Gates Industrial Corp plc

Previous wording

During the three months ended March 29, 2025, sales into replacement channels accounted for approximately 68% of our total net sales. Our replacement sales cover a very broad range of applications and industries and, accordingly, are highly correlated with industrial activity and utilization and not a single end market. Replacement products are principally sold through distribution partners that may carry a very broad line of products or may specialize in products associated with a smaller set of end market applications.

Current wording

During the six months ended June 28, 2025, sales into replacement channels accounted for approximately 68% of our total net sales. Our replacement sales cover a very broad range of applications and industries and, accordingly, are highly correlated with industrial activity and utilization and not a single end market. Replacement products are principally sold through distribution partners that may carry a very broad line of products or may specialize in products associated with a smaller set of end market applications.

Previous wording

During the three months ended March 29, 2025, sales into OEM channels accounted for approximately 32% of our total net sales. OEM sales are to a variety of industrial and automotive customers. Our industrial OEM customers cover a diverse range of industries and applications and many of our largest OEM customers manufacture construction and agricultural equipment.

Current wording

During the six months ended June 28, 2025, sales into first-fit channels accounted for approximately 32% of our total net sales. First-fit sales are to a variety of industrial and automotive customers. Our industrial first-fit customers cover a diverse range of industries and applications and many of our largest first-fit customers manufacture construction and agricultural equipment.

Previous wording

Our global operating footprint and worldwide sales reach expose us to risks associated with trade conflicts between the U.S. and its trading partners. Escalating global trade conflicts due to recent U.S. and retaliatory tariffs and geopolitical tensions have led to, and may continue to lead to, inflationary pressures, uncertainty, and volatility in the market and, therefore, could impact our operations, supply chain and financial performance. While we have not experienced a significant change in customer demand or significant disruptions to our supply chain, we have begun to experience cost increases and expect additional costs, primarily for our businesses in North America and China. We are taking actions to mitigate the impact of tariffs through price increases and adjustments to our supply chain and operations, and intend to offset any incremental tariff impacts for the remainder of the year. Whether these strategies or other effects of the tariffs will impact customer behaviors, including future demand for our products, remains uncertain. We will continue to monitor and evaluate risks related to the tariffs and any resulting impact on macroeconomic conditions and our business. For further information regarding the risks and uncertainties associated with U.S. government policies, actions or legislation, please refer to “Part II - Item 1A: Risk Factors” included elsewhere in this quarterly report.

Current wording

Our global operating footprint and worldwide sales reach expose us to risks associated with trade conflicts between the U.S. and its trading partners. Escalating global trade conflicts due to recent U.S. and retaliatory tariffs and geopolitical tensions have led to, and may continue to lead to, inflationary pressures, uncertainty, and volatility in the market and, therefore, could impact our operations, supply chain and financial performance. While we have not experienced a meaningful change in customer demand or significant disruptions to our supply chain, we have begun to experience cost increases and may incur additional costs, primarily for our businesses in North America. The global tariff regime continues to evolve and we could have additional exposures in the future. We are taking actions to mitigate the impact of tariffs through price increases and adjustments to our supply chain and operations, and intend to offset any incremental tariff impacts for the remainder of the year. Whether these strategies or other effects of the tariffs will impact customer behaviors, including future demand for our products, remains uncertain. We will continue to monitor and evaluate risks related to the tariffs and any resulting impact on macroeconomic conditions and our business.

Previous wording

Results for the three months ended March 29, 2025 compared to the results for the three months ended March 30, 2024

Current wording

Results for the three and six months ended June 28, 2025 compared to the results for the three and six months ended June 29, 2024

Previous wording

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

Current wording

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

Previous wording

Net sales during the three months ended March 29, 2025 were $847.6 million, compared to $862.6 million during the prior year period, a decrease of 1.7%, or $15.0 million. The following table lists the primary drivers behind the change in net sales (amounts in millions):

Current wording

Net sales during the three months ended June 28, 2025 were $883.7 million, compared to $885.5 million during the prior year period, a decrease of 0.2%, or $1.8 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 March 29, 2025 was $503.0 million, compared to $532.6 million for the prior year period, a decrease of 5.6%, or $29.6 million. The following table lists the primary drivers behind the change in cost of sales (amounts in millions):

Current wording

Cost of sales for the three months ended June 28, 2025 was $523.5 million, compared to $528.1 million for the prior year period, a decrease of 0.9%, or $4.6 million. The following table lists the primary drivers behind the change in cost of sales (amounts in millions):

Previous wording

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

Current wording

Selling, general and administrative (“SG&A”) expenses for the three months ended June 28, 2025 were $231.2 million compared to $221.2 million for the prior year period. This increase of $10.0 million was driven primarily by the $6.6 million gain from disposal of property, plant and equipment that occurred during the prior year period and higher restructuring-related severance expenses of $3.1 million.

Previous wording

SG&A expenses for the three months ended March 29, 2025 were $217.3 million compared to $211.7 million for the prior year period. This increase of $5.6 million was primarily attributable to higher corporate-owned life insurance related expenses of $6.6 million, and higher consulting and professional fees of $1.7 million. This increase was partially offset by lower stock based compensation of $2.5 million during the three months ended March 29, 2025 compared to prior year period.

Current wording

SG&A expenses for the six months ended June 28, 2025 were $447.4 million compared to $436.3 million for the prior year period. This increase of $11.1 million was primarily attributable to the $7.2 million gain from disposal of property, plant and equipment that occurred during the prior year period and $8.1 million of higher corporate-owned life insurance related expenses, partially offset by decreased labor and benefit costs.

Previous wording

Transaction-related expenses for the three months ended March 29, 2025 were $0.4 million compared to $0.4 million for the prior year period. Transaction-related expenses incurred during the three months ended March 29, 2025 were primarily related to certain non-recurring debt related costs. Transaction-related expenses incurred during the three months ended March 30, 2024 primarily related to a secondary offering by a selling shareholder.

Current wording

Transaction-related expenses of $0.0 million and $0.4 million were incurred during the three and six months ended June 28, 2025, respectively, primarily related to certain non-recurring debt related costs. Transaction-related expenses of $1.2 million and $1.6 million were incurred during the prior year three and six months ended June 29, 2024, respectively, primarily related to the debt refinancing that occurred in June 2024 and certain other corporate transactions.

Previous wording

Restructuring and other restructuring-related expenses during the three months ended March 29, 2025 primarily included $2.3 million of costs related to the relocation of certain production activities and reorganization of our operations in Mexico, as well as severance and professional service fees.

Current wording

Restructuring and other restructuring-related expenses during each of 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. Other restructuring and restructuring-related costs incurred during the three and six months ended June 28, 2025 included costs related to general severance, other labor and benefits, professional service fees, and costs related to relocation of production activities and reorganization of our operations in Mexico.

Previous wording

Restructuring and other restructuring-related expenses during the three months ended March 30, 2024 related to professional service fees, relocation of certain production activities in Mexico, and other restructuring costs associated with prior period facility closures or relocations in several countries.

Current wording

Restructuring and restructuring-related expenses during the three and six months ended June 29, 2024 included $0.8 million and $1.6 million, respectively, of costs related to the relocation of certain production activities in Mexico. Other restructuring costs incurred during the three and six months ended June 29, 2024 included professional service fees, and costs associated with prior period facility closures or relocations in several countries.

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 on debt for the three months ended March 29, 2025 decreased when compared to the comparable prior year period, primarily due to the combination of favorable impact of derivatives and lower interest rates applicable on the floating rate Dollar Term Loans. Amortization of deferred issuance costs during the three months ended March 30, 2024 included the accelerated amortization of $1.0 million due to the $100.0 million repayment against our 2021 Dollar Term Loans (as defined below) in February 2024.

Current wording

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 $20.3 million and $28.2 million during the three and six months ended June 28, 2025, respectively, when compared to the equivalent prior year period, primarily due to the $14.8 million accelerated amortization of deferred issuance costs related to the debt refinancing that occurred in June 2024, partially offset by the unfavorable impact of derivatives. Additionally, interest on debt decreased by $7.5 million and $15.6 million during the three and six months ended June 28, 2025, respectively, when compared to the equivalent prior year period, primarily due to lower interest rates as a result of the refinancing activities executed in 2024.

Previous wording

Other expenses for the three months ended March 29, 2025 were $1.3 million, compared to $1.5 million of income in the prior year period. This change was driven primarily by the impact of lower interest income on bank deposits compared to the prior year period due to lower interest rates, and unfavorable net movements in foreign currency exchange rates on net debt and hedging instruments. The decrease was partially offset by a lower foreign currency remeasurement loss related to translation adjustments for entities that operate in highly inflationary economies, specifically Argentina and Türkiye.

Current wording

Other expenses (income) for the three and six months ended June 28, 2025 were expenses of $6.8 million and $9.2 million, respectively, compared to income of $6.0 million and $10.9 million, respectively, in the prior year periods. These changes were primarily driven by financing related loss primarily due to foreign currency exchange rate movement on intercompany loans and hedging instruments and the unfavorable impact of foreign currency transaction loss related to settlement and translation of monetary assets and liabilities for the three and six months ended June 28, 2025. The change was also attributed to lower interest income on our bank deposits, partially offset by a lower foreign currency remeasurement loss related to translation adjustments for entities that operate in highly inflationary economies, specifically Argentina and Türkiye, for the six months ended June 28, 2025 compared to the prior year period.

Previous wording

For the three months ended March 29, 2025, we had an income tax expense of $25.2 million on pre-tax income of $93.8 million, which resulted in an effective tax rate of 26.9%, compared to an income tax expense of $34.5 million on pre-tax income of $80.7 million, which resulted in an effective tax rate of 42.8% for the three months ended March 30, 2024.

Current wording

For the three months ended June 28, 2025, we had 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%, compared to an income tax expense of $12.3 million on pre-tax income of $90.2 million, which resulted in an effective tax rate of 13.6% for the three months ended June 29, 2024.

Previous wording

For the three months ended March 29, 2025, the effective tax rate was driven primarily by the jurisdictional mix of earnings and by net discrete tax expense of $0.1 million comprised of a discrete tax benefit of $6.0 million related to excess tax benefits on stock option exercises and $0.1 million related to other net discrete benefits, offset by discrete expenses of $5.2 million primarily related to changes in the realizability of certain deferred tax assets and $1.0 million related to net unrecognized tax benefits. For the three months ended March 30, 2024, the effective tax rate was driven primarily by the jurisdictional mix of earnings and by discrete tax expenses of $11.7 million, of which $9.1 million related to changes in the realizability of certain deferred tax assets, $1.4 million related to net unrecognized tax benefits, and $1.2 million related to other net discrete expenses.

Current wording

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. For the three months ended June 29, 2024, the effective tax rate was driven primarily by discrete tax benefits of $12.2 million, of which $13.8 million related to unrecognized tax benefits due to audit closures offset by $1.6 million of discrete expenses related to changes in the realizability of certain deferred tax assets.

Previous wording

As of each reporting date, we consider new evidence, both positive and negative, that could impact our view with regard to the future realization of deferred tax assets. We maintain our positions with regard to future realization of deferred tax assets, including those with respect to which we continue maintaining valuation allowances, until there is sufficient new evidence to support a change in expectations. Such a change in expectations could arise due to many factors, including those impacting our forecasts of future earnings, as well as changes in the international tax laws under which we operate and tax planning. It is not reasonably possible to forecast any such changes at the present time, but it is possible that, should they arise, our view of their effect on the future realization of deferred tax assets may materially impact our financial statements.

Current wording

As of each reporting date, we consider new evidence, both positive and negative, that could impact our view with regard to the future realization of deferred tax assets. We will maintain our positions with regard to future realization of deferred tax assets, including those with respect to which we continue maintaining valuation allowances, until there is sufficient new evidence to support a change in expectations. Such a change in expectations could arise due to many factors, including those impacting our forecasts of future earnings, as well as changes in the international tax laws under which we operate and tax planning. It is not reasonably possible to forecast any such changes at the present time, but it is possible that, should they arise, our view of their effect on the future realization of deferred tax assets may materially impact our financial statements.

Previous wording

Power Transmission (62.2% of Gates’ net sales for the three months ended March 29, 2025)

Current wording

Power Transmission (62.2% and 62.2%, respectively, of Gates’ net sales for the three and six months ended June 28, 2025)

Previous wording

Power Transmission Adjusted EBITDA for the three months ended March 29, 2025 decreased by 1.9%, or $2.3 million, compared to the prior period. This decrease was driven primarily by a combination of increased SG&A expenses and the adverse net impact of movements in average currency exchange rates, partially offset by favorable benefits from pricing and enterprise initiatives that favorably impacted manufacturing performance. As a result, Adjusted EBITDA margin for the three months ended March 29, 2025 was 22.1%, a 20 basis point decrease from the prior year period Adjusted EBITDA margin of 22.3%.

Current wording

Power Transmission Adjusted EBITDA for the three months ended June 28, 2025 decreased by 0.8%, or $1.0 million, compared to the prior year period, driven primarily by a combination of lower volumes, absorption of fixed costs and unfavorable impact of foreign currency transaction loss, partially offset by pricing. As a result, Adjusted EBITDA margin was 22.3%, a 50 basis point decline from the prior year period.

Previous wording

Fluid Power (37.8% of Gates’ net sales for the three months ended March 29, 2025)

Current wording

Fluid Power (37.8% and 37.8%, respectively, of Gates’ net sales for the three and six months ended June 28, 2025)

Previous wording

Net sales in Fluid Power for the three months ended March 29, 2025 decreased by 2.9%, or $9.4 million. Lower volumes drove $2.8 million of the decrease, which was more than offset by a $3.2 million benefit from pricing. Impact by movements in average currency exchange rates of $9.8 million was the primary driver of Fluid Power’s net sales decline. As such, core sales increased by 0.1%, or $0.4 million, compared to the prior year period.

Current wording

Net sales in Fluid Power for the three months ended June 28, 2025 decreased by 2.9%, or $10.0 million, compared to the prior year period, driven primarily by a decrease in volume, partially offset by a$5.8 million benefit from pricing. Our net sales were adversely impacted by movements in average currency exchange rates of $1.5 million. As such, core sales decreased by 2.5%, or $8.5 million, compared to the prior year period.

Previous wording

Fluid Power Adjusted EBITDA for the three months ended March 29, 2025 decreased by 7.8%, or $6.0 million, compared to the prior year period. The decrease in Adjusted EBITDA was driven primarily by a combination of lower absorption of fixed costs and volumes, partially offset by favorable benefits from pricing and favorable mix of replacement channel sales to OEM channel sales. The Adjusted EBITDA margin consequently decreased by 120 basis points compared to the prior year period.

Current wording

Fluid Power Adjusted EBITDA for the three months ended June 28, 2025 decreased by 2.6%, or $2.0 million, compared to the prior year period, driven primarily by a combination of lower volumes and absorption of fixed costs, partially offset by pricing and favorable mix of replacement channel sales to OEM channel sales. As a result, the Adjusted EBITDA margin was 22.9%, a 10 basis point improvement from the prior year period.

Previous wording

Cash provided by operating activities was $7.3 million during the three months ended March 29, 2025 compared to cash used in operating activities of $21.0 million during the prior year period, driven primarily by a favorable $16.4 million in trade working capital movement, a decrease of $16.8 million in income taxes paid, and a decrease of $9.0 million interest paid compared to the prior year period.

Current wording

Cash provided by operating activities was $110.3 million during the six months ended June 28, 2025 compared to cash provided by operating activities of $72.8 million during the prior year period, primarily driven by a $15.2 million movement of operating assets and liabilities and a decrease of $29.2 million in cash interest paid compared to the prior year period.

Previous wording

Net cash used in investing activities during the three months ended March 29, 2025 was $31.0 million, compared to $19.5 million in the prior year period. The increase of cash used in investing activities was primarily driven by increased capital expenditures of $8.1 million and a $5.1 million increase in net cash paid under company-owned life insurance policies compared to the prior year period.

Current wording

Net cash used in investing activities during the six months ended June 28, 2025 was $62.0 million, compared to $40.1 million in the prior year period. The increase of cash used in investing activities was primarily driven by a $13.9 million increase in net cash paid under company-owned life insurance policies, $8.4 million lower proceeds from the sale of property, plant and equipment that occurred in the prior year period, and increased capital expenditures of $10.3 million, partially offset by investment purchases of $11.2 million made in the prior year period.

Previous wording

Net cash used in financing activities was $24.6 million during the three months ended March 29, 2025, compared to $148.9 million in the prior year period. Current year outflows were primarily related to the $13.0 million paid to acquire shares under our share repurchase program, $4.7 million debt repayment, and $11.5 million of employee taxes paid from share withheld on exercised options.

Current wording

Net cash used in financing activities was $33.4 million during the six months ended June 28, 2025, compared to $157.6 million in the prior year period. Current year outflows were primarily related to the $9.4 million debt repayment, $13.0 million paid to acquire shares under our share repurchase program and $16.9 million of employee taxes paid from shares withheld.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

On July 24, 2025, we notified our lenders that we will make a voluntary principal debt repayment of $100.0 million against our 2022 Dollar Term Loans on July 31, 2025.

Previous wording

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

Current wording

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

Previous wording

For the three months ended March 29, 2025, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 72% of our net sales and 63% of our EBITDA as defined in the financial covenants attaching to the senior secured credit facilities. As of March 29, 2025, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 66% of our total assets and approximately 26% of our total liabilities.

Current wording

For the twelve months ended June 28, 2025, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 71% of our net sales and 62% of our EBITDA as defined in the financial covenants attaching to the senior secured credit facilities. As of June 28, 2025, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 68% of our total assets and approximately 29% of our total liabilities.

Previous wording

On June 4, 2024, we extinguished our asset-backed revolving credit facility as discussed further in Note 12 to the condensed consolidated financial statements included elsewhere in this quarterly report. As part of an amendment to our credit agreement, we increased borrowing capacity under our secured revolving credit facility that provides for multi-currency revolving loans from $250.0 million to $500.0 million and extended the maturity from November 18, 2026 to the date that is the earliest of (x) June 4, 2029 and (y) April 1, 2029, if greater than $500.0 million in aggregate principal amount of the Dollar Senior Notes due 2029 are outstanding. As of March 29, 2025, there were letters of credit outstanding against the facility amounting to $28.8 million and no drawings on the revolving credit facility. As of March 29, 2025, our total committed borrowing headroom was $471.2 million, in addition to cash balances of $640.2 million.

Current wording

On June 4, 2024, we extinguished our asset-backed revolving credit facility as discussed further in Note 12 to the condensed consolidated financial statements included elsewhere in this quarterly report. As part of an amendment to our credit agreement, we increased borrowing capacity under our secured revolving credit facility that provides for multi-currency revolving loans from $250.0 million to $500.0 million and extended the maturity from November 18, 2026 to the date that is the earliest of (x) June 4, 2029 and (y) April 1, 2029, if greater than $500.0 million in aggregate principal amount of the Dollar Senior Notes due 2029 are outstanding. As of June 28, 2025, there were letters of credit outstanding against the facility amounting to $29.7 million. As of June 28, 2025, our total committed borrowing headroom was $470.3 million, in addition to cash and cash equivalents balances of $719.7 million.

Previous wording

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

Current wording

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

Previous wording

•restructuring expenses, including severance-related expenses;

Current wording

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

Previous wording

We exclude from Adjusted EBITDA acquisition-related costs that are required to be expensed in accordance with U.S. GAAP. We also exclude costs associated with major corporate transactions because we do not believe that they relate to our performance. Other items are excluded from Adjusted EBITDA because they are individually or collectively significant items that are not considered to be representative of the underlying performance of our businesses. During the periods presented, we excluded restructuring, restructuring-related expenses, and asset impairments that reflect specific actions taken by management to shutdown, downsize, or otherwise fundamentally reorganize areas of Gates’ business. We also excluded a credit gain related to a customer bankruptcy, share based compensation, and changes in the LIFO inventory reserve recognized in cost of sales for certain inventories that are valued on a LIFO basis. During inflationary or deflationary pricing environments, LIFO adjustments can result in variability of the cost of sales recognized each period as the most recent costs are matched against current sales, while historical, typically lower, costs are retained in inventory. LIFO adjustments are determined based on published pricing indices, which often are not representative of the actual cost changes or timing of those changes as experienced by our business. Excluding the impact from the application of LIFO therefore improves the comparability of our financial performance from period to period and with the Company’s peers, and more closely represents the physical flow of our inventory and how we manage the business.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

(2) Inventory write-offs and adjustments include the reversal of the adjustment to remeasure certain inventories on a LIFO basis. During the three months ended March 29, 2025, the Company experienced a decrease in inventory values that resulted in the liquidation of a LIFO inventory layer. This LIFO liquidation did not have a significant effect on net income.

Current wording

(2) Inventory write-offs and adjustments include the reversal of the adjustment to remeasure certain inventories on a LIFO basis.

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 last 12 months, as calculated pursuant to such agreements, resulted in a net benefit to Adjusted EBITDA for ratio calculation purposes of $9.6 million as of March 29, 2025. Pursuant to the terms of the credit agreement governing our revolving credit facility and term loans, the Company may not, subject to certain exceptions, permit its Consolidated First Lien Net Leverage Ratio (as defined in the credit agreement) to exceed 4.50 to 1.00 as of the end of the test period if borrowings under the revolving credit facility exceed a certain threshold. Pursuant to the credit agreement, this ratio is defined as Consolidated First Lien Net Debt (as defined in the credit agreement) divided by Consolidated EBITDA (as defined in the credit agreement). For a description of the other material terms related to our debt agreements, please refer to Note 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 June 28, 2025, as calculated pursuant to such agreements, resulted in a net benefit to Adjusted EBITDA for ratio calculation purposes of $6.9 million. Pursuant to the terms of the credit agreement governing our revolving credit facility and term loans, the Company may not, subject to certain exceptions, permit its Consolidated First Lien Net Leverage Ratio (as defined in the credit agreement) to exceed 4.50 to 1.00 as of the end of the test period if borrowings under the revolving credit facility exceed a certain threshold. Pursuant to the credit agreement, this ratio is defined as Consolidated First Lien Net Debt (as defined in the credit agreement) divided by Consolidated EBITDA (as defined in the credit agreement). For a description of the other material terms related to our debt agreements, please refer to Note 12 to the condensed consolidated financial statements included elsewhere in this report, and for a discussion of risks related to the compliance or non-compliance with the covenants described herein on the Company’s financial condition and liquidity, please refer to the factors described in Item 1A. “Risk Factors—Risks Related to Our Indebtedness” in Part I of the annual report. During the periods covered by the condensed consolidated financial statements included in this report, we were in compliance with the financial covenant and had no borrowing on the revolving credit facility.

Previous wording

Gates Industrial Corporation plc is not an obligor under our revolving credit facility, our term loans or the indenture governing our outstanding notes. Gates Industrial Holdco Limited, a direct wholly-owned subsidiary of Gates Industrial Corporation plc, is the parent guarantor under our revolving credit facility, our term loans, and our outstanding notes. The only significant differences between the results of operations and net assets that would be shown in the consolidated financial statements of Gates Industrial Holdco Limited and those for the Company that are included elsewhere in this report are (i) an additional net intercompany loan payable due to Gates Industrial Holdco Limited and its subsidiaries from the Company, which was $216.0 million and $258.4 million as of March 29, 2025 and December 28, 2024, respectively, (ii) an additional intercompany receivable of $4.7 million as of March 29, 2025 and an intercompany payable of $6.6 million as of December 28, 2024, due to Gates Industrial Holdco Limited and its subsidiaries from the Company attributable to UK tax group relief, and (iii) additional cash and cash equivalents held by the Company, which was $1.7 million and $10.6 million as of March 29, 2025 and December 28, 2024, respectively.

Current wording

Gates Industrial Corporation plc is not an obligor under our revolving credit facility, our term loan facility or the indenture governing our outstanding notes. Gates Industrial Holdco Limited, a direct wholly-owned subsidiary of Gates Industrial Corporation plc, is the parent guarantor under our revolving credit facility, our term loan facility, and our outstanding notes. The only significant differences between the results of operations and net assets that would be shown in the consolidated financial statements of Gates Industrial Holdco Limited and those for the Company that are included elsewhere in this report are (i) an additional net intercompany loan receivable due to Gates Industrial Holdco and its subsidiaries from the Company, which was $234.4 million and $258.4 million as of June 28, 2025 and December 28, 2024, respectively, (ii) an additional intercompany receivable of $5.2 million as of June 28, 2025 and an intercompany payable of $6.6 million as of December 28, 2024, due to Gates Industrial Holdco Limited and its subsidiaries from the Company attributable to UK tax group relief, and (iii) an additional cash and cash equivalents held by the Company, which was $18.7 million and $10.6 million as of June 28, 2025 and December 28, 2024, respectively.