Gates Industrial Corp plc
For the period ended Mar 28, 2026. Filed May 1, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 28, 2026 · Filed May 1, 2026
GTES$24.10+2.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-27; filed 2025-10-29.
0001628280-25-047174
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-28; filed 2026-05-01.
0001628280-26-029351
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 117 previous paragraphs and 93 current paragraphs.
52 unchanged; 34 reworded; 7 added; 29 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 15 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
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.
Current report
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.
Current report
Other expense
Current report
Our other expense was as follows:
Current report
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.
Current report
Power Transmission’s core sales decline was primarily driven by lower sales to customers in our aftermarket channel, where sales declined by 3.2% during the three months ended March 28, 2026, compared to the prior year period. Automotive aftermarket experienced a sales decline of 5.0% during March 28, 2026. OEM sales declined by 1.2%, with automotive OEM sales declining by 8.5% during the three months ended March 28, 2026. This was partially offset by Industrial OEM, with a sales increase of 7.1% during the three months ended March 28, 2026, compared to the prior year period, particularly in EMEA. From an end market perspective, construction and personal mobility sales increased by 20.6% and 7.1%, respectively, during the three months ended March 28, 2026, while automotive sales decreased by 5.6% compared to the prior year period.
Current report
Three months ended March 28, 2026 compared to the three months ended March 29, 2025
Removed paragraphs (29)
Previous report
Global conflicts, such as the conflict between Russia and Ukraine, and sanctions and counter-sanctions imposed in response, created increased economic uncertainty and operational complexity both in Europe, Middle East and Africa (“EMEA”) and globally, the impacts of which we cannot fully predict.
Previous report
Net sales during the nine months ended September 27, 2025 were $2,587.0 million, compared to $2,578.8 million during the prior year period, an increase of 0.3%, or $8.2 million. The following table lists the primary drivers behind the change in net sales (amounts in millions):
Previous report
Cost of sales
Previous report
Cost of sales for the nine months ended September 27, 2025 was $1,540.6 million, compared to $1,555.6 million for the prior year period, a decrease of 1.0%, or $15.0 million. The following table lists the primary drivers behind the change in cost of sales (amounts in millions):
Previous report
SG&A expenses for the nine months ended September 27, 2025 were $666.6 million compared to $653.5 million for the prior year period. This increase of $13.1 million was primarily attributable to the $7.3 million of higher corporate-owned life insurance related expenses and $7.2 million gain from disposal of property, plant and equipment that occurred during the prior year partially offset by lower labor and benefits expense of $2.0 million.
Previous report
Restructuring expenses during the three and nine months ended September 27, 2025 included $0.3 million and $12.9 million, respectively, of severance and related benefits expense related to a global cost reduction effort. In addition, during the three and nine months ended September 27, 2025, we incurred restructuring expenses of $4.7 million related to a manufacturing reduction in force in the Americas. Other restructuring expenses incurred during the three and nine months ended September 27, 2025 were related to professional service fees, severance and related benefit costs for the relocation of production activities to Mexico. Other restructuring-related expenses incurred during the three and nine months ended September 27, 2025 were primarily costs related to general severance and related benefits, and professional service fees.
Previous report
Restructuring and other restructuring-related expenses during the three and nine months ended September 28, 2024 included $1.0 million and $2.5 million, respectively, of costs related to the relocation of certain production activities in Mexico. During the three months ended September 28, 2024, we also incurred severance costs of $1.0 million related to the consolidation of production activities across certain North American plants. Other restructuring costs incurred during the three and nine months ended September 28, 2024 included legal and consulting expenses, and costs associated with prior period facility closures or relocations in several countries.
Previous report
Other income
Previous report
Our other income was as follows:
Previous report
Other income for the three months ended September 27, 2025 was $14.3 million compared to income of $1.2 million, for the three months ended September 28, 2024. The change was primarily driven by insurance recoveries received in September 2025 as well as a decrease in foreign currency transaction losses.
Previous report
Other income for the nine months ended September 27, 2025 was $5.1 million compared to income of $12.1 million, for the nine months ended September 28, 2024. The decrease in income was primarily driven by foreign currency transaction and financing- related losses in addition to lower interest income on bank deposits. This was partially offset by insurance recoveries received in September 2025.
Previous report
For the nine months ended September 27, 2025, the effective tax rate was driven primarily by net discrete tax benefits of $20.6 million, of which $10.5 million related to uncertain tax benefits primarily due to audit settlements, $9.2 million related to excess tax benefits on stock option exercises, $8.2 million related to prior year adjustments primarily from the U.S. and various foreign jurisdictions in which returns were filed, and $2.3 million related to changes in undistributed foreign earnings, offset by $5.8 million related to changes in the realizability of certain deferred tax assets, $2.1 million related to insurance recovery, and $1.7 million related to tax law changes primarily in the U.S., Germany and Italy. For the nine months ended September 28, 2024, the net impact of discrete items was nominal, and the effective tax rate was driven primarily by jurisdictional mix of earnings.
Previous report
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. We do not expect the provisions effective in 2025 to have a materially adverse impact on our results of operations, financial position or cash flows.
Previous report
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. Beginning in 2025, OBBBA reinstates an immediate deduction for domestic research and development expenses, makes permanent 100% bonus depreciation on domestic fixed assets, and modifies the business interest limitation calculation to exclude the impact of foreign earnings and domestic depreciation and amortization costs. Beginning in 2026, OBBBA also makes extensive reforms to the U.S. international tax regime. Based on current expectations in 2025, the impacts of the OBBBA are reflected in our results for the quarter ended September 27, 2025 and $3.2 million income tax expense related to OBBBA will be recognized during the year through the effective tax rate. We will continue to evaluate the full impact of OBBBA as additional guidance becomes available.
Previous report
Net sales in Power Transmission for the nine months ended September 27, 2025 increased by 1.4%, or $22.5 million, compared to the prior year period, driven primarily by benefits from pricing of $23.0 million, and an increase in volume. Our net sales for the nine months ended September 27, 2025 were adversely impacted by movements in average currency exchange rates of $3.4 million. As such, core sales increased by 1.6%, or $25.9 million, compared to the prior year period.
Previous report
Power Transmission’s core sales to industrial customers increased by 4.7% and 4.1% during the three and nine months ended September 27, 2025, respectively, compared to the prior year periods. Industrial OEM sales increased by 8.4% and 9.6%, respectively, during the three and nine months ended September 27, 2025 compared to the prior year periods, particularly in EMEA. The growth in industrial sales were across multiple end markets, led by personal mobility, which grew 22.1% and 27.2% during the three and nine months ended September 27, 2025, respectively, primarily focused in EMEA. The automotive channel remained relatively flat for the three and nine months ended September 27, 2025, with automotive replacement growth partially offset by decreasing demands from automotive OEM.
Previous report
Power Transmission Adjusted EBITDA for the nine months ended September 27, 2025 increased by 1.6%, or $5.8 million, compared to the prior year period. This increase was driven primarily by benefits from pricing, partially offset by lower absorption of fixed costs and higher SG&A expenses. As a result, Adjusted EBITDA margin was 22.5%, a 10 basis point improvement compared to the prior year period.
Previous report
Net sales in Fluid Power for the three months ended September 27, 2025 increased by 1.6%, or $5.1 million, compared to the prior year period, driven primarily by benefits from pricing of$10.5 million, partially offset by lower volumes. Our net sales were favorably impacted by movements in average currency exchange rates of $2.9 million. As such, core sales increased by 0.7%, or $2.2 million, compared to the prior year period.
Previous report
Fluid Power Adjusted EBITDA for the nine months ended September 27, 2025 decreased by 1.7%, or $3.8 million, compared to the prior year period. This decrease was driven primarily by a combination of lower absorption of fixed costs and volumes, partially offset by pricing. As a result, the Adjusted EBITDA margin was 22.6%, a 10 basis points decline compared to the prior year period.
Previous report
Nine months ended September 27, 2025 compared to the nine months ended September 28, 2024
Previous report
Debt issuances and redemptions
Previous report
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 report
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 report
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.
Previous report
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).
Previous report
•loss on deconsolidation of Russian subsidiary;
Previous report
•credit gain related to a customer bankruptcy; and
Previous report
(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.
Previous report
(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.
Reworded paragraphs (34)
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 the nine months ended September 27, 2025, 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 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.
Previous wording
During the nine months ended September 27, 2025, sales into first-fit channels accounted for approximately 32% of our total net sales. First-fit sales are to a variety of industrial and automotive customers. Our industrial first-fit customers cover a diverse range of industries and applications and many of our largest first-fit customers manufacture construction and agricultural equipment.
Current wording
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.
Previous wording
During the nine months ended September 27, 2025, sales in the personal mobility end market continued to experience strong growth, and our replacement channel sales grew modestly, including positive core growth in the industrial replacement 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.
Current wording
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.
Previous wording
Our global operating footprint and worldwide sales reach expose us to risks associated with trade conflicts between the U.S. and its trading partners. Escalating 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 begun to experience some slower than expected demand recovery, cost increases and may incur additional costs, primarily for our businesses in North America. The global tariff regime continues to evolve and we could have additional exposures in the future. We are taking actions to mitigate the impact of tariffs through price increases and adjustments to our supply chain and operations, and intend to continue to offset any incremental tariff impacts for the remainder of the year. Whether these strategies or other effects of the tariffs will further impact customer behaviors, including future demand for our products, remains uncertain. We will continue to monitor and evaluate risks related to the tariffs and any resulting impact on macroeconomic conditions and our business.
Current wording
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.
Previous wording
Results for the three and nine months ended September 27, 2025 compared to the results for the three and nine months ended September 28, 2024
Current wording
Results for the three months ended March 28, 2026 compared to the results for the three months ended March 29, 2025
Previous wording
Net sales during the three months ended September 27, 2025 were $855.7 million, compared to $830.7 million during the prior year period, an increase of 3.0%, or $25.0 million. The following table lists the primary drivers behind the change in net sales (amounts in millions):
Current wording
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):
Previous wording
Cost of sales for the three months ended September 27, 2025 was $514.1 million, compared to $494.9 million for the prior year period, an increase of 3.9%, or $19.2 million. The following table lists the primary drivers behind the change in cost of sales (amounts in millions):
Current wording
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):
Previous wording
Selling, general and administrative (“SG&A”) expenses for the three months ended September 27, 2025 were $219.2 million compared to $217.2 million for the prior year period. This increase of $2.0 million was driven primarily by higher restructuring-related severance expense of $2.3 million and higher labor and benefits expense of $2.0 million, partially offset by lower warranty expense of $1.8 million and lower outbound freight costs of $1.5 million.
Current wording
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.
Previous wording
Transaction-related expenses of $0.1 million and $0.5 million were incurred during the three and nine months ended September 27, 2025, respectively. Transaction expenses for the three months September 27, 2025 were primarily related to certain corporate transactions. Transaction expenses for the nine months ended September 27, 2025 were primarily related to certain non-recurring debt related costs and certain other corporate transactions. Transaction-related expenses of $0.5 million and $2.1 million were incurred during the prior year three and nine months ended September 28, 2024, respectively. Transaction expenses for the three months ended September 28, 2024 were primarily related to the secondary offering completed during August 2024. Transaction expenses for the nine months ended September 28, 2024 were primarily related to the debt refinancing that occurred in June 2024, the secondary offerings completed in both February and August 2024, and certain other corporate transactions.
Current wording
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.
Previous wording
Details of our long-term debt are presented in Note 12 to the condensed consolidated financial statements included elsewhere in this report. Interest expense decreased by $0.2 million and $28.4 million during the three and nine months ended September 27, 2025, respectively, when compared to the equivalent prior year period, primarily due to the $14.8 million accelerated amortization of deferred issuance costs related to the debt refinancing that occurred in June 2024, partially offset by the unfavorable impact of derivatives. Additionally, interest on debt decreased by $2.7 million and $18.3 million during the three and nine months ended September 27, 2025, respectively, when compared to the equivalent prior year period, primarily due to lower interest rates as a result of the refinancing activities executed in 2024.
Current wording
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.
Previous wording
For the three months ended September 27, 2025, we had an income tax expense of $6.1 million on pre-tax income of $94.8 million, which resulted in an effective tax rate of 6.4%, compared to an income tax expense of $14.0 million on pre-tax income of $69.2 million, which resulted in an effective tax rate of 20.2%, for the three months ended September 28, 2024.
Current wording
For the three months ended March 28, 2026, we had an income tax expense of $11.5 million on pre-tax income of $77.9 million, which resulted in an effective tax rate of 14.8%, compared to an income tax expense of $25.2 million on pre-tax income of $93.8 million, which resulted in an effective tax rate of 26.9%, for the three months ended March 29, 2025.
Previous wording
For the three months ended September 27, 2025, the effective tax rate was driven primarily by net discrete tax benefits of $13.5 million, of which $12.6 million related to uncertain tax benefits primarily due to audit settlements, $5.0 million primarily related to prior year adjustments in the U.S. and Luxembourg in which returns were filed, and $2.2 million related to changes in undistributed foreign earnings primarily in Türkiye, offset by $2.1 million related to insurance recovery, $2.0 million related to tax law changes in the U.S. and Germany, and $2.2 million of other net discrete tax expenses. For the three months ended September 28, 2024, the effective tax rate was driven primarily by discrete tax benefits of $7.8 million, of which $6.5 million related to the changes in the realizability of certain deferred tax assets, primarily related to U.S. foreign tax credit carryforwards, $3.2 million related to the loss on the deconsolidation of Russian subsidiary, offset by $1.9 million of other net discrete tax expenses.
Current wording
For the three months ended March 28, 2026, the effective tax rate was driven primarily by net discrete tax benefits of $6.4 million, comprised of a discrete tax benefit of $4.2 million related to the expected refund of research and development credits from prior years, $1.9 million related to changes in realizability of certain deferred tax assets primarily in Türkiye, $1.1 million related to excess tax benefits on stock option exercises, and $0.5 million related to other net discrete tax benefits, offset by $1.3 million related to prior year adjustments, primarily in Türkiye, reflecting tax returns that were filed. For the three months ended March 29, 2025, the effective tax rate was driven primarily by the jurisdictional mix of earnings and by net discrete tax expense of $0.1 million, comprised of a discrete tax benefit of $6.0 million related to excess tax benefits on stock option exercises, and $0.1 million related to other net discrete benefits, offset by discrete expenses of $5.2 million primarily related to changes in the realizability of certain deferred tax assets and $1.0 million related to net unrecognized tax benefits.
Previous wording
Power Transmission (62.3% and 62.3%, respectively, of Gates’ net sales for the three and nine months ended September 27, 2025)
Current wording
Power Transmission (62.6% of Gates’ net sales for the three months ended March 28, 2026)
Previous wording
Net sales in Power Transmission for the three months ended September 27, 2025 increased by 3.9%, or $19.9 million, compared to the prior year period, driven primarily by benefits from pricing of $12.6 million, partially offset by lower volumes. Our net sales for the three months ended September 27, 2025 were favorably impacted by movements in average currency exchange rates of $8.3 million. As such, core sales increased by 2.3%, or $11.6 million, compared to the prior year period.
Current wording
Net sales in Power Transmission for the three months ended March 28, 2026, increased by 1.1%, or $6.0 million, compared to the prior year period, driven primarily by benefits from pricing of $11.3 million, partially offset by lower volumes. Our net sales for the three months ended March 28, 2026 were favorably impacted by movements in average currency exchange rates of $19.2 million. As such, core sales decreased by 2.5%, or $13.2 million, compared to the prior year period.
Previous wording
Power Transmission Adjusted EBITDA for the three months ended September 27, 2025 increased by 8.1%, or $9.1 million, compared to the prior year period, driven primarily by benefits from pricing and favorable impacts in average currency exchange rates, partially offset by lower absorption of fixed costs. As a result, Adjusted EBITDA margin was 22.9%, a 90 basis point improvement from the prior year period.
Current wording
Power Transmission Adjusted EBITDA for the three months ended March 28, 2026 decreased by 4.0%, or $4.7 million, compared to the prior year period, driven primarily by lower volume, partially offset by benefits from pricing and favorable impacts in average currency exchange rates. As a result, Adjusted EBITDA margin was 21.0%, a 110 basis point decline from the prior year period.
Previous wording
Fluid Power (37.7% and 37.7%, respectively, of Gates’ net sales for the three and nine months ended September 27, 2025)
Current wording
Fluid Power (37.4% of Gates’ net sales for the three months ended March 28, 2026)
Previous wording
Net sales in Fluid Power for the nine months ended September 27, 2025 decreased by 1.4%, or $14.3 million, compared to the prior year period, driven primarily by a decrease in volume, partially offset by a $19.4 million benefit from pricing. Our net sales were adversely impacted by movements in average currency exchange rates of $8.3 million. As such, core sales decreased by 0.6%, or $6.0 million, compared to the prior year period.
Current wording
Net sales in Fluid Power for the three months ended March 28, 2026 decreased by 0.8%, or $2.5 million, compared to the prior year period, driven primarily by a decrease in volume, partially offset by a $9.0 million benefit from pricing. Our net sales were favorably impacted by movements in average currency exchange rates of $8.7 million. As such, core sales decreased by 3.5%, or $11.2 million, compared to the prior year period.
Previous wording
Fluid Power’s core sales to our automotive channel increased by 10.5%, while sales in our industrial channel declined by 2.8% during the three months ended September 27, 2025. Fluid Power’s core sales growth in the automotive channel was focused in North America, which experienced a 9.0% increase during the three months ended September 27, 2025. The decline in the industrial channel was primarily attributed to North America, partially offset by growth from East Asia and India. During the nine months ended September 27, 2025, the decline of Fluid Power’s core sales of 0.6% was primarily attributable to a 3.7% decrease in the industrial channel sales compared to the prior year period, primarily driven by the on-highway end market. The decline in industrial sales was partially offset by an 8.5% increase in sales to our automotive customers for the nine months ended September 27, 2025, primarily from North America and EMEA, whose sales increased by 6.2% and 16.3%, respectively.
Current wording
Fluid Power’s core sales to our aftermarket channel decreased by 2.6%, while sales in our OEM channel declined by 5.6% during the three months ended March 28, 2026. Industrial aftermarket experienced a sales decline of 6.1%, during the three months ended March 28, 2026, partially offset by a 3.0% increase in automotive aftermarket sales, primarily driven from the Americas and APAC. From an end market perspective, the decline of Fluid Power’s core sales of 3.5% during the three months ended March 28, 2026, was primarily attributable to a decrease in construction and on highway, partially offset by an increase in automotive.
Previous wording
Fluid Power Adjusted EBITDA for the three months ended September 27, 2025 increased by 6.0%, or $4.2 million, compared to the prior year period, driven primarily by benefits from pricing and lower SG&A expense, partially offset by lower absorption of fixed costs. As a result, the Adjusted EBITDA margin was 22.9%, a 100 basis point improvement from the prior year period.
Current wording
Fluid Power Adjusted EBITDA for the three months ended March 28, 2026 decreased by 7.4%, or $5.2 million, compared to the prior year period, driven primarily by lower volumes, partially offset by benefits from pricing. As a result, the Adjusted EBITDA margin was 20.6%, a 140 basis point decline from the prior year period.
Previous wording
Cash provided by operating activities was $208.3 million during the nine months ended September 27, 2025 compared to cash provided by operating activities of $188.7 million during the prior year period, primarily driven by a $41.2 million increase in net income and an $18.8 million decrease in deferred income taxes compared to the prior year period. This was partially offset by a $40.3 million unfavorable movement in operating assets and liabilities.
Current wording
Cash provided by operating activities was $30.2 million during the three months ended March 28, 2026, compared to cash provided by operating activities of $7.3 million during the prior year period, primarily driven by a $27.8 million favorable movement in operating assets and liabilities, partially offset by a $2.1 million decrease in net income.
Previous wording
Net cash used in investing activities during the nine months ended September 27, 2025 was $86.9 million, compared to $80.3 million in the prior year period. The increase of cash used in investing activities was primarily driven by a $13.8 million increase in net cash paid under company-owned life insurance policies, increased capital expenditures of $7.1 million, and $8.8 million fewer proceeds from the sale of property, plant and equipment compared to the prior year period. The increase in cash used in investing activities was partially offset by a $12.5 million cash derecognition from the deconsolidation of our Russian subsidiary and $11.3 million of investment purchases made during the prior year period.
Current wording
Net cash used in investing activities during the three months ended March 28, 2026, was $27.2 million, compared to $31.0 million in the prior year period. The decrease of cash used in investing activities was primarily driven by decreased capital expenditures of $4.7 million, partially offset by a $0.4 million increase in net cash paid under company-owned life insurance policies, and $0.7 million fewer proceeds from the sale of property, plant and equipment.
Previous wording
Net cash used in financing activities was $134.9 million during the nine months ended September 27, 2025, compared to $253.5 million in the prior year period. Current year outflows were primarily related to $114.1 million of debt repayment, $20.1 million of employee taxes paid from shares withheld and $13.0 million paid to acquire shares under our share repurchase program. This was partially offset by $9.8 million from issuance of shares and $9.0 million from other financing activities.
Current wording
Net cash used in financing activities was $25.1 million during the three months ended March 28, 2026, compared to $24.6 million in the prior year period. Current year outflows were primarily related to $16.6 million paid to acquire shares under our share repurchase program and $8.6 million of employee taxes paid from shares withheld on exercised options. Prior year outflows were primarily related to $13.0 million paid to acquire shares under our share repurchase program, $4.7 million in debt repayment, and $11.5 million of employee taxes paid from shares withheld on exercised options.
Previous wording
For the twelve months ended September 27, 2025, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 70% of our net sales and 50% of our EBITDA as defined in the financial covenants attaching to the senior secured credit facilities. As of September 27, 2025, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 69% of our total assets and approximately 28% of our total liabilities.
Current wording
For the three months ended March 28, 2026, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 74% of our net sales and 70% of our EBITDA as defined in the financial covenants attaching to the senior secured credit facilities. As of March 28, 2026, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 69% of our total assets and approximately 27% of our total liabilities.
Previous wording
On June 4, 2024, we extinguished our asset-backed revolving credit facility as discussed further in Note 12 to the condensed consolidated financial statements included elsewhere in this quarterly 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 September 27, 2025, there were letters of credit outstanding against the facility amounting to $29.7 million. As of September 27, 2025, our total committed borrowing headroom was $470.3 million, in addition to cash and cash equivalents balances of $689.4 million.
Current wording
Our secured revolving credit facility that provides for multi-currency revolving loans has a borrowing capacity of $500.0 million and matures on 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 March 28, 2026, there were letters of credit outstanding against the facility amounting to $28.8 million. As of March 28, 2026, our total committed borrowing headroom was $471.2 million, in addition to cash and cash equivalents balances of $785.3 million.
Previous wording
•restructuring expenses, including severance and restructuring-related expenses;
Current wording
•restructuring expenses, including severance and restructuring-related expenses; and
Previous wording
The following table reconciles net income, the most directly comparable GAAP measure, to Adjusted EBITDA:
Current wording
The following table reconciles net income to Adjusted EBITDA:
Previous wording
(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.
Current wording
(1) Transaction-related expenses relate primarily to advisory fees and other costs recognized in respect of major corporate transactions, including the acquisition of businesses, and equity and debt transactions.
Previous wording
(3) Inventory write-offs and adjustments include the reversal of the adjustment to remeasure certain inventories on a LIFO basis.
Current wording
(2) Inventory adjustments includes the reversal of the adjustment to remeasure certain inventories on a LIFO basis.
Previous wording
(4) Other (income) expenses excludes foreign currency transaction losses and insurance recoveries of $9.9 million and $7.8 million during the three and nine months ended September 27, 2025, respectively, and foreign currency transaction loss of $2.7 million and $3.6 million gain during the three and nine months ended September 28, 2024, respectively.
Current wording
(3) Other expenses (income) excludes foreign currency transaction losses and insurance recoveries of $3.5 million for the three months ended March 28, 2026; foreign currency transaction loss of $1.1 million for the three months ended March 29, 2025.
Previous wording
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 twelve months ended September 27, 2025, as calculated pursuant to such agreements, resulted in a net benefit to Adjusted EBITDA for ratio calculation purposes of $9.2 million. 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 12 to the condensed 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 the annual report. During the periods covered by the condensed consolidated financial statements included in this report, we were in compliance with the financial covenant and had no borrowing on the revolving credit facility.
Current wording
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 twelve months ended March 28, 2026, as calculated pursuant to such agreements, resulted in a net benefit to Adjusted EBITDA for ratio calculation purposes of $4.3 million. 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 12 to the condensed 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 the annual report. During the periods covered by the condensed consolidated financial statements included in this report, we were in compliance with the financial covenant and had no borrowing on the revolving credit facility.
Previous wording
Gates Industrial Corporation plc is not an obligor under our revolving credit facility, our term loan facility 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 loan facility, 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) an additional net intercompany loan receivable due to Gates Industrial Holdco and its subsidiaries from the Company, which was $218.7 million and $258.4 million as of September 27, 2025 and December 28, 2024, respectively, (ii) an additional intercompany payable of $12.0 million as of September 27, 2025 and an intercompany payable of $6.6 million as of December 28, 2024, due to Gates Industrial Holdco Limited and its subsidiaries from the Company attributable to UK tax group relief, and (iii) an additional cash and cash equivalents held by the Company, which was $8.8 million and $10.6 million as of September 27, 2025 and December 28, 2024, respectively.
Current wording
Gates Industrial Corporation plc is not an obligor under our revolving credit facility, our term loan facility 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 loan facility, 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) an additional net intercompany loan receivable due to Gates Industrial Holdco and its subsidiaries from the Company, which was $238.8 million and $226.4 million as of March 28, 2026 and December 31, 2025, respectively, (ii) an additional intercompany receivable of $3.7 million as of March 28, 2026 and an intercompany receivable of $7.5 million as of December 31, 2025, due to Gates Industrial Holdco Limited and its subsidiaries from the Company attributable to UK tax group relief, and (iii) an additional cash and cash equivalents held by the Company, which was $18.1 million and $10.6 million as of March 28, 2026 and December 31, 2025, respectively.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
For the nine months ended September 27, 2025, we had an income tax expense of $48.1 million on pre-tax income of $268.8 million, which resulted in an effective tax rate of 17.9%, compared to an income tax expense of $60.8 million on pre-tax income of $240.1 million, which resulted in an effective tax rate of 25.3%, for the nine months ended September 28, 2024.
Previous report — wording carried elsewhere
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.