Gates Industrial Corp Ltd.
For the period ended Sep 26, 2026. Filed Oct 30, 2026.
View on SEC.govAbout this filing
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.
Sep 26, 2026 · Filed Oct 30, 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 2026-06-27; filed 2026-07-31.
0001628280-26-051411
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-26; filed 2026-10-30.
0001628280-26-068578
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 106 previous paragraphs and 107 current paragraphs.
60 unchanged; 37 reworded; 10 added; 9 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 15 previous and 16 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 (10)
Current report
While the tables above reflect the impact of material inflation recognized in cost of sales during the period, current period inflation for purchases increased $10.5 million and $26.3 million during the three and nine months ended September 26, 2026, respectively, reflecting higher current input costs. The timing of inventory recognition may result in a lag between changes in currently incurred inflation and the impact recognized in cost of sales.
Current report
Other income
Current report
Our other income was as follows:
Current report
Other income for the three and nine months ended September 26, 2026 was $7.5 million and $4.0 million, respectively, compared to $14.3 million and $5.1 million, respectively, for the three and nine months ended September 27, 2025. For the three months ended September 26, 2026, other income decreased primarily due an increase in the foreign currency loss on hyperinflation remeasurement, and insurance recoveries received in September 2025. For the nine months ended September 26, 2026, the decrease was primarily driven by an increase in net adjustments related to post-retirement benefits, an increase in foreign currency loss on hyperinflation remeasurement, and insurance recoveries received in September 2025, partially offset by foreign currency transaction and financing related gains on in-house banking.
Current report
The following table summarizes the Company's provision for income taxes and effective income tax provision rate for the three and nine months ended September 26, 2026 and September 27, 2025:
Current report
The increase in the effective income tax rate for the three months ended September 26, 2026 compared with the three months ended September 27, 2025 was primarily due to less discrete tax benefits related to unrecognized tax benefits, partially offset by recognized benefits associated with the One Big Beautiful Bill Act (the “OBBBA”).
Current report
The decrease in the effective income tax rate for the nine months ended September 26, 2026 compared with the nine months ended September 27, 2025 was primarily due to additional discrete tax benefits related to changes in the realizability of certain deferred tax assets, primarily in Luxembourg, and recognized benefits associated with the OBBBA.
Current report
After weighing all available positive and negative evidence, giving more weight to objectively verifiable evidence, management concluded that there were no material changes to its valuation allowance positions during the quarter ended September 26, 2026. Accordingly, no material valuation allowance releases or additional valuation allowances were recorded during the period.
Current report
Nine months ended September 26, 2026 compared to the nine months ended September 27, 2025
Current report
(4) 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.
Removed paragraphs (9)
Previous report
Other expense
Previous report
Our other expense was as follows:
Previous report
Other expense for the three and six months ended June 27, 2026 was $1.4 million and $3.5 million, respectively, compared to $6.8 million and $9.2 million of expense, respectively, for the three and six months ended June 28, 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. For the six months ended June 27, 2026, this was partially offset by a pension settlement loss of $5.2 million in March 2026.
Previous report
For the three months ended June 27, 2026, we had an income tax benefit of $78.0 million on pre-tax income of $100.2 million, which resulted in an effective tax rate of (77.8)%, compared to an income tax expense of $16.8 million on pre-tax income of $80.2 million, which resulted in an effective tax rate of 20.9%, for the three months ended June 28, 2025.
Previous report
For the three months ended June 27, 2026, the effective tax rate was driven primarily by net discrete tax benefits of $100.7 million, comprised of discrete tax benefits related to $97.1 million of changes in realizability of certain deferred tax assets primarily in Luxembourg, $8.3 million related to unrecognized tax benefits, and $3.5 million related to other net discrete tax benefits, offset by $8.2 million of discrete expense related to an audit settlement in China. For the three months ended June 28, 2025, the effective tax rate was driven primarily by net discrete tax benefits of $7.2 million, of which $3.2 million related to prior year adjustments primarily from various foreign jurisdictions in which returns were filed, $2.6 million related to excess tax benefits on stock option exercises, and $2.0 million related to changes in the realizability of certain deferred tax assets, offset by $0.6 million of other net discrete tax expenses.
Previous report
For the six months ended June 27, 2026, we had an income tax benefit of $66.5 million on pre-tax income of $178.1 million, which resulted in an effective tax rate of (37.3)%, compared to an income tax expense of $42.0 million on pre-tax income of $174.0 million, which resulted in an effective tax rate of 24.1%, for the six months ended June 28, 2025.
Previous report
For the six months ended June 27, 2026, the effective tax rate was driven primarily by net discrete tax benefits of $107.1 million, comprised of a discrete tax benefit of $99.0 million related to the changes in realizability of certain deferred tax assets primarily in Luxembourg, $9.1 million related to unrecognized tax benefits, $4.2 million related to the expected refund of research and development credits from prior years, and $3.0 million related to other net discrete tax benefits; offset by $8.2 million related to an audit settlement in China. For the six months ended June 28, 2025, the effective tax rate was driven primarily by net discrete tax benefits of $7.1 million, of which $8.6 million related to excess tax benefits on stock option exercises, $3.2 million related to prior year adjustments primarily from various foreign jurisdictions in which returns were filed and $0.6 million other discrete tax benefits, offset by $3.2 million related to changes in the realizability of certain deferred tax assets and $2.1 million related to net unrecognized tax benefits.
Previous report
After weighing all of the evidence, giving more weight to the evidence that was objectively verifiable, we determined that, as of June 27, 2026, it is more likely than not that deferred tax assets in Luxembourg totaling $108.6 million are realizable as a result of facilitating the Redomiciliation which increased Luxembourg’s projected earnings. Accordingly, we recognized $96.6 million of our deferred tax assets as a discrete event in the quarter, while the remaining $12.0 million will be recognized during the year through the effective tax rate. As a result of changes in future taxable profits against which net operating losses and interest carryforward can be utilized, our position and judgment regarding the realizability of these deferred tax assets changed.
Previous report
Six months ended June 27, 2026 compared to the six months ended June 28, 2025
Reworded paragraphs (37)
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 aftermarket channel customers, and to OEMs 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.
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 OEMs 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 115 years since Gates’ founding in 1911.
Previous wording
During the six months ended June 27, 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.
Current wording
During the nine months ended September 26, 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 six months ended June 27, 2026, sales into OEM channels accounted for approximately 32% of our total net sales. OEM sales are to a variety of industrial and automotive customers. Our industrial OEM customers cover a diverse range of industries and applications and many of our largest OEM customers manufacture construction and agricultural equipment.
Current wording
During the nine months ended September 26, 2026, sales into OEM channels accounted for approximately 32% of our total net sales. OEM sales are to a variety of industrial and automotive customers. Our industrial OEM customers cover a diverse range of industries and applications and many of our largest OEM customers manufacture construction and agricultural equipment.
Previous wording
During the six months ended June 27, 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.
Current wording
During the nine months ended September 26, 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.
Previous wording
On February 20, 2026, the U.S. Supreme Court issued a ruling addressing the validity of certain tariffs implemented under the International Emergency Economic Powers Act ("IEEPA"). In March 2026, the U.S. Court of International Trade issued an additional ruling that importers that paid tariffs under IEEPA are due refunds. We paid tariffs during fiscal years 2025 and 2026 on certain imported products and materials that were subject to these IEEPA‑based duties. The Company submitted refund claims in the second quarter of 2026 and recognized a receivable for these claims. The Company is evaluating the disposition and potential pass-through of refunds to customers that were charged for tariffs related to these refunds. The ultimate receipt and disposition of IEEPA refunds is not material to the Company’s financial results.
Current wording
On February 20, 2026, the U.S. Supreme Court issued a ruling addressing the validity of certain tariffs implemented under the International Emergency Economic Powers Act ("IEEPA"). In March 2026, the U.S. Court of International Trade issued an additional ruling that importers that paid tariffs under IEEPA are due refunds. We paid tariffs during fiscal years 2025 and 2026 on certain imported products and materials that were subject to these IEEPA‑based duties. The Company submitted refund claims in the second quarter of 2026 and recognized a receivable for these claims. The Company continues to evaluate the disposition and potential pass-through of refunds to customers that were charged for tariffs related to these refunds. The ultimate receipt and disposition of IEEPA refunds is not material to the Company’s financial results.
Previous wording
Results for the three and six months ended June 27, 2026 compared to the results for the three and six months ended June 28, 2025
Current wording
Results for the three and nine months ended September 26, 2026 compared to the results for the three and nine months ended September 27, 2025
Previous wording
Net sales during the three months ended June 27, 2026 were $941.6 million, compared to $883.7 million during the prior year period, an increase of 6.6%, or $57.9 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 September 26, 2026 were $903.6 million, compared to $855.7 million during the prior year period, an increase of 5.6%, or $47.9 million. The following table lists the primary drivers behind the change in net sales (amounts in millions):
Previous wording
Net sales during the six months ended June 27, 2026 were $1,792.7 million, compared to $1,731.3 million during the prior year period, an increase of 3.5%, or $61.4 million. The following table lists the primary drivers behind the change in net sales (amounts in millions):
Current wording
Net sales during the nine months ended September 26, 2026 were $2,696.3 million, compared to $2,587.0 million during the prior year period, an increase of 4.2%, or $109.3 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 June 27, 2026 was $555.5 million, compared to $523.5 million for the prior year period, an increase of 6.1%, or $32.0 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 September 26, 2026 was $520.3 million, compared to $514.1 million for the prior year period, an increase of 1.2%, or $6.2 million. The following table lists the primary drivers behind the change in cost of sales (amounts in millions):
Previous wording
Cost of sales for the six months ended June 27, 2026 was $1,068.6 million, compared to $1,026.5 million for the prior year period, an increase of 4.1%, or $42.1 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 nine months ended September 26, 2026 was $1,588.9 million, compared to $1,540.6 million for the prior year period, an increase of 3.1%, or $48.3 million. The following table lists the primary drivers behind the change in cost of sales (amounts in millions):
Previous wording
SG&A expenses for the six months ended June 27, 2026 were $477.6 million compared to $447.4 million for the prior year period. This increase of $30.2 million was driven primarily by higher labor and benefits expense of $9.7 million, unfavorable impacts of exchange rates of $9.6 million, an increase in depreciation expense of $5.4 million and higher consulting and professional fees of $3.1 million. This increase was partially offset by lower corporate owned life insurance expense of $5.2 million.
Current wording
Selling, general and administrative (“SG&A”) expenses for the three months ended September 26, 2026 were $247.4 million compared to $219.2 million for the prior year period. This increase of $28.2 million was driven primarily by higher labor and benefits expense of $8.0 million, higher outbound freight expense of $3.6 million, an increase in depreciation expense of $3.5 million, and an increase in restructuring expense of $4.5 million. This increase was partially offset by lower consulting and legal expense of $2.1 million.
Previous wording
Selling, general and administrative (“SG&A”) expenses for the three months ended June 27, 2026 were $250.7 million compared to $231.2 million for the prior year period. This increase of $19.5 million was driven primarily by higher labor and benefits expense of $5.4 million, unfavorable impacts of exchange rates of $3.5 million, an increase in depreciation expense of $3.2 million, and an increase in restructuring expense of $2.2 million. This increase was partially offset by lower corporate owned life insurance expense of $3.0 million.
Current wording
SG&A expenses for the nine months ended September 26, 2026 were $725.0 million compared to $666.6 million for the prior year period. This increase of $58.4 million was driven primarily by higher labor and benefits expense of $17.8 million, unfavorable impacts of exchange rates of $10.0 million, an increase in depreciation expense of $8.9 million, higher outbound freight expense of $6.7 million and an increase in restructuring expense of $6.5 million. This increase was partially offset by lower corporate owned life insurance expense of $4.1 million.
Previous wording
Transaction-related expenses of $3.1 million and $3.6 million were incurred during the three and six months ended June 27, 2026, respectively, primarily related to expenses surrounding the previously disclosed acquisition of the belts business from the Timken company, which is expected to close in the second half of 2026, and certain other corporate transactions. Transaction-related expenses of $0.0 million and $0.4 million were incurred during the three and six months ended June 28, 2025, respectively, and were primarily related to certain non-recurring debt related costs.
Current wording
Transaction-related expenses of $4.0 million and $7.6 million were incurred during the three and nine months ended September 26, 2026, respectively, primarily related to expenses surrounding the previously disclosed acquisition of the belts business from The Timken Company, which closed on September 28, 2026, and certain other corporate transactions. Transaction-related expenses of $0.1 million and $0.5 million were incurred during the three and nine months ended September 27, 2025, respectively, and were primarily related to certain non-recurring debt related costs and certain other corporate transactions.
Previous wording
Restructuring expenses during the three and six months ended June 27, 2026 included $0.7 million and $1.4 million, respectively, of costs related to a global cost reduction effort and reorganization of our operations in Mexico. Restructuring related expenses during the three and six months ended June 27, 2026 included $3.9 million and $6.3 million, respectively, of costs related to the relocation of certain production activities and reorganization of our operations in Mexico and $5.4 million and $6.8 million, respectively, of costs related to professional service fees and general severance.
Current wording
Restructuring expenses during the three and nine months ended September 26, 2026 included $0.6 million and $2.0 million, respectively, of costs related to a global cost reduction effort, severance and labor costs as well as reorganization of our operations in Mexico. Restructuring related expenses during the three and nine months ended September 26, 2026 included $7.7 million and $14.0 million, respectively, of costs related to the relocation of certain production activities and reorganization of our operations in Mexico as well as $6.0 million and $12.8 million, respectively, of costs related to professional service fees and general severance.
Previous wording
Restructuring expenses during both the three and six months ended June 28, 2025 primarily included $12.6 million of severance and other labor and benefits expense related to a global cost reduction effort. Restructuring related expenses during the three and six months ended June 28, 2025 included $1.3 million and $2.3 million, respectively, of costs related to the relocation of certain production activities and reorganization of our operations in Mexico and $3.0 million and $4.7 million, respectively, of costs related to professional service fees and general severance.
Current wording
Restructuring expenses during the three and nine months ended September 27, 2025 included $0.3 million and $12.9 million, respectively, of severance and other labor and 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. Restructuring related expenses during the three and nine months ended September 27, 2025 included $1.6 million and $4.0 million, respectively, of costs related to the relocation of certain production activities and reorganization of our operations in Mexico and $4.0 million and $8.7 million, respectively, of costs related to professional service fees and general severance.
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 increased by $1.2 million and $1.5 million during the three and six months ended June 27, 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.
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 decreased by $4.4 million and $2.9 million during the three and nine months ended September 26, 2026, respectively, when compared to the equivalent prior year period, primarily due to a less favorable impact from derivatives, offset by lower applicable interest rates on the Dollar Term Loans.
Previous wording
In connection with facilitating the Redomiciliation, the Company recognized a tax benefit from the reduction of a valuation allowance on certain foreign deferred tax assets that are expected to be used in future periods. As a result, beginning the second quarter of 2026, the Company’s effective tax rate decreased, and is expected to be followed by an increase during the period in which the foreign deferred tax asset is utilized. Because these items are non-cash in nature and resulted from the non-recurring Redomiciliation rather than the Company’s ordinary operations, the resulting tax benefit in the three months ended June 27, 2026 is not, and the expected tax detriment in future periods will not be, reflected in certain of the Company’s non-GAAP measures, including adjusted net income and the adjusted effective tax rate.
Current wording
In connection with facilitating the Redomiciliation, the Company recognized a tax benefit from the reduction of a valuation allowance on certain foreign deferred tax assets that are expected to be used in future periods. As a result, beginning the second quarter of 2026, the Company’s effective tax rate decreased, and is expected to be followed by an increase in future periods in which the foreign deferred tax asset is utilized. Because these items are non-cash in nature and resulted from the non-recurring Redomiciliation rather than the Company’s ordinary operations, the resulting tax impacts will not be reflected in certain of the Company’s non-GAAP measures, including adjusted net income and the adjusted effective tax rate.
Previous wording
Power Transmission (62.5% and 62.6% of Gates’ net sales for the three and six months ended June 27, 2026, respectively)
Current wording
Power Transmission (62.0% and 62.4% of Gates’ net sales for the three and nine months ended September 26, 2026, respectively)
Previous wording
Net sales in Power Transmission for the three months ended June 27, 2026, increased by 7.0%, or $38.4 million, compared to the prior year period, driven primarily by an increase in volume of $20.2 million and benefits from pricing of $8.7 million. Our net sales for the three months ended June 27, 2026 were favorably impacted by movements in average currency exchange rates of $9.5 million. As such, core sales increased by 5.3%, or $28.9 million, compared to the prior year period.
Current wording
Net sales in Power Transmission for the three months ended September 26, 2026, increased by 5.0%, or $26.8 million, compared to the prior year period, driven primarily by an increase in volume of $12.0 million and benefits from pricing of $15.6 million. Our net sales for the three months ended September 26, 2026 were negatively impacted by movements in average currency exchange rates of $0.8 million. As such, core sales increased by 5.2%, or $27.6 million, compared to the prior year period.
Previous wording
Net sales in Power Transmission for the six months ended June 27, 2026, increased by 4.1%, or $44.4 million, compared to the prior year period, driven primarily by benefits from pricing of $20.0 million, partially offset by lower volumes. Our net sales for the six months ended June 27, 2026 were favorably impacted by movements in average currency exchange rates of $28.7 million. As such, core sales increased by 1.5%, or $15.7 million, compared to the prior year period.
Current wording
Net sales in Power Transmission for the nine months ended September 26, 2026, increased by 4.4%, or $71.2 million, compared to the prior year period, driven primarily by benefits from pricing of $35.8 million, and higher volumes. Our net sales for the nine months ended September 26, 2026 were favorably impacted by movements in average currency exchange rates of $27.9 million. As such, core sales increased by 2.7%, or $43.3 million, compared to the prior year period.
Previous wording
Power Transmission’s core sales to industrial customers increased by 9.0% and 6.3% during the three and six months ended June 27, 2026, respectively, compared to the prior year periods. Industrial OEM core sales increased by 13.6% and 10.4% during the three and six months ended June 27, 2026, respectively, particularly in APAC and EMEA. Core sales in the automotive end markets increased by 3.1% during the three months ended June 27, 2026, and decreased by 1.4% during the six months ended June 27, 2026. During the three months ended June 27, 2026, the growth in industrial sales were focused in personal mobility and on highway, which increased by 25.5% and 25.9% respectively. During the six months ended June 27, 2026, the growth in industrial sales were focused in personal mobility and on highway, which increased by 19.8% and 18.7%, respectively. The growth in personal mobility and on highway were primarily focused in EMEA and APAC.
Current wording
Power Transmission’s core sales to industrial customers increased by 14.0% and 8.8% during the three and nine months ended September 26, 2026, respectively, compared to the prior year periods. Industrial OEM core sales increased by 19.3% and 13.3% during the three and nine months ended September 26, 2026, respectively, particularly in APAC and EMEA. Core sales in the automotive end markets remained flat during the three months ended September 26, 2026, and decreased by 0.9% during the nine months ended September 26, 2026. During the three months ended September 26, 2026, the growth in industrial sales was focused in personal mobility and diversified industrial, which increased by 34.2% and 8.9%, respectively. During the nine months ended September 26, 2026, the growth in industrial sales was focused in on highway and personal mobility, which increased by 19.4% and 26.0%, respectively. The growth in on highway and personal mobility were primarily focused in APAC and EMEA.
Previous wording
Power Transmission Adjusted EBITDA for the three months ended June 27, 2026 increased by 9.8%, or $12.0 million, compared to the prior year period, driven primarily by an increase in volume, benefits from pricing and favorable manufacturing performance. As a result, Adjusted EBITDA margin was 22.9%, a 60 basis point improvement from the prior year period.
Current wording
Power Transmission Adjusted EBITDA for the three months ended September 26, 2026 increased by 12.3%, or $15.0 million, compared to the prior year period, driven primarily by benefits from pricing, an increase in volume and favorable manufacturing performance. As a result, Adjusted EBITDA margin was 24.5%, a 160 basis point improvement from the prior year period.
Previous wording
Power Transmission Adjusted EBITDA for the six months ended June 27, 2026 increased by 3.0%, or $7.3 million, compared to the prior year period, driven primarily by favorable manufacturing performance, benefits from pricing and favorable impacts in average currency exchange rates, partially offset by lower volume, increased spend in SG&A and inflationary impacts. As a result, Adjusted EBITDA margin was 22.0%, a 20 basis point decline from the prior year period.
Current wording
Power Transmission Adjusted EBITDA for the nine months ended September 26, 2026 increased by 6.2%, or $22.3 million, compared to the prior year period, driven primarily by favorable manufacturing performance, benefits from pricing and favorable impacts in average currency exchange rates, partially offset by lower volume, increased spend in SG&A and inflationary impacts. As a result, Adjusted EBITDA margin was 22.8%, a 30 basis point improvement from the prior year period.
Previous wording
Fluid Power (37.5% and 37.4% of Gates’ net sales for the three and six months ended June 27, 2026, respectively)
Current wording
Fluid Power (38.0% and 37.6% of Gates’ net sales for the three and nine months ended September 26, 2026, respectively)
Previous wording
Net sales in Fluid Power for the three months ended June 27, 2026 increased by 5.8%, or $19.5 million, compared to the prior year period, driven primarily by an $11.1 million benefit from pricing andfavorable impacts in average currency exchange rates of $5.5 million. As such, core sales increased by 4.2%, or $14.0 million, compared to the prior year period.
Current wording
Net sales in Fluid Power for the three months ended September 26, 2026 increased by 6.5%, or $21.1 million, compared to the prior year period, driven primarily by a $13.6 million benefit from pricing andfavorable impacts in average currency exchange rates of $1.4 million. As such, core sales increased by 6.1%, or $19.7 million, compared to the prior year period.
Previous wording
Net sales in Fluid Power for the six months ended June 27, 2026 increased by 2.6%, or $17.0 million, compared to the prior year period, driven primarily by a $20.1 million benefit from pricing, partially offset by lower volumes. Our net sales for the six months ended June 27, 2026 were favorably impacted by movements in average currency exchange rates of $14.2 million. As such, core sales increased by 0.4%, or $2.8 million, compared to the prior year period.
Current wording
Net sales in Fluid Power for the nine months ended September 26, 2026 increased by 3.9%, or $38.1 million, compared to the prior year period, driven primarily by a $33.7 million benefit from pricing, partially offset by lower volumes. Our net sales for the nine months ended September 26, 2026 were favorably impacted by movements in average currency exchange rates of $15.6 million. As such, core sales increased by 2.3%, or $22.5 million, compared to the prior year period.
Previous wording
Fluid Power’s core sales to industrial customers increased by 5.6% during the three months ended June 27, 2026, and remained flat for the six months ended June 27, 2026. The growth to industrial customers was primarily driven by industrial OEM core sales, which increased by 11.3% and 2.7% for the three and six months ended June 27, 2026, respectively, particularly in APAC. Fluid Power’s core sales to automotive customers increased by 0.3% and 1.7% for the three and six months ended June 27, 2026, respectively. This increase was driven primarily from automotive aftermarket, particularly in the Americas.
Current wording
Fluid Power’s core sales to industrial customers increased by 8.1% during the three months ended September 26, 2026, and 2.6% for the nine months ended September 26, 2026. The growth to industrial customers was primarily driven by industrial OEM, which increased by 16.4% and 7.1% for the three and nine months ended September 26, 2026, respectively, particularly in APAC. Fluid Power’s core sales to automotive customers increased by 1.0% and 1.5% for the three and nine months ended September 26, 2026, respectively, which was focused in APAC. Fluid Power also experienced growth in on highway, with an increase of 20.7% and 8.7%, respectively, for the three and nine months ended September 26, 2026.
Previous wording
Fluid Power Adjusted EBITDA for the six months ended June 27, 2026 decreased by 3.4%, or $5.0 million, compared to the prior year period, driven primarily by lower volumes and inflationary impacts, partially offset by benefits from pricing. As a result, the Adjusted EBITDA margin was 21.2%, a 130 basis point decline from the prior year period.
Current wording
Fluid Power Adjusted EBITDA for the three months ended September 26, 2026 increased by 6.2%, or $4.6 million, compared to the prior year period, driven primarily by volume; benefits from pricing and manufacturing performance were partially offset by increased inflationary costs, driving an improvement to gross margin of 130 basis points, but was substantially offset by increased restructuring and SG&A. As a result, the Adjusted EBITDA margin was 22.8%, a 10 basis point decline from the prior year period.
Previous wording
Fluid Power Adjusted EBITDA for the three months ended June 27, 2026 increased by 0.3%, or $0.2 million, compared to the prior year period, driven primarily by lower volumes and inflationary impacts, partially offset by benefits from pricing. As a result, the Adjusted EBITDA margin was 21.7%, a 120 basis point decline from the prior year period.
Current wording
Fluid Power Adjusted EBITDA for the nine months ended September 26, 2026 decreased by 0.2%, or $0.4 million, compared to the prior year period, driven primarily by lower volumes, inflationary impacts, and an increase in SG&A spend, partially offset by benefits from pricing. As a result, the Adjusted EBITDA margin was 21.7%, a 90 basis point decline from the prior year period.
Previous wording
Cash provided by operating activities was $108.8 million during the six months ended June 27, 2026, compared to cash provided by operating activities of $110.3 million during the prior year period, primarily driven by a $102.8 million increase in deferred income taxes, a $17.3 million unfavorable movement in operating assets and liabilities and higher depreciation and amortization expense of $7.3 million, offset by a $112.8 million increase in net income.
Current wording
Cash provided by operating activities was $170.0 million during the nine months ended September 26, 2026, compared to cash provided by operating activities of $208.3 million during the prior year period, primarily driven by a $106.4 million increase in deferred income taxes and a $58.5 million unfavorable movement in operating assets and liabilities, partially offset by a $115.6 million increase in net income, higher depreciation and amortization expense of $10.1 million and an $8.7 million decrease in net post-employment benefit obligations.
Previous wording
Net cash used in investing activities during the six months ended June 27, 2026, was $41.8 million, compared to $62.0 million in the prior year period. The decrease of cash used in investing activities was primarily driven by decreased capital expenditures of $15.4 million, and a $5.3 million decrease in net cash paid under company-owned life insurance policies, partially offset by $0.6 million fewer proceeds from the sale of property, plant and equipment.
Current wording
Net cash used in investing activities during the nine months ended September 26, 2026 was $47.1 million, compared to $86.9 million in the prior year period. The decrease of cash used in investing activities was primarily driven by decreased capital expenditures of $18.0 million, a $6.4 million decrease in net cash paid under company-owned life insurance policies, and cash proceeds from a $15.9 million settlement of a Japanese Yen foreign exchange forward contract.
Previous wording
Net cash used in financing activities was $50.8 million during the six months ended June 27, 2026, compared to $33.4 million in the prior year period. Current year outflows were primarily related to $38.7 million paid to acquire shares under our share repurchase program and $8.7 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, $16.9 million of employee taxes paid from shares withheld on exercised options and $9.4 million in debt repayment.
Current wording
Net cash used in financing activities was $105.4 million during the nine months ended September 26, 2026, compared to $134.9 million in the prior year period. Current year outflows were primarily related to $96.1 million paid to acquire shares under our share repurchase program and $8.7 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, $20.1 million of employee taxes paid from shares withheld on exercised options and $114.1 million in debt repayment.
Previous wording
For the three months ended June 27, 2026, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 74% of our net sales and 67% of our EBITDA as defined in the financial covenants attaching to the senior secured credit facilities. As of June 27, 2026, 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 September 26, 2026, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 73% of our net sales and 62% of our EBITDA as defined in the financial covenants attaching to the senior secured credit facilities. As of September 26, 2026, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 67% of our total assets and approximately 27% of our total liabilities.
Previous 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 June 27, 2026, there were letters of credit outstanding against the facility amounting to $27.8 million. As of June 27, 2026, our total committed borrowing headroom was $472.2 million, in addition to cash and cash equivalents balances of $823.5 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 September 26, 2026, there were letters of credit outstanding against the facility amounting to $27.6 million. As of September 26, 2026, our total committed borrowing headroom was $472.4 million, in addition to cash and cash equivalents balances of $830.8 million.
Previous wording
(3) Other(income) expenses excludes foreign currency transaction losses of $1.5 million and $4.3 million and insurance losses of $1.8 million and $2.5 million during the three and six months ended June 27, 2026, respectively, and foreign currency transaction losses of $1.0 million and $2.1 million during the three and six months ended June 28, 2025, respectively.
Current wording
(3) Other (income) expenses excludes foreign currency transaction (gains) losses of $(1.1) million and $3.2 million and insurance losses of $2.2 million and $4.7 million during the three and nine months ended September 26, 2026, respectively, and 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.
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 June 27, 2026, as calculated pursuant to such agreements, resulted in a net benefit to Adjusted EBITDA for ratio calculation purposes of $3.2 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 September 26, 2026, as calculated pursuant to such agreements, resulted in a net benefit to Adjusted EBITDA for ratio calculation purposes of $7.3 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 Ltd. 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 Ltd., 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 $240.7 million and $226.4 million as of June 27, 2026 and December 31, 2025, respectively, (ii) an additional intercompany receivable of $1.5 million as of June 27, 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 $3.6 million and $7.4 million as of June 27, 2026 and December 31, 2025, respectively.
Current wording
Gates Industrial Corporation Ltd. 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 Ltd., 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 Limited and its subsidiaries from the Company, which was $260.5 million and $226.4 million as of September 26, 2026 and December 31, 2025, respectively, (ii) an additional intercompany payable of $19.1 million as of September 26, 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 $3.6 million and $7.4 million as of September 26, 2026 and December 31, 2025, respectively.