adopted are outlined in Note 3 to our audited consolidated financial statements included elsewhere in this annual report.