Gates Industrial Corp plc
For the period ended Dec 28, 2024. Filed Feb 6, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 6, 2025
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-K
Period ended 2023-12-30; filed 2024-02-08.
0001718512-24-000010
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-28; filed 2025-02-06.
0001718512-25-000013
Item 7. 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 164 previous paragraphs and 146 current paragraphs.
80 unchanged; 45 reworded; 20 added; 39 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 13 previous and 12 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 (20)
Current report
During Fiscal 2024, demands from industrial OEM channels softened while our enterprise initiatives and the favorable mix of replacement channel sales to OEM channel sales improved our profitability. We expect our business operations to capitalize on a potential industrial demand recovery during 2025 and our inventory position to support exceptional customer service and position us for growth. As the industrial markets stabilize, we expect that our ongoing execution of enterprise initiatives and incremental new business investments will enable us to improve profitability and drive higher organic growth over the long term.
Current report
Net sales during Fiscal 2024 were $3,408.2 million, compared to $3,570.2 million during the prior year, a decrease of 4.5%, or $162.0 million. The following table lists the primary drivers behind the change in net sales (amounts in millions):
Current report
Cost of sales for Fiscal 2024 was $2,049.7 million, compared to $2,211.3 million for the prior year, a decrease of 7.3%, or $161.6 million. The following table lists the primary drivers behind the change in cost of sales (amounts in millions):
Current report
SG&A expenses for Fiscal 2024 were $870.0 million compared to $882.2 million for the prior year. This decrease of $12.2 million was primarily attributable to favorable movements in average currency exchange rates, gain from disposal of property, plant and equipment, higher corporate-owned life insurance related income, and lower provision for expected credit losses during the current year period. The decrease was partially offset by increased outbound freight costs, consulting fees, and other expenses.
Current report
Restructuring and other restructuring related initiatives during Fiscal 2024 included $4.1 million of costs related to the relocation of certain production activities and reorganization of our operations in Mexico. Additionally, we incurred $1.6 million in severance and other costs related to the consolidation of production activities across certain North American plants. Other costs related to restructuring and restructuring related initiatives incurred during Fiscal 2024 included legal and consulting expenses, and costs associated with prior period facility closures or relocations in several countries.
Current report
Amortization of deferred issuance costs during Fiscal 2024 increased by $14.0 million, primarily due to the accelerated amortization of $14.8 million of deferred issuance costs related to the debt refinancing that occurred in June 2024 and the accelerated amortization of $1.0 million due to the $100.0 million repayment against our 2021 Dollar Term Loans (as defined below) in February 2024.
Current report
Other (income) expenses
Current report
Income tax expense
Current 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. In response to the implementation of Pillar Two in 2024, we took steps in 2023 to mitigate cash tax impacts of Pillar Two that had the effect of increasing our estimated annual effective tax rate by three to five percentage points starting from 2024. While the impact on the Company will need to be determined by reference to the final rules, we currently do not expect any material impact as of December 28, 2024, and do not expect a material impact in future years.
Current report
Net sales in Power Transmission for Fiscal 2024 decreased by 3.8%, or $83.1 million, driven by lower volumes of $74.6 million and adverse movements in average currency exchange rates of $31.7 million. The decrease was offset by a $23.2 million benefit from pricing. As such, core sales decreased by 2.3%, or $51.4 million, compared to the prior year.
Current report
Debt issuances and redemptions
Current 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. We issued the 2024 Dollar Term Loans with no discount and incurred third party costs totaling approximately $9.5 million, which have been deferred and will be amortized to interest expense over the remaining term of the related borrowings using the effective interest method. The 2024 Dollar Term Loans require a prepayment premium in connection with certain repricing transactions occurring within nine months following the closing of the amendment. The repayment of our 2021 Dollar Term Loans resulted in the accelerated recognition of $11.2 million of deferred issuance costs (recognized in interest expense).
Current report
On June 4, 2024, we also issued new Dollar Senior Notes due 2029 of $500.0 million, and fully redeemed our existing Dollar Senior Notes due 2026 of $568.0 million aggregate principal amount, which included the payment of $13.7 million of accrued interest thereon. We issued the new Dollar Senior Notes with no discount and incurred third party costs of approximately $7.6 million, which have been deferred and will be amortized to interest expense over the remaining term of the new Dollar Senior Notes using the effective interest method. The redemption of our Dollar Senior Notes due 2026 resulted in the accelerated recognition of $2.6 million of deferred issuance costs (recognized in interest expense).
Current report
In February 2024, we made a voluntary principal debt repayment of $100.0 million against our 2021 Dollar Term Loans. As a result of this repayment, we accelerated the recognition of $1.0 million of deferred issuance costs (recognized in interest expense).
Current report
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.
Current 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).
Current report
Non-GAAP Financial Measures
Current report
•loss on deconsolidation of previously controlled subsidiary;
Current report
(1)In July 2022, 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.
Current report
Core sales and core sales growth reconciliations
Removed paragraphs (39)
Previous report
Our operations are supported largely by local supply chains. Where necessary, we have taken steps to qualify additional suppliers to ensure we are able to maintain continuity of supply. Although we have not experienced any significant operational disruptions to date, we have incurred meaningful operational inefficiencies. During Fiscal 2023, previous challenges related to supply chains, logistics, and inflation continued to ease, which improved our productivity and expanded our profitability. We continue to make progress on improving our inventory position and turnover to meet our customer demands.
Previous report
During 2022, our operations in China were further impacted by the COVID-19 pandemic and related government actions, resulting in a modest loss of production, sales and profitability as well as decreased customer demand and labor availability. Although these conditions improved in 2023, we may experience future production or distribution disruptions associated with public health crises where individual locations are temporarily closed or productivity is reduced by government mandates or as a result of supply chain or labor disruptions, which could place further constraints on our ability to produce or deliver our products and meet customer demand or increase our costs. We may also continue to experience periods of inconsistency in customer demand.
Previous report
We continue to monitor the macroeconomic environment, geopolitical conditions, and industry trends that may impact our business. While we may experience a certain level of inventory de-stocking from our customers and slower demand in the first half of 2024 as a result of the current economic environment, we are optimistic to see a rebound of demand later in the year and the continued normalization of the operating environment in 2024.
Previous report
Net sales during Fiscal 2023 were $3,570.2 million, compared to $3,554.2 million during the prior year, an increase of 0.5%, or $16.0 million, driven primarily by a $200.4 million benefit from pricing, partially offset by the impact of lower volumes. In addition, our net sales for Fiscal 2023 were adversely impacted by movements in average currency exchange rates of $8.9 million compared to the prior year, principally due to the strengthening of the U.S. dollar against a number of currencies, in particular the Chinese Renminbi, Turkish Lira, Canadian Dollar, Japanese Yen and Indian Rupee, partially offset by the weakening of the U.S. dollar against the Mexican Peso and the Euro. As such, core sales increased by $24.9 million, or 0.7%, during Fiscal 2023 compared to the prior year.
Previous report
The overall core sales improvements were primarily driven by increases in sales to customers in our automotive channels, with automotive replacement sales up by 6.1% and automotive first fit sales up by 7.5%. The majority of this growth was focused in EMEA, Greater China and South America, where automotive sales grew by 15.4%, 6.9% and 15.4%, respectively, during Fiscal 2023 compared to the prior year. Total sales to industrial end markets decreased by 3.2% during Fiscal 2023 compared to the prior period, particularly driven by a decrease in sales in the diversified industrial and personal mobility end markets of 7.1% and 24.6%, respectively, in comparing to the prior period. Particularly, the diversified industrial end market experienced sales declines of 12.4%, 3.5% and 12.8%, respectively, in EMEA, North America and Greater China during Fiscal 2023 compared to the prior year. Personal mobility experienced sales declines of 28.5% and 28.8%, respectively, in North America and EMEA during Fiscal 2023 compared to the prior year.
Previous report
Cost of sales for Fiscal 2023 was $2,211.3 million, compared to $2,303.6 million for the prior year, a decrease of 4.0%, or $92.3 million. This decrease was primarily attributable to lower volumes, favorable movements in average currency exchange rates and improved inbound freight costs totaling $154.2 million, partially offset by lower absorption of fixed costs and higher inflation related costs.
Previous report
Gross profit
Previous report
As a result of the factors described above, gross profit for Fiscal 2023 was $1,358.9 million, compared to $1,250.6 million for the prior year period, an increase of 8.7% or $108.3 million. Our gross profit margin increased by 290 basis points to 38.1% for Fiscal 2023.
Previous report
SG&A expenses for Fiscal 2023 were $882.2 million compared to $853.7 million for the prior year. This increase of $28.5 million was driven primarily by an increase in labor and benefits expense of $38.4 million, partially offset by lower share-based compensation costs of $16.9 million largely due to the March 2022 vesting of certain pre-IPO options as discussed further in Note 18 to the condensed consolidated financial statements included elsewhere in this report.
Previous report
Our restructuring initiatives are primarily intended to optimize our manufacturing and distribution footprint over the mid-term by removing structural fixed costs, and to streamline our SG&A back-office functions.
Previous report
Restructuring and other strategic initiatives during Fiscal 2022 related primarily to our ongoing European reorganization, including $2.5 million of labor, severance and other costs related to relocating certain production activities within Europe during Fiscal 2022, in addition to severance costs of $2.4 million during the year related to relocation and integration of certain support functions into our regional shared service center. We also incurred $3.5 million of costs during Fiscal 2022 in relation to the suspension of our operations in Russia, which included severance costs of $0.7 million, an impairment of inventories of $1.1 million (recognized in cost of sales), and an impairment of fixed and other assets of $1.1 million (recognized in asset impairments). Other restructuring costs incurred during the period related to facility relocations and other legal and consulting costs.
Previous report
Amortization of deferred issuance costs during Fiscal 2022 included the accelerated amortization of $2.2 million due to the repayment of the Euro Term Loan on November 16, 2022. Additional deferred issuance costs incurred from issuing the New Dollar Term Loans in November 2022 added to amortization expense in Fiscal 2023.
Previous report
Other expenses (income)
Previous report
Income tax expense (benefit)
Previous report
In December 2021, the OECD published its Pillar Two model rules, which generally provide for a minimum effective tax rate of 15%. In December 2022, the E.U. Commission adopted a Directive to implement Pillar Two in the E.U., containing detailed rules for top up tax in respect of certain low taxed entities. In July 2022, the U.K. released draft legislation to implement the OECD agreed Pillar Two model rules in the U.K., which is expected to apply for accounting periods beginning on or after December 31, 2023. All sets of proposals are subject to exemptions and exclusions, and are generally intended to apply only to entities that are members of a consolidated group with an annual revenue of at least €750 million. However, while the detail of the proposals is subject to change and the impact on the Company will need to be determined by reference to the final rules, we do not currently anticipate a material impact.
Previous report
Adjusted EBITDA
Previous report
Adjusted EBITDA for Fiscal 2023 was $747.0 million, compared to $680.6 million in the prior year, an increase of 9.8% or $66.4 million. The Adjusted EBITDA margin was 20.9% for Fiscal 2023, a 180 basis point improvement from the prior year. The increase in Adjusted EBITDA was driven primarily by the increase in gross profit of $108.3 million, as described above, partially offset by higher labor and benefit expenses.
Previous report
For a reconciliation of net income to Adjusted EBITDA for each of the periods presented and the calculation of the Adjusted EBITDA margin, see “—Non-GAAP Measures.”
Previous report
Net sales in Power Transmission for Fiscal 2023 increased by 0.8%, or $17.5 million, driven primarily by a $116.3 million benefit from pricing, partially offset by the impact of lower volumes. In addition, Power Transmission net sales were adversely impacted by movements in average currency exchange rates of $18.9 million. As such, core sales increased by 1.7%, or $36.4 million, compared to the prior year.
Previous report
Debt drawings and redemptions
Previous report
On November 16, 2022, we issued a new tranche of $575.0 million of dollar-denominated term loans (“New Dollar Term Loans”) pursuant to an amendment to the credit agreement governing our term loan facilities, using the proceeds to extinguish the entire outstanding principal balance of €563.8 million under our Euro Term Loan facility plus €1.0 million accrued interest. The New Dollar Term Loans have substantially similar terms as the then-outstanding Dollar Term Loans (the “Existing Dollar Term Loans”), except bearing interest at the borrower’s option at either Term SOFR (as defined in the credit agreement) plus 3.50% margin per annum, subject to a 0.50% per annum Term SOFR floor, or at the base rate plus 2.50% per annum, subject to a 1.50% per annum base rate floor. The New Dollar Term Loans require quarterly amortization payments of 1% per annum based on the initial aggregate principal amount and mature in November 2029. Issuance discounts and costs totaling approximately $23.2 million related to the issuance of the New Dollar Term Loan 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 Euro Term Loan resulted in the accelerated recognition of $2.2 million deferred financing costs (recognized in interest expense).
Previous report
On November 16, 2022, we amended the credit agreement governing our term loan facilities to pay off and replace our Euro Term Loan with a new class of $575.0 million of New Dollar Term Loans as described above.
Previous report
Net Debt
Previous report
Net Debt is a non-GAAP measure representing the principal amount of our debt less the carrying amount of cash and cash equivalents. During Fiscal 2023, our Net Debt decreased by $161.7 million from $1,913.0 million as of December 31, 2022 to $1,751.3 million as of December 30, 2023. Net Debt was impacted favorably by $1.7 million due to movements in currency exchange rates. Excluding this impact, Net Debt decreased by $160.0 million, which was driven primarily by cash provided by operating activities of $481.0 million, partially offset by $251.7 million paid to acquire shares under our share repurchase program, capital expenditures of $71.4 million, and dividends paid to non-controlling interests of $18.2 million during Fiscal 2023.
Previous report
Cash Balances
Previous report
As of December 30, 2023, our total cash and cash equivalents were $720.6 million, compared to $578.4 million as of December 31, 2022.
Previous report
Restricted cash was $3.4 million as of December 30, 2023, compared to $3.0 million as of December 31, 2022, including $0.5 million and $0.6 million as of December 30, 2023 and December 31, 2022, respectively, both of which were held in escrow for insurance purposes. Cash held in our non-wholly owned Asian subsidiaries was $182.4 million and $161.3 million as of December 30, 2023 and December 31, 2022, respectively.
Previous report
Non-GAAP Measures
Previous report
Adjusted EBITDA Margin
Previous report
Adjusted EBITDA margin is a non-GAAP measure that represents Adjusted EBITDA expressed as a percentage of net sales. We use Adjusted EBITDA margin to measure the success of our businesses in managing our cost base and improving profitability.
Previous report
Core sales growth reconciliations
Previous report
Net Debt
Previous report
Management uses net debt, rather than the narrower measure of cash and cash equivalents and restricted cash which forms the basis for the consolidated statement of cash flows, as a measure of our liquidity and in assessing the strength of our balance sheet.
Previous report
Management analyzes the key cash flow items driving the movement in net debt to better understand and assess Gates’ cash performance and utilization in order to maximize the efficiency with which resources are allocated. The analysis of cash movements in net debt also allows management to more clearly identify the level of cash generated from operations that remains available for distribution after servicing our debt and after the cash impacts of acquisitions and disposals.
Previous report
Net debt represents the net total of:
Previous report
• the principal amount of our debt; and
Previous report
• the carrying amount of cash and cash equivalents.
Previous report
Net debt was as follows:
Previous report
The principal amount of debt is reconciled to the carrying amount of debt as follows:
Reworded paragraphs (45)
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 (“first-fit”) 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 and first-fit; diversified industrial; industrial off-highway; industrial on-highway; 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 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.
Previous wording
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 channels. This diversification 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 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.
Previous wording
During Fiscal 2023, sales into replacement channels accounted for approximately 64% of our total net sales. Our replacement sales cover a very broad range of applications and industries and, accordingly, are highly correlated with industrial activity and utilization and not a single end market. Replacement products are principally sold through distribution partners that may carry a very broad line of products or may specialize in products associated with a smaller set of end market applications.
Current wording
During Fiscal 2024, sales into replacement channels accounted for approximately 68% of our total net sales. Our replacement sales cover a very broad range of applications and industries and, accordingly, are highly correlated with industrial activity and utilization and not a single end market. Replacement products are principally sold through distribution partners that may carry a very broad line of products or may specialize in products associated with a smaller set of end market applications.
Previous wording
During Fiscal 2023, sales into first-fit channels accounted for approximately 36% 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 Fiscal 2024, 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
Global conflicts, such as the conflict between Russia and Ukraine and the sanctions and counter-sanctions imposed in response to it, created increased economic uncertainty and operational complexity both in Europe, Middle East and Africa (“EMEA”) and globally, particularly in 2022 and early 2023.
Current wording
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. Gates had a single distribution center in Russia that sold primarily to customers based in Russia. In early July 2022, we suspended our operations in Russia. During Fiscal 2024, we deconsolidated the Russian subsidiary upon loss of control and recognized a deconsolidation loss of $12.7 million.
Previous wording
(1) See “—Non-GAAP Measures” for a reconciliation of Adjusted EBITDA to net income from continuing operations, the closest comparable GAAP measure, for each of the periods presented.
Current wording
(1) See “—Non-GAAP Financial Measures” for a reconciliation of Adjusted EBITDA to net income from continuing operations, the closest comparable GAAP measure, for each of the periods presented.
Previous wording
Selling, general and administrative expenses
Current wording
Selling, general and administrative (“SG&A”) expenses
Previous wording
Transaction-related expenses of $2.2 million were incurred during Fiscal 2023, related primarily to the secondary offerings completed in May, August, and December of 2023, fees for amending the New Dollar Term Loans in October 2023 and certain other corporate transactions. Transaction-related expenses of $2.1 million were incurred during the prior year, related primarily to the secondary offering completed in March 2022 and certain other corporate transactions.
Current wording
Transaction-related expenses of $3.3 million were incurred during Fiscal 2024, related primarily to the debt agreement amendments and refinancings that occurred in June 2024 and December 2024, the four secondary offerings completed in 2024, and certain other corporate transactions. Transaction-related expenses of $2.2 million were incurred during the prior year, related primarily to the three secondary offerings completed in 2023, fees for amending the 2022 Dollar Term Loans (as defined below) in October 2023, and certain other corporate transactions.
Previous wording
Restructuring and other strategic initiatives during Fiscal 2023 related primarily to relocating certain production activities in China and Mexico, which included severance and other costs of $4.5 million and $3.0 million, respectively. Additionally, we incurred $0.7 million in severance and other costs related to optimizing production in Europe and $0.9 million of non-severance labor and benefit costs related to relocation and integration of certain support functions into our regional shared service center in Europe. Other restructuring costs during the period included $3.4 million for legal and consulting expenses, as well as activities associated with prior period facility closures or relocations in several countries.
Current wording
Restructuring and other restructuring related initiatives during Fiscal 2023 related primarily to relocating certain production activities in China and Mexico, which included severance and other costs of $4.5 million and $3.0 million, respectively. Additionally, we incurred $0.7 million in severance and other costs related to optimizing production in Europe and $0.9 million of non-severance labor and benefit costs related to relocation and integration of certain support functions into our regional shared service center in Europe. Other restructuring costs during the period included $3.4 million for legal and consulting expenses, as well as activities associated with prior period facility closures or relocations in several countries.
Previous wording
Interest on debt for Fiscal 2023 increased by $24.4 million when compared to the prior year primarily due to higher interest rates on the Dollar Term Loans, partially offset by the impact of derivatives. In addition, interest expense on other loans increased by $0.8 million during Fiscal 2023 due to higher interest rates and higher borrowing amounts under the asset-backed revolver.
Current wording
Interest on debt for Fiscal 2024 decreased by $27.1 million when compared to the prior year, primarily due to lower interest rates applicable on the floating rate Dollar Term Loans and the favorable impact of derivatives. In addition, we incurred no interest under the asset-backed revolver during 2024, which was terminated in June 2024.
Previous wording
Other expenses for Fiscal 2023 were $14.1 million, compared to an income of $13.2 million in the prior year. The economies of Türkiye and Argentina are both designated as highly inflationary economies under U.S. GAAP. The functional currencies for a portion of our Türkiye operations and our Argentina operations were each previously changed from their local currency to the U.S. dollar as a result of applying highly-inflationary accounting treatment. During Fiscal 2023, the foreign currency remeasurement loss related to translation adjustments for entities that operate in highly inflationary economies increased by $20.2 million compared to the prior year period. Additionally, this change was also driven by the impact of net movements in foreign currency exchange rates on net debt and hedging instruments and higher interest costs on post-retirement obligations based on the most recent actuarial valuations, partially offset by increased interest income on our bank deposits.
Current wording
Other (income) expenses for Fiscal 2024 was an income of $17.8 million, compared to a loss of $14.1 million in the prior year. The economies of Türkiye and Argentina are both designated as highly inflationary economies under U.S. GAAP. The functional currencies for a portion of our Türkiye and Argentina operations were each previously changed from their local currency to the U.S. Dollar as a result of applying highly inflationary accounting treatment. During Fiscal 2024, the foreign currency remeasurement loss related to translation adjustments for the associated entities decreased by $15.9 million compared to the prior year period. Additionally, the increase of other income was also driven by a foreign currency gain on net debt and hedging instruments of $13.7 million during the year, compared to a loss of $4.2 million during Fiscal 2023.
Previous wording
For Fiscal 2023, we had an income tax expense of $28.3 million on pre-tax income of $285.3 million, which resulted in an effective tax rate of 9.9% compared to an income tax expense of $14.9 million on pre-tax income of $257.8 million, which resulted in an effective tax rate of 5.8% for Fiscal 2022.
Current wording
For Fiscal 2024, we had an income tax expense of $107.5 million on pre-tax income of $328.0 million, which resulted in an effective tax rate of 32.8% compared to an income tax expense of $28.3 million on pre-tax income of $285.3 million, which resulted in an effective tax rate of 9.9% for Fiscal 2023.
Previous wording
The effective tax rate for Fiscal 2022 was driven primarily by tax benefits related to $53.1 million of changes in valuation allowance (offset by $53.1 million of tax on international operations) including $15.3 million for the partial release of valuation allowance on deferred tax assets for U.S. foreign tax credits , $25.2 million of unrecognized tax benefits primarily due to $26.4 million of lapsed statute of limitations, $10.0 million of manufacturing incentives, $8.1 million of company-owned life insurance deductions, and $0.6 million of state tax provision (net of federal benefit); offset by tax expense related to $53.1 million of tax on international operations, $5.4 million of net other expense and $4.8 million related to currency exchange rate movement.
Current wording
The effective tax rate for Fiscal 2024 was primarily driven by $91.5 million net tax expense related to $68.0 million of change in deferred tax assets for Luxembourg net operating losses related to a reduction in the Luxembourg corporate income tax rate enacted in 2024, $10.7 million of tax on international operations, $9.6 million of currency exchange rate movements primarily related to Luxembourg currency revaluation on indefinite-lived net operating losses, and $3.2 million of net other expense; offset by $66.0 million of net tax benefits related to $45.5 million of change in valuation allowance primarily related to a reduction in the Luxembourg corporate income tax rate enacted in 2024, $10.2 million of company-owned life insurance deductions, and $10.3 million of unrecognized tax benefits primarily due to audit settlement.
Previous wording
The effective tax rate for Fiscal 2023 was driven primarily by tax benefits related to $13.3 million of manufacturing incentives, $12.3 million of unrecognized tax benefits primarily due to audit settlement, $9.9 million of company-owned life insurance deductions, $8.8 million of change in valuation allowance, and $4.4 million of state tax provision (net of federal benefit); offset by tax expense related to $7.4 million of tax on international operations, $1.7 million of currency exchange rate movements and $1.0 million of net other expense.
Current wording
The effective tax rate for Fiscal 2023 was primarily driven by $38.7 million net tax benefits related to $13.3 million of manufacturing incentives, $12.3 million in unrecognized tax benefits primarily due to audit settlement, $9.9 million of company-owned life insurance deductions, $8.8 million of change in valuation allowance, and $4.4 million of state tax provision (net federal benefit); offset by $10.1 million net tax expense related to $7.4 million of tax on international operations, $1.7 million of currency exchange rate movements and $1.0 million of net other expense.
Previous wording
After weighing all of the evidence, giving more weight to the evidence that was objectively verifiable, we determined in Fiscal 2023 that it was more likely than not that deferred income tax assets in the U.S. related to net operating losses totaling $2.1 million are realizable as a result of changes in estimates of taxable profits against which these losses can be utilized. In Fiscal 2022 we determined that it was more likely than not that deferred income tax assets in the U.S. related to foreign tax credits totaling $15.3 million are realizable as a result of changes in estimates of taxable profits against which these credits can be utilized.
Current wording
After weighing all of the evidence, giving more weight to the evidence that was objectively verifiable, we determined in Fiscal 2024 that it was more likely than not that deferred income tax assets of $5.5 million in Türkiye related to net operating losses, $3.7 million in Poland related to special economic zone business credits, and $3.4 million in the U.S. related to net operating losses, are not realizable. Similarly, we determined in Fiscal 2024 that it is more likely than not that deferred income tax assets in the U.S. related to foreign tax credits totaling $3.2 million are realizable as a result of changes in estimates of taxable profits against which these credits can be utilized. In Fiscal 2023 we determined that it was more likely than not that deferred income tax assets in the U.S. related to net operating losses totaling $2.1 million are realizable as a result of changes in estimates of taxable profits against which these losses can be utilized.
Previous wording
Power Transmission (61.4% of Gates’ net sales for the year ended December 30, 2023)
Current wording
Power Transmission (61.9% of Gates’ net sales for the year ended December 28, 2024)
Previous wording
Power Transmission’s overall core sales to automotive customers grew by 8.1% during Fiscal 2023, compared to the prior year periods. Automotive growth during Fiscal 2023 was focused in EMEA, South America and Greater China, which experienced core sales growth of 15.4%, 16.6% and 6.3%, respectively, compared to the prior year period. The overall growth in power transmission core sales was partially offset by a 7.6% decline of sales in the industrial channel during Fiscal 2023, compared to the prior year. The decline within the industrial channel was focused in EMEA and North America, with core sales declines of 17.9% and 8.4%, respectively, compared to the prior year period. Personal mobility and diversified industrial experienced declines of 26.9% and 7.8%. respectively, compared to the prior year period, primarily in North America and EMEA.
Current wording
Power Transmission’s overall core sales to our industrial channel customers had a core sales decline of 5.6% during Fiscal 2024, compared to the prior year periods. Personal mobility, industrial off-highway, and diversified industrial end markets experienced declines of 22.4%, 6.9%, and 2.0%, respectively, compared to the prior year period, primarily in North America and EMEA. Automotive channel sales were relatively consistent compared to the prior year periods, declining by 0.4% during Fiscal 2024. The decline in the automotive channel during Fiscal 2024 was focused in EMEA and Greater China, which experienced core sales declines of 2.0% and 11.6%, respectively, compared to the prior year period. This was partially offset by core sales growth in the automotive channel in North America, South America and East Asia.
Previous wording
Power Transmission Adjusted EBITDA for Fiscal 2023 increased by 14.0% or $56.6 million compared to the prior year, driven primarily by the benefit from pricing, partially offset by lower volumes and higher inflation-related costs. As a result, the Adjusted EBITDA margin for Fiscal 2023 was 21.0%, a 240 basis point increase from the prior year.
Current wording
Power Transmission Adjusted EBITDA for Fiscal 2024 increased by 1.8% or $8.1 million compared to the prior year, driven primarily by enterprise initiatives that favorably impacted manufacturing performance and pricing, partially offset by lower volumes. As a result, the Adjusted EBITDA margin for Fiscal 2024 was 22.2%, a 120 basis point increase from the prior year.
Previous wording
Fluid Power (38.6% of Gates’ net sales for the year ended December 30, 2023)
Current wording
Fluid Power (38.1% of Gates’ net sales for the year ended December 28, 2024)
Previous wording
Net sales in Fluid Power for Fiscal 2023 decreased by 0.1%, or $1.5 million, compared to the prior year, driven primarily by the impact of lower volumes, mostly offset by an $84.1 million benefit from pricing. In addition, Fluid Power net sales were favorably impacted by movements in average currency exchange rates of $10.0 million. As such, core sales decreased by 0.8%, or $11.5 million compared to the prior year.
Current wording
Net sales in Fluid Power for Fiscal 2024 decreased by 5.7%, or $78.9 million, driven by lower volumes of $98.3 million and adverse movements in average currency exchange rates of $4.7 million. The decrease was offset by a $24.1 million benefit from pricing. As such, core sales decreased by 5.4%, or $74.2 million, compared to the prior year.
Previous wording
Fluid Power’s core sales decline in Fiscal 2023 was driven by decreased sales to both industrial and automotive customers. Sales to industrial channels decreased by 1.0%, and automotive channels declined by 0.2%, respectively, compared to the prior year period. The decline of industrial sales were primarily in North America, South America and Greater China, which had declines of 1.3%, 18.5% and 13.2%, respectively, compared to the prior year period. The agriculture and diversified industrial end markets, which drove most of the industrial sales, had declines of 11.9% and 5.7%, respectively. This decline was partially offset by an increase in sales to the energy end market of 7.5%.
Current wording
Fluid Power’s core sales decline in Fiscal 2024 was driven by decreased sales to industrial customers of 9.3%, compared to the prior year period. The decline of industrial sales were primarily in North America and EMEA, which had declines of 10.7% and 12.5%, respectively, compared to the prior year period. Construction and agriculture end markets drove most of the decline, with core sales that decreased by 9.1% and 18.4%, respectively, during Fiscal 2024 as compared to the prior year period. The decline in industrial sales was partially offset by core sales growth in the automotive channel of 7.9% compared to the prior year period. Growth of automotive channel sales was primarily contributed by North America and EMEA.
Previous wording
Fluid Power Adjusted EBITDA for Fiscal 2023 increased by 3.5%, or $9.8 million compared to the prior year period, driven primarily by pricing, partially offset by lower volumes and increased labor and benefits cost. As a result, the Adjusted EBITDA margin was 20.8%, an 80 basis point improvement from the prior year.
Current wording
Fluid Power Adjusted EBITDA for Fiscal 2024 increased by 2.1%, or $6.0 million, compared to the prior year period, driven primarily by enterprise initiatives that favorably impacted manufacturing performance and pricing, and favorable mix of replacement channel sales to OEM channel sales. This was partially offset by lower volumes. As a result, the Adjusted EBITDA margin was 22.5%, a 170 basis point improvement from the prior year.
Previous wording
Our primary liquidity and capital resource needs are for working capital, debt service requirements, capital expenditures, share repurchases, facility expansions and acquisitions. We expect to finance our future cash requirements with cash on hand, cash flows from operations and, where necessary, borrowings under our revolving credit facilities. We have historically relied on our cash flow from operations and various debt and equity financings for liquidity.
Current wording
Our primary liquidity and capital resource needs are for working capital, debt service requirements, capital expenditures, share repurchases, facility expansions and acquisitions. We expect to finance our future cash requirements with cash on hand, cash flows from operations and, where necessary, borrowings under our secured revolving credit facility. We have historically relied on our cash flow from operations and various debt and equity financings for liquidity.
Previous wording
As market conditions warrant, we and/or our Sponsor may from time to time seek to repurchase securities that we have issued or loans that we have borrowed in privately negotiated or open market transactions, by tender offer or otherwise. Subject to any applicable limitations contained in the agreements governing our indebtedness, any such purchases may be funded by existing cash or by incurring new secured or unsecured debt, including borrowings under our credit facilities. The amounts involved in any such purchase transactions, individually or in the aggregate, may be material. Any such purchases may relate to a substantial amount of a particular tranche of debt, with a corresponding reduction, where relevant, in the trading liquidity of that debt. In addition, any such purchases made at prices below the “adjusted issue price” (as defined for U.S. federal income tax purposes) may result in taxable cancellation of indebtedness income to us, which may be material, and result in related adverse tax consequences to us.
Current wording
As market conditions warrant, we may from time to time seek to repurchase securities that we have issued or loans that we have borrowed in privately negotiated or open market transactions, by tender offer or otherwise. Subject to any applicable limitations contained in the agreements governing our indebtedness, any such purchases of ordinary shares or other securities or loans may be funded by existing cash or by incurring new secured or unsecured debt, including borrowings under our credit facilities. The amounts involved in any such purchase transactions, individually or in the aggregate, may be material. Any such purchases of debt securities or loans may relate to a substantial amount of a particular tranche of debt, with a corresponding reduction, where relevant, in the trading liquidity of that debt. In addition, any such purchases of debt made at prices below the “adjusted issue price” (as defined for U.S. federal income tax purposes) may result in taxable cancellation of indebtedness income to us, which may be material, and result in related adverse tax consequences to us.
Previous wording
Cash provided by operating activities was $481.0 million during Fiscal 2023 compared to cash provided by operating activities of $265.8 million during the prior year period, driven primarily by an improvement of $194.6 million in trade working capital movement, combined with improved operating performance in Fiscal 2023 and a decrease of $7.3 million in taxes paid. These increases in operating cash flows are partially offset by an increase of $36.4 million cash paid for interest in the current year period.
Current wording
Cash provided by operating activities was $379.6 million during Fiscal 2024 compared to cash provided by operating activities of $481.0 million during the prior year period, driven primarily by a decrease of $135.5 million in trade working capital movement, combined with an increase of $11.8 million in taxes paid. These increases in operating cash outflows were partially offset by a decrease of $22.5 million cash paid for interest in the current year period and improved operating performance in Fiscal 2024.
Previous wording
Net cash used in investing activities during Fiscal 2023 was $81.8 million, compared to $90.7 million in the prior year period. The decrease of cash used in investing activities was primarily driven by decreased capital expenditures of $15.6 million in Fiscal 2023 compared to the prior year period, partially offset by a $6.0 million increase in net cash paid under company-owned life insurance policies.
Current wording
Net cash used in investing activities during Fiscal 2024 was $104.4 million, compared to $81.8 million in the prior year period. The increase of cash used in investing activities was primarily driven by increased capital expenditures of $35.3 million, a $12.5 million cash derecognition from the deconsolidation of our Russian subsidiary, and higher investment purchases in Fiscal 2024 compared to the prior year period, partially offset by a $20.7 million increase in net cash received under company-owned life insurance policies.
Previous wording
Net cash used in financing activities was $258.3 million during Fiscal 2023, compared to $253.1 million in the prior year period. Fiscal 2023 outflows were primarily related to the $251.7 million paid to acquire shares under a share repurchase program through an intermediary from Blackstone as further described in Note 19 to the consolidated financial statements included elsewhere in this report, as compared to $175.9 million paid to acquire shares under a share repurchase program in Fiscal 2022. The increase of cash outflows for share repurchases compared to the prior year period was partially offset by decreased debt issuance costs paid of $22.0 million in Fiscal 2023, $12.3 million lower debt repayments net of borrowings, and $10.5 million in lower dividends paid to non-controlling interest shareholders in Fiscal 2023.
Current wording
Net cash used in financing activities was $286.7 million during Fiscal 2024, compared to $258.3 million in the prior year period. Fiscal 2024 outflows were primarily related to the $176.1 million paid to acquire shares under a share repurchase program through an intermediary from Blackstone as further described in Note 19 to the consolidated financial statements included elsewhere in this report, as compared to $251.7 million paid to acquire shares under a share repurchase program in Fiscal 2023. The financing cash outflows in Fiscal 2024 also included $88.8 million higher debt repayments net of borrowings, and increased debt issuance costs paid of $20.3 million, compared to prior year periods.
Previous wording
We refer to the term loans denominated in U.S. dollars as the “Dollar Term Loans” and the unsecured senior notes denominated in U.S. dollars as the “Dollar Senior Notes”. Details of our long-term debt are presented in Note 15 to the consolidated financial statements included elsewhere in this annual report.
Current wording
We refer to the term loans denominated in U.S. dollars as the “Dollar Term Loans” and the unsecured senior notes denominated in U.S. dollars as the “Dollar Senior Notes”. The Dollar Term Loans that were issued on February 24, 2021 and extinguished on June 4, 2024 are referred to as the “2021 Dollar Term Loans”. The new tranche of dollar term loans that were issued on June 4, 2024 and repriced on December 10, 2024 are referred to as the “2024 Dollar Term Loans”, and the Dollar Term Loans that were issued on November 16, 2022 and repriced on June 4, 2024 and December 10, 2024 are referred to as the “2022 Dollar Term Loans.” Details of our long-term debt are presented in Note 15 to the consolidated financial statements included elsewhere in this annual report.
Previous wording
During May 2023, we drew $100.0 million under our asset-backed revolving credit facility to partially fund the purchase of shares under our share repurchase program, as discussed further in Note 19 to the consolidated financial statements included elsewhere in this annual report. The balance on the asset-backed revolving credit facility was fully paid off during the year ended December 30, 2023.
Current wording
In August 2024, we drew $40.0 million under our revolving credit facility to partially fund the purchase of our ordinary shares under our 2024 share repurchase program, as discussed further in Note 19 to the consolidated financial statements included elsewhere in this annual report. In September and October 2024, we made payments on this amount and had no balance as of December 28, 2024.
Previous wording
During March 2022, we drew $70.0 million under our asset-backed revolving credit facility to partially fund the purchase of shares under our share repurchase program, as discussed further in Note 19 to the consolidated financial statements included elsewhere in this annual report. During Fiscal 2022, we paid down the borrowings on the asset-backed revolver and had no remaining outstanding balance as of December 31, 2022.
Current wording
In May 2023, we drew $100.0 million under our asset-backed revolving credit facility to partially fund the purchase of shares under our share repurchase program, as discussed further in Note 19 to the consolidated financial statements included elsewhere in this annual report. During Fiscal 2023, we paid down the borrowings on the asset-backed revolver and had no outstanding borrowings as of December 30, 2023. This facility was terminated on June 4, 2024.
Previous wording
On October 10, 2023, we amended the New Dollar Term Loans’ interest rate to be, at our option, either Term SOFR, subject to a floor of 0.50%, plus a margin of 3.00% per annum, or the base rate, subject to a 1.50% per annum floor, plus 2.00% per annum.
Current wording
On October 10, 2023, 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 3.00% per annum, or the base rate, subject to a 1.50% per annum floor, plus 2.00% per annum.
Previous wording
On March 1, 2023, we amended the Existing Dollar Term Loans, revolving credit facility and asset-backed revolver, which bore interest at LIBOR plus an applicable margin. The amendments modified the reference rates for borrowings in dollar from LIBOR to Term SOFR or Adjusted Term SOFR, as applicable. For further information on the facilities, see Note 15 to the consolidated financial statements included elsewhere in this annual report.
Current wording
On March 1, 2023, we amended the 2021 Dollar Term Loans, revolving credit facility and asset-backed revolver, which bore interest at LIBOR plus an applicable margin. The amendments modified the reference rates for borrowings in dollar from LIBOR to Term SOFR or Adjusted Term SOFR, as applicable.
Previous wording
For the twelve months ended December 30, 2023, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 74% of our net sales and 73% of our EBITDA as defined in the financial covenants attaching to the senior secured credit facilities. As of December 30, 2023, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 67% of our total assets and approximately 26% of our total liabilities.
Current wording
For the twelve months ended December 28, 2024, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 73% of our net sales and 65% of our EBITDA as defined in the financial covenants attaching to the senior secured credit facilities. As of December 28, 2024, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 66% of our total assets and approximately 25% of our total liabilities.
Previous wording
As of December 30, 2023, our asset-backed revolving credit facility had a borrowing base of $250.0 million, being the maximum amount we can draw down based on the current value of the secured assets. As of December 30, 2023, there were letters of credit outstanding against the facility amounting to $29.7 million. We also have a secured revolving credit facility that provides for multi-currency revolving loans up to an aggregate principal amount of $250.0 million, with no amounts drawn as of December 30, 2023. As of December 30, 2023, our total committed borrowing headroom was $470.3 million, in addition to cash balances of $720.6 million.
Current wording
On June 4, 2024, we extinguished our asset-backed revolving credit facility as discussed further in Note 15 to the consolidated financial statements included elsewhere in this annual report. As part of an amendment to our credit agreement, we increased borrowing capacity under our secured revolving credit facility that provides for multi-currency revolving loans from $250.0 million to $500.0 million and extended the maturity from November 18, 2026 to the date that is the earliest of (x) June 4, 2029 and (y) April 1, 2029, if greater than $500.0 million in aggregate principal amount of the Dollar Senior Notes due 2029 are outstanding. As of December 28, 2024, there were letters of credit outstanding against the facility amounting to $28.2 million and no drawings on the revolving credit facility. As of December 28, 2024, our total committed borrowing headroom was $471.8 million, in addition to cash balances of $682.0 million.
Previous wording
Our consolidated contractual obligations and commercial commitments are summarized in the following table which includes aggregate information about our contractual obligations as of December 30, 2023 and the periods in which payments are due, based on the earliest date on which we could be required to settle the liabilities. The table below excludes our gross liability for uncertain tax positions of $79.4 million because the timing of cash settlement, if any, is unknown at this time.
Current wording
Our consolidated contractual obligations and commercial commitments are summarized in the following table which includes aggregate information about our contractual obligations as of December 28, 2024 and the periods in which payments are due, based on the earliest date on which we could be required to settle the liabilities. The table below excludes our gross liability for uncertain tax positions of $82.2 million because the timing of cash settlement, if any, is unknown at this time.
Previous wording
(2) Post-retirement benefit obligations represent our expected cash contributions to defined benefit pension and other post-retirement benefit plans in 2024. It is not practicable to present expected cash contributions for subsequent years because they are determined annually on an actuarial basis to provide for current and future benefits in accordance with federal law and other regulations.
Current wording
(2) Post-retirement benefit obligations represent our expected cash contributions to defined benefit pension and other post-retirement benefit plans in Fiscal 2025. It is not practicable to present expected cash contributions for subsequent years because they are determined annually on an actuarial basis to provide for current and future benefits in accordance with federal law and other regulations.
Previous 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.
Current 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.
Previous wording
(3) On January 31, 2023, one of our customers filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. In connection with the bankruptcy proceedings, we evaluated our potential risk and exposure relating to our outstanding pre-petition accounts receivable balance from the customer and recorded a $11.4 million pre-tax charge during Fiscal 2023 to reflect our estimated recovery. We continue to monitor the circumstances surrounding the bankruptcy in determining whether adjustments to this recovery estimate are necessary.
Current wording
(4)On January 31, 2023, one of our customers filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. In connection with the bankruptcy proceedings, we preliminarily evaluated our potential risk and exposure relating to our outstanding pre-petition accounts receivable balance from the customer and recorded an initial pre-tax charge to reflect our estimated recovery. We continue to monitor the circumstances surrounding the bankruptcy and adjust our estimate as necessary.
Previous wording
Core sales growth is a non-GAAP measure that represents net sales for the period excluding the impacts of movements in average currency exchange rates and the first-year impacts of acquisitions and disposals, when applicable. We present core revenue growth because it allows for a meaningful comparison of year-over-year performance without the volatility caused by foreign currency gains or losses or the incomparability that would be caused by impacts of acquisitions or disposals. Management believes that this measure is therefore useful for securities analysts, investors and other interested parties to assist in their assessment of the operating performance of our businesses. The closest GAAP measure is net sales.
Current wording
Core sales is a non-GAAP measure that represents net sales for the period excluding the impacts of movements in average currency exchange rates and the first-year impacts of acquisitions and disposals, when applicable. Core sales growth is the change in core sales expressed as a percentage of prior period net sales. We present core sales growth because it allows for a meaningful comparison of year-over-year performance without the volatility caused by foreign currency gains or losses or the incomparability that would be caused by impacts of acquisitions or disposals. Management believes that this measure is therefore useful for securities analysts, investors and other interested parties to assist in their assessment of the operating performance of our businesses. The closest GAAP measure is net sales.
Previous wording
The financial maintenance ratio in our revolving 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 revolving credit facility, 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 Global LLC level and adjust for certain additional items such as severance costs, the pro forma impacts of acquisitions and the pro forma impacts of cost-saving initiatives. These additional adjustments during the last 12 months, as calculated pursuant to such agreements, resulted in a net benefit to Adjusted EBITDA for ratio calculation purposes of $4.6 million.
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 last 12 months, as calculated pursuant to such agreements, resulted in a net benefit to Adjusted EBITDA for ratio calculation purposes of $8.5 million as of December 28, 2024. Pursuant to the terms of the credit agreement governing our revolving credit facility and term loans, the Company may not, subject to certain exceptions, permit its Consolidated First Lien Net Leverage Ratio (as defined in the credit agreement) to exceed 4.50 to 1.00 as of the end of the test period if borrowings under the revolving credit facility exceed a certain threshold. Pursuant to the credit agreement, this ratio is defined as Consolidated First Lien Net Debt (as defined in the credit agreement) divided by Consolidated EBITDA (as defined in the credit agreement). For a description of the other material terms related to our debt agreements, please refer to Note 15 to the consolidated financial statements included elsewhere in this report, and for a discussion of risks related to the compliance or non-compliance with the covenants described herein on the Company’s financial condition and liquidity, please refer to the factors described in Item 1A. “Risk Factors—Risks Related to Our Indebtedness” in Part I of this annual report. During the periods covered by the consolidated financial statements included in this report, we were in compliance with the financial covenant and had no borrowing on the revolving credit facility.
Showing the first 40 of 45 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
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.