Gates Industrial Corp plc

Previous wording

We are a global manufacturer of innovative, highly engineered power transmission and fluid power solutions. We offer a broad portfolio of products to diverse replacement channel customers, and to original equipment manufacturers (“OEM”) as specified components, with the majority of our revenue coming from replacement channels. Our products are used in applications across numerous end markets, including automotive replacement, 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 replacement markets. 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.

Current wording

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.

Previous wording

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, replacement 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.

Current wording

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.

Previous wording

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 replacement 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.

Current wording

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.

Previous wording

During Fiscal 2024, sales into replacement channels accounted for approximately 68% of our total net sales. Our replacement 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. Replacement 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.

Current wording

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.

Previous wording

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

Current wording

(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.

Previous wording

Net sales during Fiscal 2024 were $3,408.2 million, compared to $3,570.2 million during the prior year, a decrease of 4.5%, or $162.0 million. The following table lists the primary drivers behind the change in net sales (amounts in millions):

Current wording

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):

Previous wording

Cost of sales for Fiscal 2024 was $2,049.7 million, compared to $2,211.3 million for the prior year, a decrease of 7.3%, or $161.6 million. The following table lists the primary drivers behind the change in cost of sales (amounts in millions):

Current wording

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):

Previous wording

SG&A expenses for Fiscal 2024 were $870.0 million compared to $882.2 million for the prior year. This decrease of $12.2 million was primarily attributable to favorable movements in average currency exchange rates, gain from disposal of property, plant and equipment, higher corporate-owned life insurance related income, and lower provision for expected credit losses during the current year period. The decrease was partially offset by increased outbound freight costs, consulting fees, and other expenses.

Current wording

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.

Previous wording

Transaction-related expenses of $3.3 million were incurred during Fiscal 2024, 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. Transaction-related expenses of $2.2 million were incurred during the prior year, related primarily to the three secondary offerings completed in 2023, fees for amending the 2022 Dollar Term Loans (as defined below) in October 2023, and certain other corporate transactions.

Current wording

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.

Previous wording

Restructuring and other restructuring related initiatives during Fiscal 2024 included $4.1 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 related to the consolidation of production activities across certain North American plants. Other costs related to restructuring and restructuring related initiatives incurred during Fiscal 2024 included legal and consulting expenses, and costs associated with prior period facility closures or relocations in several countries.

Current wording

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.

Previous wording

Interest on debt for Fiscal 2024 decreased by $27.1 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. In addition, we incurred no interest under the asset-backed revolver during 2024, which was terminated in June 2024.

Current wording

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.

Previous wording

Amortization of deferred issuance costs during Fiscal 2024 increased by $14.0 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.

Current wording

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.

Previous wording

For Fiscal 2024, we had 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% compared to an income tax expense of $28.3 million on pre-tax income of $285.3 million, which resulted in an effective tax rate of 9.9% for Fiscal 2023.

Current wording

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.

Previous wording

The effective tax rate for Fiscal 2024 was primarily driven by $91.5 million net tax expense related to $68.0 million of change in deferred tax assets for Luxembourg net operating losses related to a reduction in the Luxembourg corporate income tax rate enacted in 2024, $10.7 million of tax on international operations, $9.6 million of currency exchange rate movements primarily related to Luxembourg currency revaluation on indefinite-lived net operating losses, and $3.2 million of net other expense; offset by $66.0 million of net tax benefits related to $45.5 million of change in valuation allowance primarily related to a reduction in the Luxembourg corporate income tax rate enacted in 2024, $10.2 million of company-owned life insurance deductions, and $10.3 million of unrecognized tax benefits primarily due to audit settlement.

Current wording

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.

Previous wording

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%. We are continuing to monitor the pending implementation of Pillar Two by individual countries and the potential effects of Pillar Two on our business. In response to the implementation of Pillar Two in 2024, we took steps in 2023 to mitigate cash tax impacts of Pillar Two that had the effect of increasing our estimated annual effective tax rate by three to five percentage points starting from 2024. While the impact on the Company will need to be determined by reference to the final rules, we currently do not expect any material impact as of December 28, 2024, and do not expect a material impact in future years.

Current wording

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.

Previous wording

After weighing all of the evidence, giving more weight to the evidence that was objectively verifiable, we determined in Fiscal 2024 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. In Fiscal 2023 we determined that it was more likely than not that deferred income tax assets in the U.S. related to net operating losses totaling $2.1 million are realizable as a result of changes in estimates of taxable profits against which these losses can be utilized.

Current wording

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.

Previous wording

Power Transmission (61.9% of Gates’ net sales for the year ended December 28, 2024)

Current wording

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

Previous wording

Net sales in Power Transmission for Fiscal 2024 decreased by 3.8%, or $83.1 million, driven by lower volumes of $74.6 million and adverse movements in average currency exchange rates of $31.7 million. The decrease was offset by a $23.2 million benefit from pricing. As such, core sales decreased by 2.3%, or $51.4 million, compared to the prior year.

Current wording

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.

Previous wording

Power Transmission’s overall core sales to our industrial channel customers had a core sales decline of 5.6% during Fiscal 2024, compared to the prior year periods. Personal mobility, industrial off-highway, and diversified industrial end markets experienced declines of 22.4%, 6.9%, and 2.0%, 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 0.4% during Fiscal 2024. The decline in the automotive channel during Fiscal 2024 was focused in EMEA and Greater China, which experienced core sales declines of 2.0% and 11.6%, respectively, compared to the prior year period. This was partially offset by core sales growth in the automotive channel in North America, South America and East Asia.

Current wording

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.

Previous wording

Power Transmission Adjusted EBITDA for Fiscal 2024 increased by 1.8% or $8.1 million compared to the prior year, driven primarily by enterprise initiatives that favorably impacted manufacturing performance and pricing, partially offset by lower volumes. As a result, the Adjusted EBITDA margin for Fiscal 2024 was 22.2%, a 120 basis point increase from the prior year.

Current wording

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.

Previous wording

Fluid Power (38.1% of Gates’ net sales for the year ended December 28, 2024)

Current wording

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

Previous wording

Net sales in Fluid Power for Fiscal 2024 decreased by 5.7%, or $78.9 million, driven by lower volumes of $98.3 million and adverse movements in average currency exchange rates of $4.7 million. The decrease was offset by a $24.1 million benefit from pricing. As such, core sales decreased by 5.4%, or $74.2 million, compared to the prior year.

Current wording

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.

Previous wording

Fluid Power’s core sales decline in Fiscal 2024 was driven by decreased sales to industrial customers of 9.3%, compared to the prior year period. The decline of industrial sales were primarily in North America and EMEA, which had declines of 10.7% and 12.5%, respectively, compared to the prior year period. Construction and agriculture end markets drove most of the decline, with core sales that decreased by 9.1% and 18.4%, respectively, during Fiscal 2024 as compared to the prior year period. The decline in industrial sales was partially offset by core sales growth in the automotive channel of 7.9% compared to the prior year period. Growth of automotive channel sales was primarily contributed by North America and EMEA.

Current wording

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.

Previous wording

Fluid Power Adjusted EBITDA for Fiscal 2024 increased by 2.1%, or $6.0 million, compared to the prior year period, driven primarily by enterprise initiatives that favorably impacted manufacturing performance and pricing, and favorable mix of replacement channel sales to OEM channel sales. This was partially offset by lower volumes. As a result, the Adjusted EBITDA margin was 22.5%, a 170 basis point improvement from the prior year.

Current wording

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.

Previous wording

Cash provided by operating activities was $379.6 million during Fiscal 2024 compared to cash provided by operating activities of $481.0 million during the prior year period, driven primarily by a decrease of $135.5 million in trade working capital movement, combined with an increase of $11.8 million in taxes paid. These increases in operating cash outflows were partially offset by a decrease of $22.5 million cash paid for interest in the current year period and improved operating performance in Fiscal 2024.

Current wording

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.

Previous wording

Net cash used in investing activities during Fiscal 2024 was $104.4 million, compared to $81.8 million in the prior year period. The increase of cash used in investing activities was primarily driven by increased capital expenditures of $35.3 million, a $12.5 million cash derecognition from the deconsolidation of our Russian subsidiary, and higher investment purchases in Fiscal 2024 compared to the prior year period, partially offset by a $20.7 million increase in net cash received under company-owned life insurance policies.

Current wording

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.

Previous wording

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 new tranche of 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.

Current wording

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.

Previous wording

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. 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 2024 Dollar Term Loans require a prepayment premium in connection with certain repricing transactions occurring within nine months following the closing of the amendment. 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).

Current wording

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).

Previous wording

On June 4, 2024, we also issued new Dollar Senior Notes due 2029 of $500.0 million, and fully redeemed our existing Dollar Senior Notes due 2026 of $568.0 million aggregate principal amount, which included the payment of $13.7 million of accrued interest thereon. We issued the new Dollar Senior Notes 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 new Dollar Senior Notes 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).

Current wording

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).

Previous wording

In February 2024, we made a voluntary principal debt repayment of $100.0 million against our 2021 Dollar Term Loans. As a result of this repayment, we accelerated the recognition of $1.0 million of deferred issuance costs (recognized in interest expense).

Current wording

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).

Previous wording

For the twelve months ended December 28, 2024, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 73% of our net sales and 65% of our EBITDA as defined in the financial covenants attaching to the senior secured credit facilities. As of December 28, 2024, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 66% of our total assets and approximately 25% of our total liabilities.

Current wording

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.

Previous wording

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 28, 2024, there were letters of credit outstanding against the facility amounting to $28.2 million and no drawings on the revolving credit facility. As of December 28, 2024, our total committed borrowing headroom was $471.8 million, in addition to cash balances of $682.0 million.

Current wording

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.

Previous wording

Our consolidated contractual obligations and commercial commitments are summarized in the following table which includes aggregate information about our contractual obligations as of December 28, 2024 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 $82.2 million because the timing of cash settlement, if any, is unknown at this time.

Current wording

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.

Previous wording

(2) Post-retirement benefit obligations represent our expected cash contributions to defined benefit pension and other post-retirement benefit plans in Fiscal 2025. 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.

Current wording

(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.

Previous wording

Management uses “Adjusted EBITDA” as its key profitability measure. This is a non-GAAP measure that represents EBITDA before certain items that are considered to hinder comparison of the performance of our businesses on a period-over-period basis or with other businesses. 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.

Current wording

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.

Previous wording

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

Current wording

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

Previous wording

•inventory adjustments related to certain inventories accounted for on the LIFO basis.

Current wording

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

Previous wording

•restructuring expenses, including severance-related expenses;

Current wording

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

Previous wording

•loss on deconsolidation of previously controlled subsidiary;

Current wording

•loss on deconsolidation of Russian subsidiary;

Previous wording

•credit loss related to a customer bankruptcy;

Current wording

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