10q10k10q10k.net

What changed in Gates Industrial Corp plc's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Gates Industrial Corp plc's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+406 added−460 removedSource: 10-K (2024-02-08) vs 10-K (2022-02-11)

Top changes in Gates Industrial Corp plc's 2023 10-K

406 paragraphs added · 460 removed · 303 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

72 edited+22 added−24 removed24 unchanged
Biggest changeOur products play essential roles in a diverse range of applications across a wide variety of end markets ranging from harsh and hazardous off-highway applications such as agriculture and construction, and diversified industrial applications such as automated manufacturing and logistics systems, to everyday consumer applications such as printers, power washers, automatic doors and vacuum cleaners.
Biggest changeOur Diverse End Markets Our products play essential roles in a diverse range of applications across a wide variety of end markets including the following: • automotive replacement and first-fit end markets; • diversified industrial applications from automated manufacturing and logistics systems to everyday consumer applications such as printers, power washers, automatic doors and vacuum cleaners; • industrial off-highway applications such as agriculture and construction; • industrial on-highway commercial vehicles such as heavy-duty trucks and buses; 9 Table of Contents • energy and resources markets such as oil, gas and mining; and • personal mobility such as scooters, motorcycles, bicycles, all-terrain vehicles (ATVs) and snowmobiles.
Item 1. Business 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 (“first-fit”) manufacturers as specified components, with the majority of our revenue coming from replacement channels.
Item 1. Business 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 thermal and emissions management and related products perform a variety of conveyance, emissions reduction and efficiency improvement functions in electric, hybrid and internal combustion passenger and commercial vehicles. In electric applications, Gates offers hose and water pump solutions for the thermal management system regulating the battery, inverter, motor(s) and passenger compartment.
Thermal and Emissions Management. Our thermal and emissions management and related products perform a variety of fluid conveyance, emissions reduction and efficiency improvement functions in electric, hybrid and internal combustion passenger and commercial vehicles. In electric applications, Gates offers hose and electric water pump solutions for the thermal management system regulating the battery, inverter, motor(s) and passenger compartment.
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 110 years since Gates’ founding in 1911.
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.
For example, a combine harvester in North America can have over 25 high-performance belts that are typically replaced at regular intervals, depending on wear and tear, with end users having access to replacement parts through a large network of distributors.
For example, a combine harvester can have over 25 high-performance belts that are typically replaced at regular intervals, depending on wear and tear, with end users having access to replacement parts through a large network of distributors.
These applications subject our products to normal wear and tear, resulting in natural, and often preventative, replacement cycles that drive high-margin, recurring revenue. Our product portfolio represents one of the broadest ranges of power transmission and fluid power products in the markets we serve, and we maintain long-standing relationships with a diversified group of blue-chip customers throughout the world.
These applications subject our products to normal wear and tear, resulting in natural, and often preventative, replacement cycles that drive high-margin, recurring revenue. Our product portfolio represents one of the broadest ranges of power transmission and fluid power products in the markets we serve, and we maintain long-standing relationships with a diversified group of well-known customers throughout the world.
Our products are therefore replaced not only as a result of normal wear and tear, but also preemptively as part of ongoing, normal maintenance to the broader system. We have a broad portfolio of both power transmission and fluid power products in the end markets we serve.
Our products are therefore replaced not only as a result of normal wear and tear, but also pre-emptively as part of ongoing, normal maintenance to the broader system. We have a broad portfolio of both power transmission and fluid power products in the end markets we serve.
In automotive applications, our synchronous belts are used to synchronize the rotation of the engine crankshaft with the camshaft due to engine combustion in a valve train system, as well as in electric power steering and parking brake systems which are present in internal-combustion, hybrid and electric vehicles.
In automotive applications, our synchronous belts are used to synchronize the rotation of the engine crankshaft with the camshaft in a valve train system, as well as in electric power steering, parking brake and accessory drive systems which are present in internal-combustion, hybrid and electric vehicles.
Globally, we offer the opportunity to earn short-term and long-term incentive awards to eligible employees, including a manufacturing incentive program to many of our production employees. Employee development and training Gates is committed to developing and unlocking the potential of our people and we make significant investments in training and professional development.
Globally, we offer the opportunity to earn short-term and long-term incentive awards to eligible employees, including manufacturing incentive programs to many of our production employees. Employee development and training Gates is committed to developing and unlocking the potential of our people and we make significant investments in training and professional development.
Additionally, the charter for the Nominating and Governance Committee of our board of directors requires that such committee review and make recommendations regarding the composition and size of the board in order to ensure the board has the requisite expertise and its membership consists of persons with sufficiently diverse and independent backgrounds.
Additionally, the charter for the Nominating and Governance Committee of our Board requires that such committee review and make recommendations regarding the composition and size of the Board to ensure the Board has the requisite expertise and its membership consists of persons with sufficiently diverse and independent backgrounds.
Our in-country deployment of manufacturing and technical resources gives us the capability to meet customer needs rapidly and satisfy regional variations in product preference, while our scale allows us to service global customers on a world-wide basis. Competition We operate in competitive markets and industries that are also very fragmented.
Our in-country deployment of 10 Table of Contents manufacturing and technical resources gives us the capability to meet customer needs rapidly and satisfy regional variations in product preference, while our scale allows us to service global customers on a world-wide basis. Competition We operate in competitive markets and industries that are very fragmented.
During Fiscal 2019, we launched the MXG line of hydraulic hose, a flexible, light-weight solution with increased durability and temperature performance, designed to replace conventional spiral hoses typically used in the most demanding applications. Also in Fiscal 2019, we launched a smart e-crimper, which is a machine used to attach fittings to hydraulic hoses.
Subsequently, we launched the MXG line of hydraulic hose, a flexible, light-weight solution with increased durability and temperature performance, designed to replace conventional spiral hoses typically used in the most demanding applications. We also launched a smart e-crimper, which is a machine used to attach fittings to hydraulic hoses.
Our industrial hoses are capable of transferring a wide range of substances - chemicals, food, beverages, petroleum, fuels, bulk materials, water, steam and air - to meet the requirements of a diverse range of applications, including manufacturing, mining, oil and gas drilling, marine, agriculture, industrial cleaning and construction.
Our industrial hoses are used to transfer a wide range of substances - chemicals, food, beverages, petroleum, fuels, bulk materials, water, steam and air - to meet the requirements of a diverse range of applications, including manufacturing, mining, oil and gas drilling, marine, agriculture, industrial cleaning and construction.
Gates was acquired by Blackstone in July 2014 and in 2015 established a new executive leadership team with Ivo Jurek as Chief Executive Officer. In January 2018, Gates completed an initial public offering (“IPO”), listing on the New York Stock Exchange (“NYSE”). We maintain an active acquisition pipeline.
Gates was acquired by Blackstone in July 2014 and in 2015 established a new executive leadership team with Ivo Jurek as Chief Executive Officer. In January 2018, Gates completed an initial public offering (“IPO”), listing on the New York Stock Exchange (“NYSE”).
We operate a large number of manufacturing facilities and service centers as well as several major technical centers giving us a presence in 30 countries throughout the world.
We operate manufacturing facilities and service centers as well as several major technical centers giving us a presence in 30 countries throughout the world.
During Fiscal 2018, Gates introduced a new Micro-V ® platform for engine accessory drive systems. The combination of newly developed material compounds and product design reduces belt weight and results in lower bending stiffness.
Recently, Gates introduced a new Micro-V ® platform for engine accessory drive systems. The combination of newly developed material compounds and product design utilizes less material, reduces belt weight and results in lower bending stiffness.
We are currently performing environmental investigations and/or remediation at a number of former and current facilities in the U.S. and Canada and are incurring costs in relation to a number of offsite waste disposal sites. For more information, see “Item 1A. Risk Factors - Risks Related to Legal and Regulatory Matters”.
We are currently performing environmental investigations and/or remediation at a number of former and current facilities in the U.S. and Canada and are incurring costs in relation to a number of offsite waste disposal sites. For more information, see “Item 1A.
We selectively participate in first-fit projects, focusing on opportunities where we are able to differentiate with technology and innovative solutions. Customers We maintain long-standing relationships with many customers, who range from local distributors with one location to large, global manufacturers of equipment. No single customer accounted for more than 10% of our Fiscal 2021 net sales.
We selectively participate in first-fit projects, focusing on opportunities where we are able to differentiate with technology and innovative solutions. Customers We maintain long-standing relationships with many customers, who range from regional or local distributors to large, global multinational distributors and OEMs. No single customer accounted for more than 10% of our Fiscal 2023 net sales.
We work closely with our first-fit customers by providing application engineering expertise to assist them with equipment design and selecting the right products to optimize performance. Close interactions between our R&D organization and customer technical teams provide input into our innovation and product development processes.
We work closely with our first-fit customers (also referred to as OEMs) by providing application engineering expertise to assist them with equipment design and selecting the right products to optimize performance. Close interactions between our research and development (“R&D”) organization and customer technical teams provide input into our innovation and product development processes.
Our fluid power products represented approximately 36% of our net sales for Fiscal 2021. Our power transmission and fluid power products are often critical to the functioning of the equipment, process or system in which they are components, such that the cost of downtime or potential equipment damage is high relative to the cost of our products.
Our power transmission and fluid power products are often critical to the functioning of the equipment, process or system in which they are components, such that the cost of downtime or potential equipment damage is high relative to the cost of our products.
Our hydraulic fittings and tubing are engineered to match the product performance of our hydraulic hoses. The high-pressure nature of hydraulic systems requires these products have high levels of performance similar to those found in our hydraulic hoses.
These products are designed for applications that require high levels of quality and durability. Our hydraulic couplings, fittings and tubing are engineered to match the product performance of our hydraulic hoses. The high-pressure nature of hydraulic systems requires that these products have high levels of performance similar to those found in our hydraulic hoses.
It has the highest power-carrying capacity in its segment, a wider operating temperature range and increased chemical resistance, allowing for narrower drives and a broad range of applications to be served with both first-fit and replacement channel customers. Metal Drive Components . We manufacture and sell the tensioners and idlers used in belt drive systems.
It has the highest power-carrying capacity in its segment, a wider operating temperature range and increased chemical resistance, allowing for narrower drives and a broad range of applications to be served with both first-fit and replacement channel customers.
Belt-based power transmission drives typically consist of either a synchronous belt or an asynchronous belt (V-belt, CVT belt or Micro-V ® belt) and related components (sprockets, pulleys, water pumps, tensioners or other accessories).
Belt-based power transmission drives typically consist of either a synchronous belt (such as a timing belt) or an asynchronous belt (such as a V-belt, continuously-variable transmission (“CVT”) belt or Micro-V® belt) and related components (sprockets, pulleys, mechanical water pumps, tensioners or other accessories).
During Fiscal 2019, Gates launched a new high-torque synchronous belt for industrial applications, the PowerGrip ® GT ® 4. This new belt leverages Gates’ materials science and process engineering capabilities, utilizing a belt construction that replaces chloroprene with an advanced ethylene elastomer formulation that is more environmentally friendly.
In recent years, Gates also launched the PowerGrip ® GT ® 4, a high-torque synchronous belt for industrial applications. This new belt leverages Gates’ materials science and process engineering capabilities, to provide a belt construction that replaces chloroprene-based elastomers with an advanced ethylene elastomer formulation that is more environmentally friendly.
We also offer a wide range of couplings to provide complete assembly solutions. Our fluid power products are used in numerous applications, including off-highway end markets such as construction and agriculture, on-highway end markets such as transportation, diversified industrial, energy, automotive and consumer products. The largest portion of our Fiscal 2021 fluid power revenue came from replacement markets.
We also offer a wide range of couplings to provide complete assembly solutions. Our fluid power products are used in numerous applications in end markets including automotive replacement and first-fit; diversified industrial; industrial off-highway; industrial on-highway; energy and resources; and personal mobility. The largest portion of our Fiscal 2023 fluid power revenue came from replacement markets.
Power transmission products represented approximately 64% of our total net sales for Fiscal 2021. Our fluid power segment includes hoses, tubing and fittings designed to convey hydraulic fluid at high pressures in both mobile and stationary applications, and other high-pressure and fluid transfer hoses used to regulate the conveyance of various fluids.
Power transmission products represented approximately 61% of our total net sales for Fiscal 2023. Our Fluid Power segment includes hoses, tubing and fittings designed to convey hydraulic fluid at high pressures in both mobile and stationary applications, and other high-pressure and fluid transfer hoses. Our fluid power products represented approximately 39% of our net sales for Fiscal 2023.
We have power transmission and fluid power operations in each commercial region and typically manufacture products for both first-fit customers and replacement customers in the same factory, which provides for sharing of raw material inputs, improved factory loading and demand leveling, as well as optimization of capital expenditures. 9 Table of Contents Our Channels We sell our power transmission and fluid power products both as replacement components and as specified components on original equipment to customers worldwide.
We have power transmission and fluid power operations in each commercial region and typically manufacture products for both first-fit customers and replacement customers in the same factory, which provides for sharing of raw material inputs, improved factory loading and demand leveling, as well as optimization of capital expenditures.
Similarly, in the North American automotive replacement market, maintenance intervals are well defined, and miles driven per vehicle and the average vehicle age have generally been increasing, leading to more wear and tear on vehicles.
Similarly, in the mature automotive aftermarkets such as North America and Europe, maintenance intervals are well defined, and miles (or kilometers) driven per vehicle and the average vehicle age have generally been increasing, leading to more wear and tear on vehicles.
These improvements enable tighter pulley configurations and reduced drive bending losses as compared to existing belt technologies; lower losses result in reduced energy consumption, CO 2 emissions and heat generation. Synchronous Belts . Synchronous belts, also known as timing belts, are non-slipping mechanical drive belts.
These improvements enable tighter pulley configurations and reduced drive bending losses as compared to previous belt technologies; lower losses result in benefits such as reduced energy consumption, CO 2 emissions and heat generation. Synchronous Belts . Synchronous belts, also known as timing belts, are non-slipping mechanical drive belts. They have molded teeth and run over matching toothed pulleys or sprockets.
We strive for zero injuries and an incident-free workplace and have achieved significant progress towards this goal through targeted risk reduction activities, improved case management, increased accountability to corrective action identification and closure, and more effective safety observation programs.
We are therefore committed to responsible business practices through the establishment, implementation, and maintenance of the Gates Global HSE Standards Manual. We strive for zero injuries and an incident-free workplace and have achieved significant progress towards this goal through targeted risk reduction activities, improved case management, increased accountability to corrective action identification and closure, and more effective safety observation programs.
Our belts are classified by their general design into asynchronous and synchronous belts; in addition, we also manufacture metal drive components and assemble certain product kits for the automotive replacement channel. Asynchronous Belts . Asynchronous belts are our highest-volume products and are used in a broad range of applications.
In addition, we also manufacture metal drive components and assemble certain product kits for the automotive replacement channel. Asynchronous Belts . Asynchronous belts are our highest-volume products and are used in a broad range of applications. We were a pioneer in the design and manufacturing of V-belts, which draw their name from the shape of their profile.
We have financial and operational control over the joint venture, and as such, consolidate it in our financial statements. 5 Table of Contents In 1996, Gates was acquired by a publicly held engineering firm based in the United Kingdom (“U.K.”), Tomkins plc, which was itself acquired by Onex Partners and the Canada Pension Plan Investment Board, who proceeded to divest certain of Tomkins plc’s businesses under a new parent entity, Pinafore Holdings B.V.
In 1996, Gates was acquired by a publicly held conglomerate based in the United Kingdom (“U.K.”), Tomkins plc, which was itself acquired in 2009 by Onex Partners and the Canada Pension Plan Investment Board, who proceeded to divest certain of Tomkins plc’s businesses under a new parent entity, Pinafore Holdings B.V.
Some of the specific global and regional development experiences we offer include a global mentoring program that promotes a diverse and inclusive culture and knowledge transfer opportunities between our mentors and mentees; a structured succession planning process that identifies key talent and develops our employees to continue working toward their career goals and early career programs designed to develop talent in different areas of the business; for example, engineering, commercial and human resources.
Some of the specific global and regional development experiences we offer include: a global mentoring program that promotes a diverse and inclusive culture and knowledge transfer opportunities between our mentors and mentees; a six-tiered leadership development program beginning with a program for those who aspire to be leaders, to first-time managers and continues through a career journey up to a program that supports our senior executives in their roles; structured development and succession planning process that identifies key talent and develops our employees to continue working toward their career goals; and early career programs designed to develop talent in different areas of the business, such as engineering and commercial.
Within our Power Transmission segment, we offer solutions across the following key application platforms: • Stationary drives: fixed drive systems such as those used in a factory driving a machine or pump, on a grain elevator driving the lift auger or in a distribution center driving automated equipment such as conveyor lines or robotic picking machines; • Mobile drives: drives on a piece of mobile machinery such as a combine harvester or a road compactor; • Engine systems: synchronous drives and related components for cam shafts and auxiliary drives and asynchronous accessory drives for air conditioning (“A/C”) compressors, power steering, alternators and starter/generator systems; • Personal mobility: drives on motorcycles, scooters, bicycles, both traditional and electric, as well as on snowmobiles and other power sports vehicles that are used to transfer power between the power source and the drive wheel(s) or track; and • Vertical lift: elevators, cargo lifts and other applications in which a belt, cable, chain or other lifting mechanism is used to carry load.
Within our Power Transmission segment, we offer solutions across the following key application platforms: • Stationary drives: fixed drive systems such as those used in a factory driving a machine or pump, on a grain elevator driving the lift auger or in a distribution center driving automated equipment such as conveyor lines or robotic picking machines; • Mobile drives: drives on a piece of mobile machinery such as the threshing and separation drives on a combine harvester; • Engine systems: synchronous drives and related components for cam shaft drives, auxiliary drives and asynchronous accessory drives for air conditioning (“A/C”) compressors, power steering, alternators and starter/generator systems; and • Personal mobility: drives on motorcycles, scooters, bicycles, both traditional and electric, as well as on snowmobiles and other power sports vehicles that are used to transfer power between the power source and the drive wheel(s) or track. 6 Table of Contents Customers choose power transmission solutions based on a number of factors, including application requirements such as load, speed, gear ratio, temperature, operating environment, ease of maintenance, noise, efficiency and reliability, as well as the support they receive from their suppliers, including application-specific engineering services.
In internal combustion applications, Gates primarily provides thermal management hose and water pumps for engine cooling, exhaust filtration hose to reduce harmful emissions and hoses for functions that improve air intake and engine efficiency. Industrial Hose .
In internal combustion applications, Gates primarily provides thermal management hose and water pumps for engine cooling, selective catalytic reduction hoses that are part of systems that reduce harmful emissions from diesel engines and hoses for functions that improve air intake and engine efficiency.
Made with a high-performance reinforcement and robust, abrasion-resistant cover, the MXT line of hydraulic hose is comprised of universally applicable, high-performance products that meet the needs of a wide range of applications.
In recent years, Gates introduced a new premium product family consisting of hydraulic hoses that are lighter weight and more flexible. Made with a high-performance reinforcement and robust, abrasion-resistant cover, the MXT line of hydraulic hose is comprised of universally applicable, high-performance products that meet the needs of a wide range of applications.
The majority of our Fiscal 2021 net sales came from replacement channels, which provide high-margin, recurring revenue streams and are driven by attractive market trends. The bulk of our power transmission replacement business resides in developed regions, in which a large, aging installed base of equipment follows a natural maintenance cycle and is served by well-established distribution channels.
The bulk of our power transmission replacement business resides in developed regions, in which a large, aging installed base of equipment follows a natural maintenance cycle and is served by well-established distribution channels.
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.
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.
Belt-based drive systems have many advantages over other alternatives, as they are typically clean, low-maintenance, lubrication-free, quiet with low-vibration, lightweight, compact, 6 Table of Contents energy-efficient, durable and reliable. In applications where these advantages are valued, customers frequently choose belts over other forms of power transmission solutions.
Belt-based drive systems have many advantages over other alternatives, as they are typically clean, low-maintenance, lubrication-free, quiet with low-vibration, lightweight, compact, energy-efficient, durable and reliable.
Sales and Marketing and Distribution Organization Our sales and distribution operations are structured to serve our customers efficiently across the globe. We have field representatives who possess local knowledge of customers and their product and application requirements, giving us the capability to meet our customers’ product availability needs on short lead times.
We have field representatives who possess local knowledge of customers and their product and application requirements, as well as established distribution networks in each region, giving us the capability to usually meet our customers’ product availability needs on short lead times.
To date, employee relations have been flexible and constructive as we continue to pursue lean manufacturing improvements in our plants. Gates employs agency contractors, temporary employees and contract employees as a relatively small percentage of our workforce. The number of associates in these categories typically varies with demand on our factories and distribution centers.
Gates employs agency contractors, temporary employees and contract employees as a relatively small percentage of our workforce. The number of associates in these categories typically varies with demand on our factories and distribution centers. Gates employs a small number of part-time associates across the globe.
See note 4 to our audited consolidated financial statements included elsewhere in this report for additional information. We sell our products under the Gates brand in all of the geographies and end markets we serve. Our power transmission segment includes elastomer drive belts and related components used to efficiently transfer motion in a broad range of applications.
We sell our products under the Gates brand in all of the geographies and end markets we serve, as well as under select customer brands in certain markets. Our Power Transmission segment includes elastomer drive belts and related components used to efficiently transfer power in a broad range of applications.
By contrast, in North America and EMEA, where there are long-established replacement markets, approximately 68% and 70% of our Fiscal 2021 net sales, respectively, were derived from these higher-margin replacement channels. In the vast majority of the applications we serve, we do not need to have been the first-fit provider to serve these applications in the replacement markets. Replacement.
By contrast, in North America and EMEA, where there are long-established replacement markets, approximately 67% and 70% of our Fiscal 2023 net sales, respectively, were derived from these higher-margin replacement channels. Replacement.
Hydraulics . Our hydraulics product line is comprised of hoses, tubing and fittings, offered either as standalone products or completed assemblies. Our hydraulic products are key components of hydraulic systems in both stationary and mobile equipment applications. We provide a full selection of hose sizes and construction types for use in a wide variety of working requirements and conditions.
Hydraulics . Our hydraulics product line is comprised of hoses, couplings, tubing and fittings, offered either as standalone products or completed assemblies. Our hydraulic products are key components of hydraulic systems in both stationary and mobile equipment applications across end-markets such as construction, agricultural and forestry equipment, as well as in a wide range of manufacturing applications.
Examples of industrial applications include use in HVAC systems, food processing and bottling plants, mining and agricultural equipment, automated warehouse systems and robotics. Our synchronous belts are also utilized in personal mobility equipment, including both traditional and electric motorcycles, bicycles and scooters, applications in which clean, quiet performance is often valued.
Our synchronous belts are also utilized in personal mobility vehicles, including both traditional and electric motorcycles, bicycles and scooters, applications in which clean, quiet performance is often valued.
As a leading designer, manufacturer and marketer of highly engineered, mission-critical products, we have become an industry leader across most of the regions and end markets in which we operate. Gates’ business is well-balanced and diversified across products, channels and geographies, as highlighted in the following charts showing breakdowns of our Fiscal 2021 net sales of $3,474.4 million.
As a leading designer, manufacturer and marketer of highly engineered, mission-critical products, we have become an industry leader across most of our end markets and the regions in which we operate.
For example, in emerging markets such as China, our business is characterized by a higher first-fit presence, given the relatively underdeveloped replacement channels. We believe that ultimately our first-fit presence in these emerging markets will allow us to better develop the replacement channels as they mature over time.
We believe that enhancing our brand visibility, including through our first-fit presence in these emerging markets will allow us to better develop the replacement channels as they mature over time.
Gates employs a small number of part-time associates across the globe. 11 Table of Contents Oversight and Governance Our board of directors is actively engaged in the oversight of the Company’s human capital management, including reviewing the following topics: the Company’s employee health and well-being programs; the Company’s stock incentive plans; the Company’s performance relative to the acquisition and retention of talent, leadership and development programs, and other initiatives and plans to help ensure that we have talent positioned to deliver on our strategy.
Oversight and Governance Our Board, with the assistance of its compensation committee, is actively engaged in the oversight of the Company’s human capital management, including reviewing the following topics: the Company’s workforce overview; the Company’s stock incentive plans; the Company’s performance relative to the acquisition and retention of talent, leadership and development programs, development planning for executives and critical roles, employee engagement, culture and diversity, equity & inclusion initiatives as well as other initiatives and plans to help ensure that we have talent positioned to deliver on our strategy.
They have teeth molded onto the inner surface and run over matching toothed pulleys or sprockets. Synchronous belts experience no slippage and are often used to transfer motion for indexing or timing purposes, as well as for linear positioning and positive drive conveying.
Synchronous belts experience no slippage and are often used to transfer high levels of power or to control motion for indexing or timing purposes, as well as for linear positioning and positive drive conveying.
Our commercial capabilities are complemented by our “in-region, for region” manufacturing footprint, which generally allows us to manufacture products in close proximity to our customers around the world.
Manufacturing Our commercial capabilities are complemented by our “in-region, for region” manufacturing footprint, which generally allows us to manufacture products in close proximity to our customers around the world. This model also yields advantages in supply resiliency, avoidance of long logistics routes and associated greenhouse gas (“GHG”) emissions and foreign exchange/tariff costs.
We have a long history of focusing on customer engagement and training, driving product innovation and providing best-in-class order fulfillment services. Power Transmission. Our Power Transmission solutions enable and control motion. They are used in applications in which belts, chains, cables, geared transmissions or direct drives transfer power from an engine or motor to another part or system.
We have a long history of focusing on customer engagement and training, driving product innovation and providing best-in-class order fulfillment services. Power Transmission. Our power transmission solutions transfer power, convey materials and provide motion control.
Generally, we seek to obtain materials in the regions where our products are manufactured to minimize lead times, as well as transportation and other costs. During Fiscal 2020 and Fiscal 2021, our teams worked closely with suppliers to ensure sufficient quantities of materials were available for us to continue to serve our customers.
Generally, we seek to obtain materials in the regions where our products are manufactured to minimize lead times, as well as transportation and other costs.
These markets are generally higher-growth and result in higher-margin business compared to our developed regions. Fluid Power. Our Fluid Power solutions are used in applications in which hoses and rigid tubing assemblies either transfer power hydraulically or convey fluids, gases or granular materials from one location to another.
In addition to our power transmission replacement business, we also serve a wide variety of well-known first-fit customers across all of our end markets. Fluid Power. Our fluid power solutions are used in applications in which hoses and rigid tubing assemblies either transfer power hydraulically or convey fluids, gases or granular materials from one location to another.
Our kits for the automotive replacement channel include all of the parts needed by an automotive service shop to perform a replacement of one of our products.
Gates’ pulleys and sprockets are precisely engineered for positive press fit, designed to optimize the performance and durable working service life of the belt drive system. Kits . Our kits for the automotive replacement channel include all of the parts needed by an automotive service shop to perform a replacement of one of our products.
In 1963, we built the first of many international facilities in Erembodegem, Belgium, followed by Jacarei, Brazil, in 1973. In 1986, we acquired the Uniroyal Power Transmission Company, which included an interest in the Unitta joint venture that lay the groundwork for Gates’ growth in the Asia-Pacific region.
In 1986, we acquired the Uniroyal Power Transmission Company, which included a controlling interest in a joint venture that laid the groundwork for Gates’ growth in the Asia-Pacific region.
As of January 1, 2022, we held more than 2,500 patents and patent applications and 3,200 trademarks in various jurisdictions, and have elected to protect a variety of technologies and processes as trade secrets.
We also have commercialization and field application engineering teams in all of our regions that are located close to customers in support of their businesses. As of December 30, 2023, we held more than 2,100 patents and patent applications and 3,500 trademarks in various jurisdictions, and have elected to protect a variety of technologies and processes as trade secrets.
Hydraulic hoses are made of synthetic rubber and reinforced with steel wire or a textile-based yarn, and typically operate at very high pressures, often in extreme environmental conditions. Hoses are designed for use in specific mechanical applications and require high levels of quality and durability.
We provide a full selection of hose sizes and construction types for use in a wide variety of operating requirements and conditions. Hydraulic hoses are made of elastomers reinforced with steel wire or a textile-based yarn, and typically 8 Table of Contents operate at very high pressures, often in extreme environmental conditions.
This design results in a thinner belt for the same drive surface, making it more flexible and offering improved efficiency through lower friction losses. In industrial end markets, asynchronous belts have a wide variety of applications, including use in pump drives, manufacturing lines, HVAC systems, industrial, truck, bus and marine engines, forestry and mining equipment and many other applications.
In industrial end markets, asynchronous belts have a wide variety of applications, including use in pump drives, manufacturing lines, HVAC systems, industrial, truck, bus and marine engines, forestry and mining equipment and many other applications. CVT systems often found in scooters, power sports vehicles and other applications use a specialized V-belt known as a CVT belt.
Our kits are convenient for service technicians as they eliminate the need for more complicated product sourcing.
Our kits are convenient for service technicians as they eliminate the need for more complicated product sourcing. On a comparable quantity basis, kits typically sell at a premium to a loose belt and the individual related components.
During Fiscal 2021, approximately 63% of our net sales were generated from replacement channels and 37% from first-fit channels globally. Our mix of replacement channel sales to first-fit sales varies by region based on our market strategy and the maturity of the equipment fleet and channel.
Our mix of replacement channel sales to first-fit sales varies by region based on our market strategy and the maturity of the equipment fleet and channel. For example, in emerging markets such as China and India, replacement channels are developing.
We offer our products and solutions across numerous and varied end markets and geographies through over 100 locations in 30 countries. Consequently, we have many competitors across our various markets and product offerings. These competitors and the degree of competition vary by product line, geographic scope, end market and channel.
Consequently, we have many competitors across our various markets and product offerings. These competitors and the degree of competition vary by product line, geography, end market and channel. Although each of our markets and product offerings has many competitors, no single competitor competes with us across all of our products, solutions, channels and end markets.
They are typically used instead of chains or gears and we believe have a number of advantages over these alternatives, including less noise, no need for lubrication, improved durability and performance and a more compact design. Our synchronous belts are made of a flexible polymer over fabric reinforcement, which often consists of Kevlar, aramid or carbon fibers.
They are typically used instead of chains or gears and we believe they have a number of advantages over these alternatives, including less noise, no need for lubrication, improved durability and performance and a more compact design. Examples of industrial applications include use in HVAC systems, food processing and bottling plants, mining and agricultural equipment, automated warehouse systems and robotics.
In addition to convenient, web-enabled access to training content and product crimp specs, this new crimper can be used with Gates’ intuitive mobile eCrimp app, which underwent a comprehensive update in Fiscal 2020. Thermal and Emissions Management.
In addition to convenient, web-enabled access to training content and product crimp specs, this new crimper can be used with Gates’ intuitive mobile eCrimp app. In Fiscal 2022, we launched the ProV hose family in Europe, which is an addition to our Pro Series product portfolio that leverages technologies developed and first launched in our MXT and MXG product lines.
Human Capital As of January 1, 2022, we employed approximately 15,050 full time employees worldwide. Approximately 7,000 of our employees are located in North America, 4,100 in EMEA, 3,300 in Greater China and East Asia & India, and 650 in South America.
Risk Factors - Risks Related to Legal and Regulatory Matters”. 11 Table of Contents Human Capital As of December 30, 2023, we employed approximately 14,700 full time employees worldwide. Approximately 6,800 of our employees are in North America, 4,300 in EMEA, 2,800 in Greater China and East Asia & India, and 800 in South America.
These products are designed and engineered to work efficiently with our belts. Tensioners are devices that maintain a constant tension in the belt drive system, thereby ensuring proper function and preventing loss of power or system failure.
Tensioners are devices that maintain a constant tension in the belt drive system, thereby ensuring proper function and preventing loss of power or system failure. Tensioners typically employ a spring-loaded arm and a damping mechanism to help control tension in a belt drive system. Idlers, which sometimes also perform as tensioners, are used to take up extra belt length.
Through its Compensation Committee, our board of directors also oversees the management continuity planning process, including reviewing and evaluating the succession plans relating to our chief executive officer and other executive officer positions and makes recommendations to the board with respect to the selection of individuals to occupy these positions.
Our Board and its compensation committee also oversee the management continuity planning process, including reviewing, and evaluating the succession plans relating to our chief executive officer and other executive officer positions. Health and safety We care about our employees and we believe that our commercial success is linked to a safe and healthy workforce.
Diversity, equity and inclusion The Gates management team is committed to creating and sustaining a diverse workplace that understands and values individual differences across demographics, experiences and perspectives. We want to ensure that collaborative and respectful business practices in a performance-based, supportive environment enable every employee to realize his/her/their career ambitions.
For our production employees, we provide skills-based training and certification opportunities. Diversity, equity and inclusion The Gates management team is committed to creating and sustaining an inclusive workplace that understands and values individual differences across demographics, experiences and perspectives.
Approximately 68% of our work force consists of production employees, while approximately 24% of our global workforce was female and 76% male. Of approximately 1,450 managerial employees, 21% were female. Some of our employees are members of labor unions, and over many years we have been able to maintain successful relationships with the unions and employment organizations.
Approximately 68% of our work force consists of production employees, while approximately 24% of our global workforce was female and 76% male. Of approximately 1,200 managerial employees, 19% were female, and 40% of our executive officers were female.
Asynchronous belts are made of proprietary rubber formulations, textiles and embedded cords for reinforcement. We were a pioneer in the design and manufacturing of V-belts, which draw their name from the shape of their profile. We also manufacture “ribbed” V-belts, which are belts with lengthwise V-shaped grooves, which we market under the Micro-V® name.
We also manufacture “ribbed” V-belts, which are belts with lengthwise V-shaped grooves, which we market under the Micro-V® name. This design results in a thinner belt for the same drive surface, making it more flexible and offering improved efficiency.
We differentiate ourselves on the basis of product performance and quality, breadth of portfolio, customer support and training, service level, fill rates and product availability. 10 Table of Contents Research, Development and Intellectual Property Applied R&D is important to our businesses and integral to our leading market positions.
Our global presence and the importance of product availability make it difficult for smaller, regional and low-cost country manufacturers to penetrate our markets. We generally differentiate ourselves on the basis of product performance and quality, innovation, breadth of portfolio, customer support and training, service level, fill rates and product availability.
During Fiscal 2018, we opened two new facilities located in Poland and in Mexico, and we also expanded our Changzhou facility in China. Our Solutions We operate our business on a product-line basis through our two reporting segments - Power Transmission and Fluid Power .
Our Solutions We operate our business on a product-line basis through our two reporting segments - Power Transmission and Fluid Power . See Note 4 to our audited consolidated financial statements included elsewhere in this report for additional information.
Our History and Recent Developments On October 1, 1911, Charles Gates, Sr. purchased the Colorado Tire and Leather Company, a manufacturer of steel-studded bands of leather that attached to tires to extend their mileage. In 1917, the Company commercialized the V-belt, which used rubber and woven threading instead of rope belts, which were more commonly used at that time.
In 1917, the Company commercialized the V-belt, which used rubber and woven threading instead of rope belts, which were more commonly used at that time. In 1963, we built the first of many international facilities in Erembodegem, Belgium, followed by Jacarei, Brazil, in 1973.
Removed
Our products are used in applications across numerous end markets, including industrial off-highway end markets such as construction and agriculture, industrial on-highway end markets such as transportation, diversified industrial, energy and resources, automotive, and mobility and recreation.
Added
Gates’ business is well-balanced and diversified across products, channels and geographies, as highlighted in the following charts showing breakdowns of our Fiscal 2023 net sales of $3,570.2 million. 5 Table of Contents Our History In 1911, Charles Gates, Sr. purchased the Colorado Tire and Leather Company, a manufacturer of steel-studded bands of leather that attached to tires to extend their mileage.
Removed
In 2018, we acquired Rapro, based in Turkey, and in 2017 we closed two transactions, Techflow Flexibles in the U.K. and Atlas Hydraulics in North America. All three of these acquisitions have been focused on expanding our presence in industrial markets with new products, capabilities, capacity and geographic reach. In addition, we continue to invest organically in new production capacity.
Added
They are used in applications in which belts, chains, cables, geared transmissions or direct drives transfer power from an engine motor or other source of mechanical power to another part or system.
Removed
Customers choose power transmission solutions based on a number of factors, including application requirements such as load, speed, gear ratio, temperature, operating environment, ease of maintenance, noise, efficiency and reliability, as well as the support they receive from their suppliers, including application-specific engineering services.
Added
Our belts are made of highly engineered polymer formulations, fabrics or textiles (made from a variety of polymer or natural fibers) and embedded cords for reinforcement (which may be made from polymers such as polyesters or aramids, fiberglass or high performance carbon fibers). Many of these materials are proprietary to Gates.
Removed
Continuously-variable transmission (“CVT”) systems often found in scooters, power sports vehicles and other applications use a specialized V-belt known as a CVT belt.
Added
In recent years, Gates launched the Carbon Drive CDC ® synchronous belt designed for commuter bicycle applications and in Fiscal 2022 Gates launched the Carbon Drive Moto X5 synchronous belt designed specifically for mid-motor, sit-down electric scooters and motorcycles typically found in commuting applications in the rapidly evolving Asian market.

… 38 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

129 edited+27 added−61 removed99 unchanged
Biggest changeSummary of Risks Related to the Ownership of our Ordinary Shares • We are subject to risks specific to ownership of our ordinary shares, including those related to being a “controlled company” within the meaning of the rules of the New York Stock Exchange (“NYSE”), adverse changes in the market value of our shares, lack of current plans for dividend payments, risks related to future issuances of shares, and risks specific to holding shares in a U.K. company. 15 Table of Contents Risks Related to Economic and Market Conditions We are subject to economic, political and other risks associated with international operations that could adversely affect our business and our strategy to capitalize on our global reach.
Biggest changeRisks Related to Economic and Market Conditions We are subject to economic, political and other risks associated with international operations that could adversely affect our business and our strategy to capitalize on our global reach. A substantial portion of our operations are conducted and located outside the U.S.
The costs associated with any protracted delay of a product launch or a recall campaign to remedy defects in products that have been sold could be substantial. We face an inherent risk of product liability claims if alleged product failure results in a claim for injury or loss.
The costs associated with any protracted delay of a product launch or a recall campaign to remedy defects in products that have been sold could be substantial. We face an inherent risk of product liability claims if an alleged product failure results in a claim for injury or loss.
Current U.K. tax law provides that we will be regarded as being U.K. resident for tax purposes from incorporation and shall remain so unless (i) we are concurrently resident of another jurisdiction (applying the tax residence rules of that jurisdiction) that has a double tax treaty with the U.K., and (ii) there is a tiebreaker provision in that tax treaty which allocates exclusive residence to that other jurisdiction.
Current U.K. tax law provides that we will be regarded as being U.K. resident for tax purposes from incorporation and shall remain so unless (i) we are concurrently resident in another jurisdiction (applying the tax residence rules of that jurisdiction) that has a double tax treaty with the U.K., and (ii) there is a tiebreaker provision in that tax treaty which allocates exclusive residence to that other jurisdiction.
Such shares may be issued with, or have attached to them, such powers, designations, preferences, voting rights, rights and terms of redemption, and relative participating, optional or other special rights and qualifications, limitations and restrictions as the Board of Directors may determine, including rights to (a) receive dividends (which may include rights to receive preferential or cumulative dividends), (b) distributions made on a winding up of the Company, and (c) be convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of shares, at such price or prices (subject to the Companies Act 2006 (“Companies Act”)) or at such rates of exchange and with such adjustments as may be determined by our Board of Directors.
Such shares may be issued with, or have attached to them, such powers, designations, preferences, voting rights, rights and terms of redemption, and relative participating, optional or other special rights and qualifications, limitations and restrictions as the Board may determine, including rights to (a) receive dividends (which may include rights to receive preferential or cumulative dividends), (b) distributions made on a winding up of the Company, and (c) be convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of shares, at such price or prices (subject to the Companies Act 2006 (“Companies Act”)) or at such rates of exchange and with such adjustments as may be determined by our Board.
Further, the insurance we carry may not be adequate to protect against unforeseen and damaging events, such as work stoppages and damage to facilities or equipment. We supply products to industries that are subject to inherent risks, including equipment defects, malfunctions and failures, and natural disasters (including as a result of climate change), which could expose us to liability.
Further, the insurance we carry may not be adequate to protect against unforeseen and damaging events, such as work stoppages and damage to facilities, equipment or reputation. We supply products to industries that are subject to inherent risks, including equipment defects, malfunctions and failures, and natural disasters (including as a result of climate change), which could expose us to liability.
Although we believe our tax estimates are reasonable, including our estimates of reserves for unrecognized tax benefits related to the implementation of our European corporate center in Fiscal 2019, any changes in our judgments and interpretation of tax laws or any material differences as a result of the audits could result in unfavorable tax adjustments that have an adverse effect on our overall tax liability.
Although we believe our tax estimates are reasonable, including our estimates of reserves for unrecognized tax benefits related to the implementation of our European corporate center in 2019, any changes in our judgments and interpretation of tax laws or any material differences as a result of the audits could result in unfavorable tax adjustments that have an adverse effect on our overall tax liability.
We may pursue strategic transactions, including acquisitions, divestitures, restructurings, joint ventures, strategic alliances or investments, which could create risks and present unforeseen integration obstacles or costs. We consider strategic transactions on an ongoing basis, and regularly discuss potential acquisitions of complementary businesses or assets to expand our product portfolio and geographic presence, certain of which may be material.
We may pursue strategic transactions, including acquisitions, divestitures, joint ventures, strategic alliances or investments, which could create risks and present unforeseen integration obstacles or costs. We consider strategic transactions on an ongoing basis, and regularly discuss potential acquisitions of complementary businesses or assets to expand our product portfolio and geographic presence, certain of which may be material.
Our Board of Directors may take into account general economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our shareholders or by our subsidiaries to us, and such other factors as our Board of Directors may deem relevant.
Our Board may take into account general economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our shareholders or by our subsidiaries to us, and such other factors as our Board may deem relevant.
Our long-term operating results depend substantially upon our ability to continually develop, introduce, and market new and innovative products, to modify existing products, to respond to technological change, and to customize certain products to meet customer requirements and evolving sustainability and industry standards. The development of new product introductions and product innovations may require significant investment by us.
Our long-term operating results depend upon our ability to continually develop, introduce, and market new and innovative products, to modify existing products, to respond to technological change, and to customize certain products to meet customer requirements and evolving sustainability and industry standards. The development of new product introductions and product innovations may require significant investment by us.
Information systems failure may disrupt our business and result in financial loss and liability to our customers. We rely on information technology networks and systems, including the Cloud and third party service providers, to process, transmit and store electronic information, and to manage or support a variety of business processes and activities.
Information systems failure may disrupt our business and result in financial loss and liability to our customers. We rely on information technology networks and systems, including the cloud-computing and third-party service providers, to process, transmit and store electronic information, and to manage or support a variety of business processes and activities.
Competitors may use our technologies in jurisdictions where we do not pursue and obtain patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but where the ability to enforce our patent rights is not as strong as in the U.S.
Competitors may also use our technologies in jurisdictions where we do not pursue and obtain patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but where the ability to enforce our patent rights is not as strong as in the U.S.
Our articles of association, as amended, authorize us to issue, subject to the limit therein on the authority of our Board of Directors to allot new shares of the Company, without the approval of the holders of our ordinary shares, a new class or classes of shares, including preference shares, with nominal value in any currency.
Our articles of association, as amended, authorize us to issue, subject to the limit therein on the authority of our Board to allot new shares of the Company, without the approval of the holders of our ordinary shares, a new class or classes of shares, including preference shares, with nominal value in any currency.
Management has identified and prioritized critical risks based on the severity and likelihood of each risk and assigned risk owners to address each major identified risk area and lead action plans to monitor and mitigate risks, where possible. Our Board of Directors provides oversight of the ERM process and regularly reviews identified critical risks.
Management has identified and prioritized critical risks based on the severity and likelihood of each risk and assigned risk owners to address each major identified risk area and lead action plans to monitor and mitigate risks, where possible. Our Board provides oversight of the ERM process and regularly reviews identified critical risks.
In connection with the implementation and maintenance of our cost reduction measures, we may face delays in anticipated workforce reductions, a decline in employee morale and a potential inability to meet operational targets due to an inability to retain or recruit key employees.
In connection with the implementation and maintenance of our cost reduction and restructuring measures, we may face delays in anticipated workforce reductions, a decline in employee morale and a potential inability to meet operational targets due to an inability to retain or recruit key employees.
Even if we do obtain patents or other intellectual property rights in our new technologies and inventions, the scope of such rights may not be sufficiently broad to afford us any significant commercial advantage over our competitors.
Even if we obtain patents or other intellectual property rights in our new technologies and inventions, the scope of such rights may not be sufficiently broad to afford us any significant commercial advantage over our competitors.
Specifically, our high level of debt could have important consequences, including the following: • making it more difficult for us to satisfy our obligations with respect to our debt; • limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements; 27 Table of Contents • requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes; • increasing our vulnerability to general adverse economic and industry conditions; • exposing us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest; • limiting our flexibility in planning for and reacting to changes in the industry in which we compete; • placing us at a disadvantage compared to other, less leveraged competitors; and • increasing our cost of borrowing.
Specifically, our high level of debt could have important consequences, including the following: • making it more difficult for us to satisfy our obligations with respect to our debt; • limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements; • requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes; • increasing our vulnerability to general adverse economic and industry conditions; • exposing us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest; • limiting our flexibility in planning for and reacting to changes in the industry in which we compete; • placing us at a disadvantage compared to other, less leveraged competitors; and • increasing our cost of borrowing.
The loss of the services of senior management and other key personnel or the failure to attract additional personnel and implement succession plans as required could have a material adverse effect on our business, financial condition and results of operations. 25 Table of Contents We may be materially adversely impacted by work stoppages and other labor matters, including labor shortages and turnover.
The loss of the services of senior management and other key personnel or the failure to attract additional personnel and implement succession plans as required could have a material adverse effect on our business, financial condition and results of operations. 22 Table of Contents We may be materially adversely impacted by work stoppages and other labor matters, including labor shortages and turnover.
Our Sponsor has an interest in over 50% of our voting share capital, and therefore, if the Takeover Panel were to determine that we were subject to the Takeover Code, our Sponsor would be able to increase its aggregate holding in us without triggering the requirement under Rule 9 of the Takeover Code to make a cash offer for the outstanding shares in the issuer.
Our Sponsor has an interest in over 30% of our voting share capital, and therefore, if the Takeover Panel were to determine that we were subject to the Takeover Code, our Sponsor would be able to increase its aggregate holding in us without triggering the requirement under Rule 9 of the Takeover Code to make a cash offer for the outstanding shares in the issuer.
As the present and former operator of industrial properties that use and generate hazardous materials, we could be subject to additional liability for environmental contamination in the future, regardless of whether we caused such contamination. Additionally, most states have passed laws that regulate or limit the use of aftermarket products in certain types of repair work.
As the present and former operator of industrial properties that use and generate hazardous materials, we could be subject to additional liability for environmental contamination in the future, regardless of whether we caused such contamination. Additionally, most U.S. states have passed laws that regulate or limit the use of aftermarket products in certain types of repair work.
Increased unionization, new labor legislation or changes in regulations could disrupt our operations, reduce our profitability, or interfere with the ability of our management to focus on executing our business strategies. Additionally, we have experienced, and may continue to experience, labor shortages, turnover and increased labor costs due to the ongoing pandemic or general macroeconomic factors.
Increased unionization, new labor legislation or changes in regulations could disrupt our operations, reduce our profitability, or interfere with the ability of our management to focus on executing our business strategies. Additionally, we have experienced, and may continue to experience, labor shortages, turnover and increased labor costs due to general macroeconomic factors.
Although we routinely conduct anti-counterfeiting activities in multiple jurisdictions, we have encountered counterfeit reproductions of our products that infringe on our intellectual property rights. We expect pirates to continue counterfeiting certain of our products using our trademarks, which has led to, and will likely continue to cause, loss of sales.
For example, although we routinely conduct anti-counterfeiting activities in multiple jurisdictions, we have encountered counterfeit reproductions of our products that infringe on our intellectual property rights. We expect pirates to continue counterfeiting certain of our products using our trademarks, which has led to, and will likely continue to cause, loss of sales.
The Audit Committee also reviews major financial risk exposures and the steps management has taken to monitor and control them. Our goal is to proactively manage risks in a structured approach and in conjunction with the strategic planning process, with the intent to preserve and enhance shareholder value.
The Audit Committee of our Board also reviews major financial risk exposures and the steps management has taken to monitor and control them. Our goal is to proactively manage risks in a structured approach and in conjunction with the strategic planning process, with the intent to preserve and enhance shareholder value.
Our shareholders adopted a resolution authorizing our Board of Directors to allot our ordinary shares and to grant rights to subscribe for or convert any security into such shares for the consideration and on the terms and conditions established by our Board of Directors in its sole discretion, whether in connection with acquisitions or otherwise.
Our shareholders adopted a resolution authorizing our Board to allot our ordinary shares and to grant rights to subscribe for or convert any security into such shares for the consideration and on the terms and conditions established by our Board in its sole discretion, whether in connection with acquisitions or otherwise.
Failure to comply with HSE laws and regulations could have significant consequences on our business and operations, including the imposition of substantial fines and sanctions for violations, injunctive relief (including requirements that we limit or cease operations at affected facilities), and negative publicity.
Failure to comply with such laws and regulations could have significant consequences on our business and operations, including the imposition of substantial fines and sanctions for violations, injunctive relief (including requirements that we limit or cease operations at affected facilities), and negative publicity.
Risks Related to Our Indebtedness Our substantial leverage could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy, or our industry or our ability to pay our debts, and could divert our cash flow from operations to debt payments.
Risks Related to Our Indebtedness Our substantial leverage and subsidiary structure could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy, or our industry or our ability to pay our debts, and could divert our cash flow from operations to debt payments.
Failure to successfully identify, consummate or integrate strategic transactions in a timely and cost-effective manner could have a material adverse effect on our business, financial condition and results of operation. 20 Table of Contents We have investments in joint ventures that limit our ability to manage third-party risks associated with these ventures.
Failure to successfully identify, consummate or integrate strategic transactions in a timely and cost-effective manner could have a material adverse effect on our business, financial condition and results of operation. We have investments in joint ventures that limit our ability to manage third-party risks associated with these ventures.
Our brand has worldwide recognition and our success is linked to our ability to maintain and enhance our brand image and reputation. In particular, we believe that maintaining and enhancing the Gates brand is critical to maintaining and expanding our customer base.
Our brand has worldwide recognition and our success may be linked to our ability to maintain and enhance our brand image and reputation. In particular, we believe that maintaining and enhancing the Gates brand is critical to maintaining and expanding our customer base.
If a customer defaults on its obligations to us, it could have a material adverse effect on our business, financial condition, results of operations or cash flows. Societal responses to sustainability issues, including those related to climate change, could adversely affect our business and performance, including indirectly through impacts on our customers.
If a customer defaults on its obligations to us, it could have a material adverse effect on our business, financial condition, results of operations or cash flows. Societal responses to sustainability issues, including those related to climate change, could adversely affect our business and performance, including indirectly through impacts on our customers and value chain partners.
In addition, our Sponsor may have an interest in our pursuing acquisitions, divestitures and other transactions that, in their judgment, could enhance their investment, even though such transactions might involve risks to us and our shareholders.
In addition, our Sponsor may have an interest in our pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment, even though such transactions might involve risks to us and our shareholders.
Because a significant percentage of our operating income in recent years has come from these regions, adverse fluctuations in the operating results in these regions could have a disproportionate impact on our results of operations in future periods.
Because a significant percentage of our operating income in recent years has come from these regions, adverse fluctuations in the operating results in these regions could have a material adverse impact on our results of operations in future periods.
Increased global cyber security vulnerabilities, threats, computer viruses and more sophisticated and targeted cyber-related attacks (such as the recent increasing use of “ransomware” and phishing attacks), as well as cyber-security failures resulting from human error, catastrophic events (such as fires, floods, hurricanes and tornadoes), and technological errors, pose a risk to our systems, products and data as well as potentially to our employees’, customers', partners', suppliers' and third-party service providers' systems and data.
Increased global cyber security vulnerabilities, threats, computer viruses and more sophisticated and targeted cyber-related attacks (such as the recent increasing use of “ransomware” and phishing attacks), as well as cyber-security failures resulting from human error, catastrophic events (such as fires, floods, hurricanes and tornadoes), and technological errors, pose a risk to our systems (including third-party systems utilized by us), products and data as well as potentially to our employees’, customers', partners', suppliers' and third-party service providers' systems and data.
The loss of one or more of these customers or other major customers, a deterioration in our relationship with any of them, or their failure to pay amounts due to us could have a material adverse effect on our business, financial condition, results of operations or cash flows.
The loss of one or more of these customers or other major customers, a deterioration in our relationship with any of them, 17 Table of Contents or their failure to pay amounts due to us could have a material adverse effect on our business, financial condition, results of operations or cash flows.
While we have no reason to believe that we will be impacted by work stoppages and other labor matters, we cannot ensure that future issues with our labor unions or with the labor unions of our customers and vendors will be resolved favorably or that we will not encounter future strikes, work stoppages, or other types of conflicts with labor unions or our employees.
While we have no reason to believe that we will be impacted by work stoppages and other labor matters, we cannot ensure that future issues with our labor unions or works councils, or with the labor unions of our customers and vendors will be resolved favorably or that we will not encounter future strikes, work stoppages, or other types of labor conflicts.
The laws and regulations in these jurisdictions are inherently complex and the Company and its subsidiaries will be obliged to make judgments and interpretations about the application of these laws and regulations to the Company and its subsidiaries and their operations and businesses, including those related to any restructuring of intercompany operations, holdings or financings; the valuation of intercompany services; cross-border payments between affiliated companies; and the related effects on income tax, VAT and transfer tax.
The laws and regulations in these jurisdictions are inherently complex and the Company and its subsidiaries will be obliged to make judgments and interpretations about the application of these laws and regulations to the Company and its subsidiaries and their operations and businesses, including those related to any restructuring of intercompany operations, holdings or financings; the valuation of intercompany services; cross-border payments between affiliated companies; and the related effects on income tax, value added tax (“VAT”) and transfer tax.
We operate in a number of jurisdictions that pose a high risk of potential anti-corruption violations, and we participate in joint ventures and relationships with third parties whose actions could potentially subject us to liability under anti-corruption laws. 23 Table of Contents We are also subject to other laws and regulations governing our operations, including regulations administered by the U.S.
We operate in a number of jurisdictions that pose a high risk of potential anti-corruption violations, and we participate in joint ventures and relationships with third parties whose actions could potentially subject us to liability under anti-corruption laws. We are subject to other laws and regulations governing our operations, including regulations administered by the U.S.
Additionally, our businesses compete globally for key production inputs. The availability of qualified suppliers and of key inputs may be disrupted by market disturbances or any number of geopolitical factors, including political unrest and significant weather events. Such disruptions may require additional capital or operating expenditure by us or force reductions in our production volumes.
Additionally, our businesses compete globally for raw materials and key production inputs. The availability of qualified suppliers and of key inputs may be disrupted by market disturbances or any number of geopolitical factors, including political unrest and significant weather events. Such disruptions may require additional capital or operating expenditures by us or force reductions in our production volumes.
However, if those ordinary shares are redeposited into DTC or any other depositary receipt system or clearance service, the redeposit will attract stamp duty or SDRT at the rate of 1.5%, which is generally to be paid by the transferor.
However, if those ordinary shares are redeposited into DTC or any other depositary receipt system or clearance service, the redeposit will generally attract stamp duty or SDRT, at the rate of 1.5% of the value of the shares, which will normally be paid by the transferor.
However, there is no assurance that our efforts have been and will be effective in ensuring our compliance with all applicable anti-corruption laws or other legal requirements.
However, there is no assurance that our efforts have been and will be effective in ensuring that we will comply with all applicable anti-corruption laws or other legal requirements.
In particular, for so long as our Sponsor continues to own a significant percentage of our ordinary shares, such Sponsor will be able to cause or prevent a change of control of our company or a change in the composition of our board of directors and could preclude any unsolicited acquisition of our company.
In particular, for so long as our Sponsor continues to own a significant percentage of our ordinary shares, such Sponsor may be able to prevent a change of control of our company or a change in the composition of our Board and could preclude any unsolicited acquisition of our company.
HSE laws have become increasingly stringent and stricter interpretation or enforcement of new and existing HSE laws could adversely affect our business, financial condition and results of our operations and product demand.
HSE and sustainability related laws and regulations have become increasingly stringent and new laws and regulations or stricter interpretation or enforcement of existing laws and regulations could adversely affect our business, financial condition and results of our operations and product demand.
The concentration of ownership could deprive other shareholders of an opportunity to receive a premium for ordinary shares as part of a sale of our company and ultimately might affect the market price of our ordinary shares. Our Sponsor and its affiliates engage in a broad spectrum of activities.
The concentration of ownership could deprive other shareholders of an opportunity to receive a premium for ordinary shares as part of a sale of our company and ultimately might affect the market price of our ordinary shares. Our Sponsor engages in a broad spectrum of activities.
A transfer of title in the ordinary shares from within the DTC system to a purchaser out of DTC and any subsequent transfers that occur entirely outside the DTC system, will generally attract a charge to stamp duty or SDRT at a rate of 0.5% of any consideration payable for such transfer, which is payable by the transferee of the ordinary shares.
A transfer of title in the ordinary shares held within DTC to a purchaser out of DTC and any subsequent transfers that occur outside the DTC system, will generally attract a charge to U.K. stamp duty or SDRT at a rate of 0.5% of any consideration payable for such transfer, which is payable by the transferee of the ordinary shares.
Our operations, products and properties are subject to extensive foreign, federal, state, local and provincial laws and regulations relating to HSE protection around the world.
Our operations, products and properties are subject to extensive foreign, federal, state, local and provincial laws and regulations relating to HSE and sustainability matters around the world.
In the ordinary course of their business activities, our Sponsor and its affiliates may engage in activities where their interests conflict with our interests or those of our shareholders.
In the ordinary course of its business activities, our Sponsor may engage in activities where its interests conflict with our interests or those of our shareholders.
Moreover, environmental, social and governance topics and activities have been the subject of increased focus by certain investors and regulators. Our business could be adversely impacted if we fail to achieve any of these objectives or if the reputation or image of our brand is tarnished or receives negative publicity.
Moreover, sustainability topics and activities have been the subject of increased focus by certain of our stakeholders and regulators. Our business could be adversely impacted if we fail to achieve any of these objectives or if the reputation or image of our brand is tarnished or receives negative publicity.
These information technology networks and systems may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components, power outages, hardware failures or computer viruses.
These information technology networks and systems may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components, power outages, hardware failures, malware and other vulnerabilities.
Other countries have enacted or are enacting data localization and privacy laws that require data to stay within their borders, as well as requiring that data subjects provide clear and concise consent on how collected data will be utilized.
Other countries such as China, India, Thailand, Brazil and Argentina have enacted or are enacting data localization and privacy laws that require data to stay within their borders, as well as requiring that data subjects provide clear and concise consent on how collected data will be utilized.
These restrictions limit the ability of certain of our subsidiaries to, among other things: • incur or guarantee additional debt or issue disqualified stock or preferred stock; • pay dividends and make other distributions on, or redeem or repurchase, capital stock; • make certain investments; • incur certain liens; • enter into transactions with affiliates; • merge or consolidate; • enter into agreements that restrict the ability of restricted subsidiaries to make dividends or other payments; • designate restricted subsidiaries as unrestricted subsidiaries; and • transfer or sell assets.
These restrictions limit the ability of certain of our subsidiaries to, among other things: incur or guarantee additional debt or issue disqualified stock or preferred stock; pay dividends and make other distributions on, or redeem or repurchase, capital stock; make certain investments; incur certain liens; enter into transactions with affiliates; merge or consolidate; or transfer or sell assets.
The impact of these cost-reduction actions on our sales and profitability may be influenced by many factors and we may not be able to maintain the level of cost savings that we have achieved depending on our ability to successfully complete these efforts.
The impact of these cost-reduction and restructuring actions on our sales and profitability may be influenced by many factors and we may not be able to maintain the level of cost savings that we have achieved.
HSE laws vary by jurisdiction but generally govern air emissions, wastewater discharges, material handling and transportation, waste management and disposal, substances in products, and workplace health and safety, as well as the investigation and clean-up of contaminated sites.
HSE and sustainability laws vary by jurisdiction but generally govern air emissions, wastewater discharges, material handling and transportation, waste management and disposal, product stewardship, toxicity and hazardous substances, and workplace health and safety, as well as the investigation and clean-up of contaminated sites.
DTC generally has discretion to cease to act as a depository and clearing agency for the ordinary shares including to the extent that any changes in U.K. law (including changes as a result of the U.K.’s decision to leave the E.U.) changes the stamp duty or SDRT position in relation to the ordinary shares.
DTC generally has discretion to cease to act as a depository and clearing agency for the ordinary shares including to the extent that any changes in U.K. law affect the stamp duty or SDRT position in relation to the ordinary shares.
Meeting or exceeding many government-mandated safety standards is costly and requires manufacturers to remedy defects related to product safety through recall campaigns if the products do not comply with safety, health or environmental standards.
Meeting or exceeding many government-mandated product safety and stewardship standards is costly and requires manufacturers to remedy defects, including through recall campaigns if the products do not comply with HSE standards.
In addition, any event of default or declaration of acceleration under one debt instrument could also result in an event of default under one or more of our other debt instruments. 29 Table of Contents Risks Related to the Ownership of our Ordinary Shares Our Sponsor and its affiliates control us and their interests may conflict with ours in the future.
In addition, any event of default or declaration of acceleration under one debt instrument could also result in an event of default under one or more of our other debt instruments. 25 Table of Contents Risks Related to the Ownership of our Ordinary Shares Our Sponsor has significant influence over us and its interests may conflict with ours in the future.
Certain of our employees in the U.S., the U.K., Canada, Mexico, Germany and Japan are participants in defined benefit pension plans which we sponsor and/or to which we have contribution obligations. As of January 1, 2022, the net pension obligation of our underfunded defined benefit pension plans globally was $66.8 million on a Topic 715 “Compensation-Retirement Benefits” basis.
Certain of our employees in the U.S., the U.K., Canada, Mexico, Germany and Japan are participants in defined benefit pension plans which we sponsor and/or to which we have contribution obligations. As of December 30, 2023, the net pension obligation of our underfunded defined benefit pension plans globally was $61.7 million on a Topic 715 “Compensation-Retirement Benefits” basis.
We have been implementing cost reduction actions in all of our businesses and have discontinued product lines, divested non-core businesses, consolidated manufacturing operations and reduced our employee population in some locations.
We have been implementing cost reduction and restructuring actions in all of our businesses and have discontinued product lines, consolidated or relocated manufacturing operations and reduced our employee population in some locations.
In addition, there is significant demand in our industry for skilled workers. It cannot be assured that we will be able to retain all of our current senior management personnel and attract and retain other necessary personnel, including skilled workers, necessary for the development of our business.
It cannot be assured that we will be able to retain all our current senior management personnel and attract and retain other necessary personnel, including skilled workers, necessary for the development of our business.
The OECD has undertaken a new project to address the tax challenges of the digitization of the economy.
The OECD has undertaken another project to address the tax challenges of the digitization of the economy.
Accordingly, our business and results of operations, as well as the business and results of operations of our vendors and customers, are subject to risks associated with doing business internationally, including: • changing economic conditions in the global and regional end markets we serve, which could impact the level of demand for our products, as a substantial portion of our revenues are derived from customers in cyclical industries that typically are adversely affected by downward economic cycles; • macroeconomic factors beyond the Company’s control, such as the current volatility around material and logistics availability, inflation, supply chain and labor challenges; • political, social or economic instability, civil unrest, terrorist attacks, conflicts or war, public health crises and natural disasters (including as a result of climate change) that may disrupt economic activities in affected countries; • imposition of new or additional sanctions, tariffs or other trade restrictions or embargoes, as well as import and export licensing and control requirements; • volatility of global financial markets, including persisting concerns regarding the debt burden of certain European countries, interest rate fluctuations and hyperinflation or deflation in the countries in which we operate; • exchange rate fluctuations, as well as currency restructurings, the imposition of currency restrictions, and limitations on repatriation of earnings, that could affect our ability to realize a profit or our ability to readily access global cash balances; • partial or total expropriation by local, state or national governments; • the ability to comply with or effect of complying with complex and changing laws, regulations and policies of foreign governments, including differing and, in some cases, more stringent labor and environmental regulations; • differing local product preferences and product requirements; and • difficulties involved in staffing and managing widespread operations, including challenges in administering and enforcing corporate policies, which may be different than the normal business practices of local cultures.
Accordingly, our business and results of operations, as well as the business and results of operations of our vendors and customers, are subject to risks associated with doing business internationally, including: • changing economic conditions in the global and regional end markets we serve, which could impact the level of demand for our products, as a portion of our revenues are derived from customers in cyclical industries that typically are adversely affected by downward economic cycles; • macroeconomic factors beyond the Company’s control, such as recent significant volatility around material and logistics availability, inflation, supply chain and labor challenges; • political, social or economic instability, civil unrest, terrorist attacks, conflicts or war (such as the ongoing conflicts in Eastern Europe and the Middle East), public health crises (including pandemics), natural disasters (including as a result of climate change), widespread cybersecurity incidents, and other catastrophic events may disrupt economic activities (including demand for and production and distribution of our products) and our workforce in affected countries or globally; • imposition of additional sanctions, tariffs or other trade restrictions or embargoes, as well as import and export licensing and control requirements; • volatility of global financial markets, including interest rate fluctuations and hyperinflation or deflation in the countries in which we operate; • exchange rate fluctuations, as well as currency restructurings, the imposition of currency restrictions, and limitations on repatriation of earnings, that could affect our ability to realize a profit or our ability to readily access global cash balances; • partial or total expropriation by local, state or national governments; • compliance with or effect of complying with complex and changing laws, regulations and policies of foreign governments, including differing and, in some cases, more stringent labor, sustainability (such as environmental, social, and governance (“ESG”) related) and HSE regulations as well as limitations on our ability to enforce our legal rights and remedies; 14 Table of Contents • differing local product preferences and product requirements; and • difficulties involved in staffing and managing widespread operations, including challenges in enforcing corporate policies, which may be different than the normal business practices of local cultures.
Despite our current level of indebtedness, we may be able to incur substantially more debt and enter into other transactions which could further exacerbate the risks to our financial condition described above. We may be able to incur significant additional indebtedness in the future.
Despite our current level of indebtedness, we may be able to incur substantially more debt and enter into other transactions which could further exacerbate the risks to our financial condition described above. We may be able to incur significant additional indebtedness in the future to finance working capital, capital expenditures, investments, acquisitions, or for other purposes.
In addition, GHGs regulations could impact oil and gas production, a key demand driver of our industrial end markets, and reduce demand for our products by driving down the use of fossil fuels.
GHG regulations and carbon taxes could also impact oil and gas production, a key demand driver of our industrial end markets, and reduce demand for our products by driving down the use of fossil fuels.
Additionally, we have reserved 12,500,000 ordinary shares for issuance under our Omnibus Incentive Plan. Any ordinary shares that we issue, including under our Omnibus Incentive Plan or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by the holders of our ordinary shares.
Any ordinary shares that we issue, including under our Omnibus Incentive Plan or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by the holders of our ordinary shares.
We face an inherent business risk of exposure to various types of claims, lawsuits and proceedings. We may be involved in tax, intellectual property, product liability, product warranty and environmental claims and lawsuits, and other legal, antitrust and regulatory proceedings arising in the ordinary course of our business.
We may be involved in tax, intellectual property, product liability, product warranty, environmental and antitrust claims and lawsuits, and other legal, antitrust and regulatory proceedings arising in the ordinary course of our business.
Supplier consolidation and the increase in low-cost country sourcing may increase the likelihood of receiving defective materials, thereby increasing the risk of alleged product failure and resulting liability claims. Litigation is inherently unpredictable and these claims, regardless of their outcome, may be costly, divert management attention and adversely affect our reputation.
The likelihood of receiving defective materials and related product failure and resulting liability claims may increase due changes in our supplier network, such as low-cost country sourcing. Litigation is inherently unpredictable and these claims, regardless of their outcome, may be costly, divert management attention and adversely affect our reputation.
Bribery Act of 2010, and other anti-corruption laws that generally prohibit employees and intermediaries from making improper payments for the purpose of obtaining or retaining business or gaining some other business advantage.
Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.K. Bribery Act of 2010, and other anti-corruption laws that generally prohibit employees and intermediaries from making improper payments for the purpose of obtaining or retaining business or gaining some other business advantage.
Labor is a primary component of operating our business. As of January 1, 2022, we had approximately 15,050 full time employees worldwide. Certain of our employees are represented by various unions under collective bargaining agreements, or by various regional works councils.
Labor is a primary component of operating our business. As of December 30, 2023, we had approximately 14,700 full time employees worldwide. Certain of our employees are represented by various unions under collective bargaining agreements, or by various regional works councils.
The levels of inventory maintained by our distributors and other channel partners, and changes in those levels, such as destocking, can also significantly impact our results of operations in any given period. In addition, the consolidation of channel partners and customers in certain of our end markets could adversely impact our profitability.
The levels of inventory maintained by our distributors and other channel partners, and changes in those levels, such as destocking, can also significantly impact our results of operations in any given period.
If these organizations decide not to test a particular vehicle product, or in the event that such organizations decide that a particular vehicle product does not meet applicable quality or safety standards, we may decide to discontinue sales of such product or insurance companies may decide to discontinue authorization of repairs using such product.
If these organizations decide not to test a particular vehicle product, or in the event that such organizations decide that a particular vehicle product does not meet applicable quality or safety standards, we may incur additional costs to meet such standards or experience a decrease in sales of such products, including as a result of a decision to discontinue sales of such product or insurance companies deciding to discontinue authorization of repairs using such product.
This is known as the “residency test.” Under the Takeover Code, the Takeover Panel will determine whether we have our place of central management and control in the U.K. by looking at various factors, including the structure of our Board of Directors, the functions of the directors and where they are resident. 32 Table of Contents If at the time of a takeover offer, the Takeover Panel determines that we have our place of central management and control in the U.K., we would be subject to a number of rules and restrictions, including but not limited to the following: (i) our ability to enter into deal protection arrangements with a bidder would be extremely limited; (ii) we might not, without the approval of our shareholders, be able to perform certain actions that could have the effect of frustrating an offer, such as issuing shares or carrying out acquisitions or disposals; and (iii) we would be obliged to provide equality of information to all bona fide competing bidders.
If at the time of a takeover offer, the Takeover Panel determines that we have our place of central management and control in the U.K., we would be subject to a number of rules and restrictions, including but not limited to the following: (i) our ability to enter into deal protection arrangements with a bidder would be extremely limited; (ii) we might not, without the approval of our shareholders, be able to perform certain actions that could have the effect of frustrating an offer, such as issuing shares or carrying out acquisitions or disposals; and (iii) we would be obliged to provide equality of information to all bona fide competing bidders.
If we are unsuccessful in challenging such products on the basis of patent, trademark or other intellectual property misappropriation, continued sales of such imitating products may adversely affect market share and impact customer perceptions and demand. 22 Table of Contents Failure to develop, obtain, enforce and protect intellectual property rights could adversely affect our business.
If we are unsuccessful in challenging such products on the basis of patent, trademark or other intellectual property misappropriation, continued sales of such imitating products may adversely affect 21 Table of Contents our market share and impact customer perceptions and demand for our products.
Such events could adversely affect our business. 24 Table of Contents Risks Related to Cybersecurity and Information Systems Cyber-security vulnerabilities, threats and more sophisticated and targeted computer crimes could pose a risk to our systems, networks, products, solutions, services and data.
Risks Related to Cybersecurity and Information Systems Cyber-security vulnerabilities, threats and more sophisticated and targeted computer crimes could pose a risk to our systems, networks, products, solutions, services and data.
Existing or new laws and regulations, including but not limited to those relating to HSE concerns, and the sale of aftermarket products, may prohibit, burden, restrict or make significantly more costly the sale of our products.
Risks Related to Legal and Regulatory Matters Existing or new laws and regulations, including but not limited to those relating to HSE and sustainability matters, may prohibit, burden, restrict or make significantly more costly the sale of our products and the operation of our business.
We are a holding company, and our consolidated assets are owned by, and our business is conducted through, our subsidiaries. Earnings from these subsidiaries are our primary source of funds for debt payments and operating expenses. If our subsidiaries are restricted from making distributions, our ability to meet our debt service obligations or otherwise fund our operations may be impaired.
Earnings from these subsidiaries are our primary source of funds for debt payments and operating expenses. If our subsidiaries are restricted from making distributions, our ability to meet our debt service obligations or otherwise fund our operations may be impaired.
However, we could, in the future, be subject to various claims, lawsuits and proceedings, including, amongst others, tax, intellectual property, product liability, product warranty, environmental claims and antitrust claims, and we may incur judgments or enter into settlements of lawsuits and proceedings that are not covered or not sufficiently covered by insurance.
However, we could, in the future, be subject to various claims, lawsuits and proceedings, and we may incur judgments or enter into settlements of lawsuits and proceedings that are not covered or not sufficiently covered by insurance.
We have no current plans to pay dividends on our ordinary shares. The declaration, amount and payment of any future dividends on our ordinary shares will be at the sole discretion of our board of directors.
The declaration, amount and payment of any future dividends on our ordinary shares will be at the sole discretion of our Board.
Although we rely on U.S. and foreign intellectual property rights, procuring, enforcing, and defending patents on our products in all jurisdictions throughout the world would be prohibitively expensive, and the laws of certain foreign countries may not protect or allow enforcement of intellectual property rights to the same extent as the laws of the U.S.
In this regard, we rely on U.S. and foreign patent, trademark, copyright, and trade secret laws, as well as license agreements, nondisclosure agreements, and confidentiality and other contractual provisions; however, procuring, enforcing, and defending patents on our products in all jurisdictions throughout the world would be prohibitively expensive, and the laws of certain foreign countries may not protect or allow enforcement of intellectual property rights to the same extent as the laws of the U.S.
The credit agreements that govern our senior secured term loan facilities and the indenture that governs our notes impose significant operating and financial restrictions on our subsidiaries.
Certain of our debt agreements impose significant operating and financial restrictions on our subsidiaries and us that could prevent us from capitalizing on business opportunities. The credit agreements that govern our senior secured term loan facilities and the indenture that governs our notes impose significant operating and financial restrictions on our subsidiaries.
Sales of a substantial number of our ordinary shares in the public market, or the perception that these sales could occur, could substantially decrease the market price of our ordinary shares. 31 Table of Contents Pursuant to a registration rights agreement, we granted our Sponsor the right to cause us, in certain instances, at our expense, to file registration statements under the Securities Act covering resales of our ordinary shares held by them or to participate in future registration of securities by us.
Pursuant to a registration rights agreement, we granted our Sponsor the right to cause us, in certain instances, at our expense, to file registration statements under the Securities Act covering resales of our ordinary shares held by them or to participate in future registration of securities by us.
Failure to accurately forecast demand or meet significant increases in demand could have a material adverse impact on our business, financial condition and operating results. We may not be able to maintain and enhance our strong brand on which we depend.
Failure to accurately forecast demand or meet significant increases in demand could have a material adverse impact on our business, financial condition and operating results.
If any of our manufacturing facilities, supply chains, distribution systems or technology systems were to experience a catastrophic loss or ongoing closure or disruption due to adverse weather, natural or man-made disasters (including as a result of climate change), labor unrest, public health crises such as the COVID-19 pandemic, terrorist attacks, cyberattacks, significant mechanical failure of our equipment or other catastrophic event, it could result in interruption of our business, a potential loss of customers and sales, or significantly increased operating costs, including large repair and replacement expenses.
If any of our manufacturing facilities, supply chains, distribution systems or technology systems were to experience a catastrophic loss or ongoing closure or disruption due to adverse weather or natural disasters (including as a result of climate change), labor unrest, public health crises such as pandemics, terrorist attacks or armed conflicts, cyberattacks, power loss, telecommunications failure, significant mechanical failure of our equipment or other catastrophic event or government responses thereto, it could adversely affect our employees, data centers or critical business of information technology systems, our ability to produce and distribute our products or conduct normal business operations, and our reputation and, ultimately, result in a potential loss of customers and sales or significantly increased operating costs, including large repair and replacement expenses.
For example, the European Union’s General Data Protection Regulation (“GDPR”), which greatly increases the jurisdictional reach of European Union law and adds a broad array of requirements for handling personal data, including the public disclosure of significant data breaches, became effective in May 2018, and several states in the U.S. have adopted similar legislation.
For example, the General Data Protection Regulation (“GDPR”) adopted by the European Union (“EU”) greatly increased the jurisdictional reach of EU law and added a broad array of requirements for handling personal data, including the public disclosure of significant data breaches, and many other countries and several states in the U.S. have proposed or adopted similar legislation.

… 137 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed1 unchanged
Biggest changeIncluded in our property, plant and equipment are land and buildings with a total carrying amount of $229.7 million as of January 1, 2022, compared to $247.3 million as of January 2, 2021, representing manufacturing facilities, service centers, distribution centers and offices located throughout the world, but predominantly in North America.
Biggest changeIncluded in our property, plant and equipment are land and buildings with a net carrying amount of $212.4 million as of December 30, 2023, compared to $214.0 million as of December 31, 2022, representing manufacturing facilities, service centers, 29 Table of Contents distribution centers and offices located throughout the world, but predominantly in North America.
Item 2. Properties We operate from over 100 locations in 30 countries across the Americas, Europe, Asia and Australia. Our corporate operations center is located in Denver, Colorado, and we also maintain regional headquarters in Denver, Luxembourg, Shanghai, and Singapore.
Item 2. Properties We operate from over 100 locations in 30 countries across the Americas, Europe, Asia, Australia and Africa. Our corporate headquarters is located in Denver, Colorado, and we also maintain regional headquarters in Denver, Luxembourg, Shanghai, and Singapore.
As of January 1, 2022, Gates owned 30 of these facilities, including 23 manufacturing or service centers. We also lease a number of locations around the world, primarily distribution centers and offices, none of which is individually material to our operations.
As of December 30, 2023, Gates owned 30 of these facilities, including 23 manufacturing or service centers. We also lease a number of locations around the world, primarily distribution centers and offices, none of which is individually material to our operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed3 unchanged
Biggest changeMine Safety Disclosures Not applicable. 34 Table of Contents PART II
Biggest changeMine Safety Disclosures Not applicable. 30 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−4 removed2 unchanged
Biggest changeIn addition, the ability of our subsidiaries to pay dividends will be limited by covenants in our existing indebtedness and may be limited by the agreements governing any indebtedness we or our subsidiaries may incur in the future.
Biggest changeIn addition, the ability of our subsidiaries to pay dividends will be limited by covenants in our existing indebtedness and may be limited by the agreements governing any indebtedness we or our subsidiaries may incur in the future. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved] 31 Table of Contents
This does not include a substantially greater number of holders whose ordinary shares are held by these recordholders, including through banks, brokers, and other institutions. Dividends We have no current plans to pay dividends on our ordinary shares.
This does not include a substantially greater number of holders whose ordinary shares are held by these record holders, including through banks, brokers, and other institutions. Dividends We have no current plans to pay dividends on our ordinary shares.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information Our ordinary shares are traded on the NYSE under the symbol “GTES”. As of February 4, 2022, there were three holders of record of our ordinary shares.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information Our ordinary shares are traded on the NYSE under the symbol “GTES”. As of February 5, 2024, there were three holders of record of our ordinary shares.
Removed
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following information relates to the repurchases of equity securities by Gates during each of the fiscal periods of the fourth quarter of the current year: Purchases of Equity Securities by Affiliated Purchasers (1) Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs (2) Maximum number of shares that may yet be purchased under the plans or programs (3) Oct 3, 2021 - Oct 30, 2021 — $ — N/A N/A Oct 31, 2021 - Nov 27, 2021 — $ — N/A N/A Nov 28, 2021 - Jan 1, 2022 656,451 $ 16.07 656,451 11,907,749 Total 656,451 $ 16.07 656,451 11,907,749 (1) The table reflects open market purchases of our ordinary shares by the Company and does not include commissions or other costs paid to repurchase shares.
Removed
All shares repurchased were cancelled. (2) The repurchase program was established in November 2021, allowing for up to $200 million in authorized share repurchases of our ordinary shares, exclusive of commissions, through December 31, 2022.
Removed
Under this publicly announced program, we are authorized to repurchase ordinary shares using a variety of methods, including but not limited to open market purchases and privately-negotiated transactions, all in compliance with the rules and regulations of the SEC and other applicable legal requirements.
Removed
The repurchase program does not obligate us to acquire any specific dollar amount or number of ordinary shares, and the repurchase program may be suspended or discontinued at any time. (3) Based on the closing price of our ordinary shares on January 1, 2022 of $15.91. Item 6. [Reserved] 35 Table of Contents

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 6. [Reserved] 35 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 36 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 52 Item 8. Financial Statements and Supplementary Data 54 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 54 Item 9A. Control s and Procedures 55
Biggest changeItem 6. [Reserved] 31 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 32 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 48 Item 8. Financial Statements and Supplementary Data 50 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 50 Item 9A. Controls and Procedures 51 Item 9B.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

85 edited+52 added−66 removed51 unchanged
Biggest changeSome of these impacts may be material but cannot be reasonably estimated at this time. 37 Table of Contents Results for the year ended January 1, 2022 compared to the results for the year ended January 2, 2021 Summary Gates Performance For the year ended (dollars in millions) January 1, 2022 January 2, 2021 Net sales $ 3,474.4 $ 2,793.0 Cost of sales 2,135.2 1,758.3 Gross profit 1,339.2 1,034.7 Selling, general and administrative expenses 852.7 776.9 Transaction-related expenses 3.7 5.2 Asset impairments 0.6 5.2 Restructuring expenses 7.4 37.3 Other operating income (9.3) (1.0) Operating income from continuing operations 484.1 211.1 Interest expense 133.5 154.3 Other expense (income) 0.9 (14.2) Income from continuing operations before taxes 349.7 71.0 Income tax expense (benefit) 18.4 (19.3) Net income from continuing operations $ 331.3 $ 90.3 Adjusted EBITDA (1) $ 735.8 $ 506.6 Adjusted EBITDA margin 21.2 % 18.1 % (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.
Biggest changeResults for the year ended December 30, 2023 compared to the results for the year ended December 31, 2022 Summary Gates Performance For the year ended (dollars in millions) December 30, 2023 December 31, 2022 Net sales $ 3,570.2 $ 3,554.2 Cost of sales 2,211.3 2,303.6 Gross profit 1,358.9 1,250.6 Selling, general and administrative expenses 882.2 853.7 Transaction-related expenses 2.2 2.1 Asset impairments 0.1 1.1 Restructuring expenses 11.6 9.5 Other operating expenses 0.2 0.2 Operating income from continuing operations 462.6 384.0 Interest expense 163.2 139.4 Other expense (income) 14.1 (13.2) Income from continuing operations before taxes 285.3 257.8 Income tax expense 28.3 14.9 Net income from continuing operations $ 257.0 $ 242.9 Adjusted EBITDA (1) $ 747.0 $ 680.6 Adjusted EBITDA margin 20.9 % 19.1 % (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. 33 Table of Contents Net sales 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.
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 impact materially our financial statements.
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.
Critical Accounting Estimates and Judgments Details of our significant accounting policies are set out in note 2 to our audited consolidated financial statements included elsewhere in this annual report. When applying our accounting policies, we must make assumptions, judgments and estimates concerning the future that affect reported amounts of assets, liabilities, revenue and expenses.
Critical Accounting Estimates and Judgments Details of our significant accounting policies are set out in Note 2 to our audited consolidated financial statements included elsewhere in this annual report. When applying our accounting policies, we must make assumptions, judgments and estimates concerning the future that affect the reported amounts of assets, liabilities, revenue and expenses.
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.
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.
We present core 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.
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.
As a leading designer, manufacturer and marketer of highly engineered, mission-critical products, we have become an industry leader across most of the regions and end markets in which we operate.
As a leading designer, manufacturer and marketer of highly engineered, mission-critical products, we have become an industry leader across most of our end markets and the regions in which we operate.
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 $4.7 million. Gates Industrial Corporation plc is not an obligor under our revolving credit facility, our term loan facility or the indenture governing our outstanding notes.
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. Gates Industrial Corporation plc is not an obligor under our revolving credit facility, our term loan facility or the indenture governing our outstanding notes.
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 110 years since Gates’ founding in 1911.
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.
Changes in assumptions or circumstances could result in an additional impairment in the period in which the change occurs and in future years. 50 Table of Contents Indefinite-Lived Assets Other than Goodwill To identify a potential impairment of indefinite-lived assets other than goodwill, the fair value of the asset is compared to its carrying amount.
Changes in assumptions or circumstances could result in an additional impairment in the period in which the change occurs and in future years. 46 Table of Contents Indefinite-Lived Assets Other than Goodwill To identify a potential impairment of indefinite-lived assets other than goodwill, the fair value of the asset is compared to its carrying amount.
We do not have any meaningful debt maturities until 2024; however, we regularly evaluate market conditions, our liquidity profile, and various financing alternatives for opportunities to enhance our capital structure, and may refinance all or a portion of our indebtedness on or before maturity.
We do not have any meaningful debt maturities until 2026; however, we regularly evaluate market conditions, our liquidity profile, and various financing alternatives for opportunities to enhance our capital structure, and may refinance all or a portion of our indebtedness on or before maturity.
Settlement discounts that may apply to unpaid invoices are estimated based on the settlement histories of the relevant customers. 49 Table of Contents Our transaction prices often include variable consideration, usually in the form of discounts and rebates that may apply to issued invoices.
Settlement discounts that may apply to unpaid invoices are estimated based on the settlement histories of the relevant customers. 45 Table of Contents Our transaction prices often include variable consideration, usually in the form of discounts and rebates that may apply to issued invoices.
Non-GAAP Measures EBITDA and Adjusted EBITDA “EBITDA” is a non-GAAP measure that represents net income or loss for the period before the impact of income taxes, net interest and other expenses, depreciation and amortization. EBITDA is widely used by securities analysts, investors and other interested parties to evaluate the profitability of companies.
Non-GAAP Measures EBITDA and Adjusted EBITDA “EBITDA” is a non-GAAP measure that represents net income or loss from continuing operations for the period before the impact of income taxes, net interest and other expenses, depreciation and amortization. EBITDA is widely used by securities analysts, investors and other interested parties to evaluate the profitability of companies.
These applications subject our products to normal wear and tear, resulting in natural, and often preventative, replacement cycles that drive high-margin, recurring revenue. Our product portfolio represents one of the broadest ranges of power transmission and fluid power products in the markets we serve, and we maintain long-standing relationships with a diversified group of blue-chip customers throughout the world.
These applications subject our products to normal wear and tear, resulting in natural, and often preventative, replacement cycles that drive high-margin, recurring revenue. Our product portfolio represents one of the broadest ranges of power transmission and fluid power products in the markets we serve, and we maintain long-standing relationships with a diversified group of well-known customers throughout the world.
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. During Fiscal 2021, sales into first-fit channels accounted for approximately 37% of our total net sales. First-fit sales are to a variety of industrial and automotive customers.
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. 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.
The table below excludes our gross liability for uncertain tax positions of $103.7 million because the timing of cash settlement, if any, is unknown at this time. Floating interest payments and payments and receipts on interest rate derivatives are estimated based on market interest rates prevailing at the balance sheet date.
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. Floating interest payments and payments and receipts on interest rate derivatives are estimated based on market interest rates prevailing at the balance sheet date.
During Fiscal 2021, sales into replacement channels accounted for approximately 63% 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.
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.
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 post-employment benefit obligations and after the cash impacts of acquisitions and disposals.
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.
In each case, the discount rate was determined using a capital asset pricing model adjusted for a premium to reflect the higher risk specific to the nature of the intangible asset. The discount rate used in Fiscal 2021 impairment test was 10.0%. As a result of the impairment testing, no impairment was recognized during Fiscal 2021.
In each case, the discount rate was determined using a capital asset pricing model adjusted for a premium to reflect the higher risk specific to the nature of the intangible asset. The discount rate used in Fiscal 2023 impairment test was 12.9%. As a result of the impairment testing, no impairment was recognized during Fiscal 2023.
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our audited consolidated financial statements and related notes thereto included elsewhere in this annual report. This discussion and analysis addresses Fiscal 2021 and Fiscal 2020.
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and related notes thereto included elsewhere in this annual report. This discussion and analysis addresses Fiscal 2023 compared to Fiscal 2022.
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 our peer companies with a similar leveraged, private equity ownership history.
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.
For discussion and analysis of our financial condition and results of operations for Fiscal 2020 and Fiscal 2019, see Management's Discussion and Analysis of Financial Condition and Results of Operations, in Part II, Item 7 of our Annual Report on Form 10-K for Fiscal 2020, which is incorporated herein by reference.
For discussion and analysis of our financial condition and results of operations for Fiscal 2022 compared to Fiscal 2021, see Management's Discussion and Analysis of Financial Condition and Results of Operations, in Part II, Item 7 of our Annual Report on Form 10-K for Fiscal 2022, which is incorporated herein by reference.
During Fiscal 2020, we determined that it was more likely than not that certain deferred income tax assets in the U.K., Luxembourg and Belgium totaling $29.5 million were realizable. 51 Table of Contents Accounting Pronouncements Not Yet Adopted Recently issued accounting pronouncements that may be relevant to our operations but have not yet been adopted are outlined in note 3 to our audited consolidated financial statements included elsewhere in this annual report.
During Fiscal 2022, we determined that it was more likely than not that certain deferred income tax assets in the U.S. totaling $15.3 million were realizable. 47 Table of Contents Accounting Pronouncements Not Yet Adopted Recently issued accounting pronouncements that may be relevant to our operations but have not yet been adopted are outlined in Note 3 to our audited consolidated financial statements included elsewhere in this annual report.
After weighing all of the evidence, giving more weight to the evidence that was objectively verifiable, we determined in Fiscal 2021 that it was more likely than not that deferred income tax assets in the U.S. related to foreign tax credits totaling $53.4 million are realizable as a result of changes in estimates of taxable profits against which these credits can be utilized.
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.
As market conditions warrant, we and our majority equity holders, Blackstone and its affiliates, 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.
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.
During Fiscal 2021, we determined that it was more likely than not that certain deferred income tax assets in the U.S. totaling $53.4 million were realizable.
During Fiscal 2023, we determined that it was more likely than not that certain deferred income tax assets in the U.S. totaling $2.1 million were realizable.
EBITDA eliminates potential differences in performance caused by variations in capital structures (affecting net finance costs), tax positions (such as the availability of net operating losses against which to relieve taxable profits), the cost and age of tangible assets (affecting relative depreciation expense) and the extent to which intangible assets are identifiable (affecting relative amortization expense).
EBITDA eliminates potential differences in performance caused by variations in capital structures (affecting net finance costs), tax positions (such as the availability of net operating losses against which to relieve taxable profits), the cost and age of tangible assets (affecting relative depreciation expense) and the extent to which intangible assets are identifiable (affecting relative amortization expense). 41 Table of Contents Management uses “Adjusted EBITDA” as its key profitability measure.
Net debt was as follows: (dollars in millions) As of January 1, 2022 As of January 2, 2021 Principal amount of debt $ 2,579.2 $ 2,720.8 Less: Cash and cash equivalents (658.2) (521.4) Net debt $ 1,921.0 $ 2,199.4 48 Table of Contents The principal amount of debt is reconciled to the carrying amount of debt as follows: (dollars in millions) As of January 1, 2022 As of January 2, 2021 Principal amount of debt $ 2,579.2 $ 2,720.8 Accrued interest 16.9 17.3 Deferred issuance costs (31.5) (29.4) Carrying amount of debt $ 2,564.6 $ 2,708.7 Adjusted EBITDA adjustments for ratio calculation purposes 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.
Net debt was as follows: (dollars in millions) As of December 30, 2023 As of December 31, 2022 Principal amount of debt $ 2,471.9 $ 2,491.4 Less: Cash and cash equivalents (720.6) (578.4) Net debt $ 1,751.3 $ 1,913.0 44 Table of Contents The principal amount of debt is reconciled to the carrying amount of debt as follows: (dollars in millions) As of December 30, 2023 As of December 31, 2022 Principal amount of debt $ 2,471.9 $ 2,491.4 Accrued interest 17.0 17.1 Deferred issuance costs (37.4) (45.5) Carrying amount of debt $ 2,451.5 $ 2,463.0 Adjusted EBITDA adjustments for ratio calculation purposes 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.
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.
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.
(3) Post-retirement benefit obligations represent our expected cash contributions to defined benefit pension and other post-retirement benefit plans in 2022. 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.
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.
The only significant difference between the results of operations and net assets that would be shown in the consolidated financial statements of Gates Global LLC and those for the Company that are included elsewhere in this report is a receivable of $0.9 million due to Gates Global LLC and its subsidiaries from indirect parent entities of Gates Global LLC as of January 1, 2022, compared to a receivable of $0.6 million as of January 2, 2021, and additional cash and cash equivalents held by the Company and other indirect parents of Gates Global LLC of $12.7 million and $4.2 million as of January 1, 2022 and January 2, 2021, respectively.
The only significant difference between the results of operations and net assets that would be shown in the consolidated financial statements of Gates Global LLC and those for the Company that are included elsewhere in this report is a payable of $333.6 million due to Gates Global LLC and its subsidiaries from indirect parent entities of Gates Global LLC as of December 30, 2023, compared to a payable of $117.3 million as of December 31, 2022, and additional cash and cash equivalents held by the Company and other indirect parent entities of Gates Global LLC of $3.5 million and $6.4 million as of December 30, 2023 and December 31, 2022, respectively.
For the year ended (dollars in millions) January 1, 2022 January 2, 2021 December 28, 2019 Net sales $ 3,474.4 $ 2,793.0 $ 3,087.1 Adjusted EBITDA $ 735.8 $ 506.6 $ 611.0 Adjusted EBITDA margin 21.2 % 18.1 % 19.8 % 47 Table of Contents Core growth reconciliations Core revenue 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.
For the year ended (dollars in millions) December 30, 2023 December 31, 2022 January 1, 2022 Net sales $ 3,570.2 $ 3,554.2 $ 3,474.4 Adjusted EBITDA $ 747.0 $ 680.6 $ 735.8 Adjusted EBITDA margin 20.9 % 19.1 % 21.2 % 43 Table of Contents Core sales growth reconciliations 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 may experience future production disruptions where plants are temporarily closed, or productivity is reduced, by government mandates or as a result of supply chain or labor disruptions, which could place constraints on our ability to produce or deliver our products and meet customer demand or increase our costs.
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.
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.
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.
We evaluate the recoverability of our deferred tax assets, weighing all positive and negative evidence, and are required to establish or maintain a valuation allowance for these assets if we determine that it is more likely than not that some or all of the deferred tax assets will not be realized.
We evaluate the recoverability of our deferred tax assets, weighing all positive and negative evidence, and are required to establish or maintain a valuation allowance for these assets if we determine that it is more likely than not that some or all of the deferred tax assets will not be realized. 36 Table of Contents 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.
The income approach was based on cash flow forecasts derived from the most recent financial plans approved by the board of directors, in which the principal assumptions were those regarding sales growth rates, selling prices and changes in direct costs. Forecasts for the following two years were based on region-specific growth assumptions determined by management, taking into account strategic initiatives.
The income approach was based on cash flow forecasts derived from the most recent financial plans approved by the Board, in which the principal assumptions were those regarding sales growth rates, selling prices and changes in direct costs.
As of January 1, 2022, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 62% of our total assets and approximately 28% of our total liabilities. 44 Table of Contents Net Debt Net debt is a non-GAAP measure representing the principal amount of our debt less the carrying amount of cash and cash equivalents.
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. Net Debt Net Debt is a non-GAAP measure representing the principal amount of our debt less the carrying amount of cash and cash equivalents.
For the twelve months ended January 1, 2022, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 74% of our net sales and 69% of our EBITDA as defined in the financial covenants attaching to the senior secured credit facilities.
Non-guarantor subsidiaries The majority of the Company’s U.S. subsidiaries are guarantors of the senior secured credit facilities. 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.
Differences exist among our businesses and from period to period in the extent to which their respective employees receive share-based compensation or a charge for such compensation is recognized.
Differences exist among our businesses and from period to period in the extent to which their respective employees receive share-based compensation or a charge for such compensation is recognized. We therefore exclude from Adjusted EBITDA the non-cash charges in relation to share-based compensation in order to assess the relative performance of our businesses.
Our net sales for Fiscal 2021 were favorably impacted by movements in average currency exchange rates of $76.3 million compared to the prior year, due principally to the weakening of the U.S. dollar against a number of currencies, in particular the Euro, Chinese Renminbi and the Canadian Dollar.
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.
(4) A purchase obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding on us and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. 45 Table of Contents Cash Balances As of January 1, 2022, our total cash and cash equivalents were $658.2 million, compared to $521.4 million as of January 2, 2021.
(3) A purchase obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding on us and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction.
Borrowing Headroom As of January 1, 2022, our asset-backed revolving credit facility had a borrowing base of $240.4 million, being the maximum amount we can draw down based on the current value of the secured assets. The facility was undrawn for cash, but there were letters of credit outstanding against the facility amounting to $45.3 million.
Borrowing Headroom 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 use Adjusted EBITDA margin to measure the success of our businesses in managing our cost base and improving profitability.
Adjusted EBITDA Margin 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.
Tabular Disclosure of Contractual Obligations Our consolidated contractual obligations and commercial commitments are summarized in the following table which includes aggregate information about our contractual obligations as of January 1, 2022 and the periods in which payments are due, based on the earliest date on which we could be required to settle the liabilities.
As of December 30, 2023, our total committed borrowing headroom was $470.3 million, in addition to cash balances of $720.6 million. 40 Table of Contents Tabular Disclosure of Contractual Obligations 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 following table reconciles net income from continuing operations, the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA: For the year ended (dollars in millions) January 1, 2022 January 2, 2021 December 28, 2019 Net income from continuing operations $ 331.3 $ 90.3 $ 694.7 Income tax expense (benefit) 18.4 (19.3) (495.9) Net interest and other expenses 134.4 140.1 148.0 Depreciation and amortization 222.6 218.6 222.2 EBITDA 706.7 429.7 569.0 Transaction-related expenses (1) 3.7 5.2 2.6 Asset impairments 0.6 5.2 0.7 Restructuring expenses 7.4 37.3 6.0 Share-based compensation expense 24.6 19.8 15.0 Sponsor fees (included in other operating expense) — 1.9 6.5 Inventory impairments (included in cost of sales) 1.4 1.4 1.2 Severance expenses (included in cost of sales) — 1.0 4.0 Severance expenses (included in SG&A) 0.7 8.0 3.4 Other items not directly related to current operations (2) (9.3) (2.9) 2.6 Adjusted EBITDA $ 735.8 $ 506.6 $ 611.0 (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.
Management compensates for these limitations by separately monitoring net income from continuing operations for the period. 42 Table of Contents The following table reconciles net income from continuing operations, the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA: For the year ended (dollars in millions) December 30, 2023 December 31, 2022 January 1, 2022 Net income from continuing operations $ 257.0 $ 242.9 $ 331.3 Income tax expense 28.3 14.9 18.4 Net interest and other expenses 177.3 126.2 134.4 Depreciation and amortization 217.5 217.2 222.6 EBITDA 680.1 601.2 706.7 Transaction-related expenses (1) 2.2 2.1 3.7 Asset impairments 0.1 1.1 0.6 Restructuring expenses 11.6 9.5 7.4 Share-based compensation expense 27.4 44.3 24.6 Inventory impairments and adjustments (2) (included in cost of sales) 7.4 20.9 1.4 Severance expenses (included in cost of sales) 0.4 0.8 — Severance expenses (included in SG&A) 1.0 0.5 0.7 Credit loss related to customer bankruptcy (included in SG&A) (3) 11.4 — — Cybersecurity incident expenses (4) 5.2 — — Other items not directly related to current operations 0.2 0.2 (9.3) Adjusted EBITDA $ 747.0 $ 680.6 $ 735.8 (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.
During the periods presented, the items excluded from EBITDA in computing Adjusted EBITDA primarily included: • non-cash charges in relation to share-based compensation; • transaction-related expenses incurred in relation to major corporate transactions, including the acquisition of businesses, and equity and debt transactions; • asset impairments; • restructuring expenses, including severance-related expenses; and • fees paid to our private equity sponsor for monitoring, advisory and consulting services.
During the periods presented, the items excluded from EBITDA in computing Adjusted EBITDA primarily included: • non-cash charges in relation to share-based compensation; • transaction-related expenses incurred in relation to major corporate transactions, including the acquisition of businesses, and equity and debt transactions; • asset impairments; • restructuring expenses, including severance-related expenses; • credit loss related to a customer bankruptcy; • cybersecurity incident expenses; and • inventory adjustments related to certain inventories accounted for on the LIFO basis.
We offer a broad portfolio of products to diverse replacement channel customers, and to original equipment (“first-fit”) manufacturers as specified components, with the majority of our revenue coming from replacement channels.
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.
The majority of this growth was focused in North America and EMEA, where industrial sales grew by 27.1% and 42.7%, respectively, during Fiscal 2021 compared to the prior year.
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.
Net cash used in financing activities was $148.6 million during Fiscal 2021, compared to $353.8 million in the prior year.
Net cash used in financing activities was $258.3 million during Fiscal 2023, compared to $253.1 million in the prior year period.
Interest on debt for Fiscal 2021 decreased by $12.9 million when compared to the prior year due primarily to interest savings on debt repayments and the benefit from lower interest rates on the Dollar Term Loan, offset partially by the impact of derivatives.
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.
Other expense (income) For the year ended (dollars in millions) January 1, 2022 January 2, 2021 Interest income on bank deposits $ (3.2) $ (4.3) Foreign currency loss (gain) on net debt and hedging instruments 7.6 (5.3) Net adjustments related to post-retirement benefits (4.6) (4.5) Other 1.1 (0.1) $ 0.9 $ (14.2) Other expense for Fiscal 2021 was $0.9 million, compared to an income of $14.2 million in the prior year.
Additional deferred issuance costs incurred from issuing the New Dollar Term Loans in November 2022 added to amortization expense in Fiscal 2023. 35 Table of Contents Other expenses (income) For the year ended (dollars in millions) December 30, 2023 December 31, 2022 Interest income on bank deposits $ (17.5) $ (3.6) Foreign currency loss (gain) on net debt and hedging instruments 4.2 (10.2) Net adjustments related to post-retirement benefits (3.0) (6.5) Foreign currency loss on hyperinflation remeasurement 22.6 2.4 Other 7.8 4.7 $ 14.1 $ (13.2) Other expenses for Fiscal 2023 were $14.1 million, compared to an income of $13.2 million in the prior year.
For the year ended January 1, 2022 (dollars in millions) Power Transmission Fluid Power Total Net sales for the year ended January 1, 2022 $ 2,216.3 $ 1,258.1 $ 3,474.4 Impact on net sales of movements in currency rates (49.2) (27.1) (76.3) Core revenue for the year ended January 1, 2022 2,167.1 1,231.0 3,398.1 Net sales for the year ended January 2, 2021 1,800.2 992.8 2,793.0 Increase in net sales on a core basis (core revenue) $ 366.9 $ 238.2 $ 605.1 Core revenue growth 20.4 % 24.0 % 21.7 % For the year ended January 2, 2021 (dollars in millions) Power Transmission Fluid Power Total Net sales for the year ended January 2, 2021 $ 1,800.2 $ 992.8 $ 2,793.0 Impact on net sales of movements in currency rates 18.4 16.1 34.5 Core revenue for the year ended January 2, 2021 1,818.6 1,008.9 2,827.5 Net sales for the year ended December 28, 2019 1,945.7 1,141.4 3,087.1 Decrease in net sales on a core basis (core revenue) $ (127.1) $ (132.5) $ (259.6) Core revenue decline (6.5) % (11.6) % (8.4) % Net Debt 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.
For the year ended December 30, 2023 (dollars in millions) Power Transmission Fluid Power Total Net sales for the year ended December 30, 2023 $ 2,191.2 $ 1,379.0 $ 3,570.2 Impact on net sales of movements in currency rates 18.9 (10.0) 8.9 Core revenue for the year ended December 30, 2023 2,210.1 1,369.0 3,579.1 Net sales for the year ended December 31, 2022 2,173.7 1,380.5 3,554.2 Increase (decrease) in net sales on a core basis (core revenue) $ 36.4 $ (11.5) $ 24.9 Core sales growth 1.7 % (0.8) % 0.7 % For the year ended December 31, 2022 (dollars in millions) Power Transmission Fluid Power Total Net sales for the year ended December 31, 2022 $ 2,173.7 $ 1,380.5 $ 3,554.2 Impact on net sales of movements in currency rates 149.2 35.9 185.1 Core revenue for the year ended December 31, 2022 2,322.9 1,416.4 3,739.3 Net sales for the year ended January 1, 2022 2,216.3 1,258.1 3,474.4 Increase in net sales on a core basis (core revenue) $ 106.6 $ 158.3 $ 264.9 Core sales growth 4.8 % 12.6 % 7.6 % Net Debt 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.
Adjusted EBITDA Adjusted EBITDA for Fiscal 2021 was $735.8 million, compared to $506.6 million in the prior year, an increase of 45.2% or $229.2 million. The Adjusted EBITDA margin was 21.2% for Fiscal 2021, a 310 basis point increase from the prior year.
Adjusted EBITDA 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.
Restricted cash was $2.7 million as of January 1, 2022, compared to $2.7 million as of January 2, 2021, including $1.0 million as of January 1, 2022 and $1.0 million as of January 2, 2021, which was held in escrow for insurance purposes.
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.
Income tax expense (benefit) For Fiscal 2021, we had an income tax expense of $18.4 million on pre-tax income of $349.7 million, which resulted in an effective tax rate of 5.3% compared to an income tax benefit of $19.3 million on pre-tax income of $71.0 million, which resulted in an effective tax rate of (27.2)% for Fiscal 2020.
Income tax expense (benefit) 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.
Power Transmission Adjusted EBITDA for Fiscal 2021 increased by 41.8% or $147.6 million compared to the prior year, driven primarily by a combination of higher volumes, improved manufacturing performance and pricing benefits. These increases were offset partially by higher inflation-related costs and increased SG&A spending, related primarily to labor.
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.
Excluding this impact, net debt decreased by $238.8 million, which was driven primarily by cash provided by operating activities of $382.4 million, offset partially by a number of cash outflows, including capital expenditures of $87.0 million, dividends paid to non-controlling shareholders of $26.6 million, debt issuance costs of $11.7 million paid primarily in respect of the amendments to the credit agreement in February 2021, and $10.6 million paid to acquire shares under our share repurchase program.
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.
The terminal growth rate for both reporting units was set at 2.5%, a rate that does not exceed the expected long-term growth rates in the respective principal end markets. Management applied discount rates to the resulting cash flow projections that reflect current market assessments of the time value of money and the risks specific to each reporting unit.
Management applied discount rates to the resulting cash flow projections that reflect current market assessments of the time value of money and the risks specific to each reporting unit. In each case, the discount rate was determined using a capital asset pricing model.
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. In total, our committed borrowing headroom was $445.1 million, in addition to cash balances of $658.2 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.
In each case, the discount rate was determined using a capital asset pricing model. The discount rates used in the impairment tests of goodwill during Fiscal 2021 were 9.0% for both reporting units. For both reporting units, the fair values exceeded the carrying values and no goodwill impairments were therefore recognized during Fiscal 2021.
The discount rates used in the impairment tests of goodwill during Fiscal 2023 were 12.1% and 11.5% for the Power Transmission and Fluid Power reporting units, respectively. For both reporting units, the fair values exceeded the carrying values and no goodwill impairments were therefore recognized during Fiscal 2023.
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.” 41 Table of Contents Analysis by Operating Segment Power Transmission (63.8% of Gates’ net sales for the year ended January 1, 2022) For the year ended (dollars in millions) January 1, 2022 January 2, 2021 Period over period change Net sales $ 2,216.3 $ 1,800.2 23.1 % Adjusted EBITDA $ 500.6 $ 353.0 41.8 % Adjusted EBITDA margin 22.6 % 19.6 % Net sales in Power Transmission for Fiscal 2021 increased by 23.1%, or $416.1 million, compared to the prior year.
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.” Analysis by Operating Segment Power Transmission (61.4% of Gates’ net sales for the year ended December 30, 2023) For the year ended (dollars in millions) December 30, 2023 December 31, 2022 Period over period change Net sales $ 2,191.2 $ 2,173.7 0.8 % Adjusted EBITDA $ 460.6 $ 404.0 14.0 % Adjusted EBITDA margin 21.0 % 18.6 % 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.
Other operating income Other operating income of $9.3 million was recognized during Fiscal 2021, related primarily to a net gain on the sale of a purchase option on a building that we lease in Europe. 39 Table of Contents Interest expense For the year ended (dollars in millions) January 1, 2022 January 2, 2021 Debt: —Dollar Term Loan $ 65.0 $ 77.2 —Euro Term Loan 24.1 24.2 —Dollar Senior Notes 35.4 35.9 —Other loans — 0.1 124.5 137.4 Amortization of deferred issuance costs 5.9 13.5 Other interest expense 3.1 3.4 $ 133.5 $ 154.3 Details of our long-term debt are presented in note 15 to the consolidated financial statements included elsewhere in this report.
Interest expense For the year ended (dollars in millions) December 30, 2023 December 31, 2022 Debt: —Dollar Term Loans $ 113.7 $ 71.2 —Euro Term Loan — 19.0 —Dollar Senior Notes 35.5 35.4 —Other loans 1.8 1.0 151.0 126.6 Amortization of deferred issuance costs 9.1 10.0 Other interest expense 3.1 2.8 $ 163.2 $ 139.4 Details of our long-term debt are presented in Note 15 to the consolidated financial statements included elsewhere in this report.
During the periods presented, we excluded restructuring expenses and severance-related expenses that reflect specific, strategic actions taken by management to shutdown, downsize, or otherwise fundamentally reorganize areas of Gates’ business; impairments of intangibles and of other assets, representing the excess of their carrying amounts over the amounts that are expected to be recovered from them in the future; and fees paid to our private equity sponsor.
During the periods presented, we excluded restructuring expenses and severance-related expenses that reflect specific, strategic actions taken by management to shutdown, downsize, or otherwise fundamentally reorganize areas of Gates’ business, and changes in the LIFO inventory reserve recognized in cost of sales for certain inventories that are valued on a LIFO basis.
The increase in Adjusted EBITDA was driven primarily by the increase in volumes, pricing benefits and improvement in manufacturing performance, as described above, together driving an increase in gross profit of $359.4 million, which was offset partially by higher inflation-related costs, including inbound freight, and higher SG&A expenses, as noted above.
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.
Earliest period in which payments are due (dollars in millions) Total 2022 2023 and 2024 2025 and 2026 2027 and beyond Bank overdrafts and debt: —Principal $ 2,579.2 $ 21.2 $ 664.2 $ 599.0 $ 1,294.8 —Interest payments (1) 469.9 99.7 191.2 161.7 17.3 Derivative financial instruments (2) 62.4 34.0 22.6 5.8 — Finance leases 3.4 1.4 1.6 0.4 — Operating leases 170.0 24.8 42.4 32.6 70.2 Post-retirement benefits (3) 14.1 14.1 — — — Indemnified tax liabilities 0.2 0.2 — — — Purchase obligations (4) 37.1 20.3 15.2 1.6 — Total $ 3,336.3 $ 215.7 $ 937.2 $ 801.1 $ 1,382.3 (1) Future interest payments include payments on fixed and floating rate debt.
Earliest period in which payments are due (dollars in millions) Total 2024 2025 and 2026 2027 and 2028 2029 and beyond Debt: —Principal $ 2,471.9 $ 19.5 $ 607.0 $ 1,306.3 $ 539.1 —Interest payments (1) 582.2 180.4 275.6 92.2 34.0 Finance leases 1.7 0.8 0.9 — — Operating leases 161.1 28.0 45.3 31.7 56.1 Post-retirement benefits (2) 10.3 10.3 — — — Purchase obligations (3) 45.4 27.3 14.0 4.1 — Total $ 3,272.6 $ 266.3 $ 942.8 $ 1,434.3 $ 629.2 (1) Future interest payments include payments on fixed and floating rate debt.
Transaction-related expenses Transaction-related expenses of $3.7 million were incurred during Fiscal 2021, related primarily to the amendment to our Dollar Term Loan credit facility completed in February 2021, as well as certain other corporate transactions during the year.
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.
During Fiscal 2021, our net debt decreased by $278.4 million from $2,199.4 million as of January 2, 2021 to $1,921.0 million as of January 1, 2022. Net debt was impacted favorably by $39.6 million due to movements in currency exchange rates, related primarily to the impact of the weakening of the Euro against the U.S. dollar on our Euro-denominated debt.
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.
We therefore exclude from Adjusted EBITDA the non-cash charges in relation to share-based compensation in order to assess the relative performance of our businesses. 46 Table of Contents We exclude from Adjusted EBITDA acquisition-related costs that are required to be expensed in accordance with U.S. GAAP.
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.
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.
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. 32 Table of Contents 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.
Net cash used in investing activities during Fiscal 2021 was $86.0 million, compared to $77.5 million in the prior year. This increase was driven primarily by higher capital expenditures, which increased by $19.6 million from $67.4 million in the prior year to $87.0 million in Fiscal 2021, offset partially by proceeds of $8.4 million on disposal of fixed assets.
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.
This change was driven primarily by the impact of net movements in foreign currency exchange rates on net debt and hedging instruments in addition to lower interest income on cash balances, and fees incurred in relation to our trade accounts receivable factoring program.
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.
These increases were offset partially by higher inflation-related costs and increased SG&A spending, related primarily to labor. As a result, the Adjusted EBITDA margin for Fiscal 2021 was 18.7%, a 320 basis point improvement from the prior year.
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.
Net sales Net sales during Fiscal 2021 were $3,474.4 million, compared to $2,793.0 million during the prior year, an increase of 24.4%, or $681.4 million.
Cost of sales 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.
The effective tax rate for Fiscal 2020 was driven primarily by tax benefits of $32.3 million related to audit settlements, changes in valuation allowance and tax law changes. 40 Table of Contents Deferred Income Tax Assets and Liabilities We recognize deferred tax assets and liabilities for future tax consequences arising from differences between the carrying amounts of existing assets and liabilities under U.S.
Deferred Income Tax Assets and Liabilities We recognize deferred tax assets and liabilities for future tax consequences arising from differences between the carrying amounts of existing assets and liabilities under U.S. GAAP and their respective tax bases, and for net operating loss carryforwards and tax credit carryforwards.
The effective tax rate for Fiscal 2021 was driven primarily by tax benefits of $26.4 million related to the partial valuation allowance release on deferred tax assets for U.S. foreign tax credits, $16.1 million for deferred taxes on unremitted earnings of our subsidiaries, and $14.0 million from deferred tax rate changes.
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.
These improvements, predominantly a function of the significant economic impact from the COVID-19 pandemic in the prior year, were driven primarily by increases in sales to customers in our industrial channels, with industrial first-fit sales up by 34.1% and industrial replacement sales up by 30.7%.
As such, core sales increased by $24.9 million, or 0.7%, during Fiscal 2023 compared to the prior year. The overall core sales improvements were primarily driven b y 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%.
This industrial growth was predominantly focused in the diversified industrial end market, which grew by 35.9% during Fiscal 2021 compared to the prior year, primarily in North America, EMEA and Greater China.
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.
Similarly, we determined that it was more likely than not that deferred income tax assets in Fiscal 2020 primarily related to disallowed interest carryforwards in the U.K., Luxembourg, and Belgium totaling $29.5 million were realizable. In Fiscal 2020, the deferred tax assets above include $26.0 million of assets which have no expiration in these jurisdictions.
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.
The closure of the Korean facility resulted in an accrual for severance and other labor costs of $13.2 million, an impairment of inventory of $1.4 million (recognized in cost of sales) and an impairment of fixed assets of $4.8 million (included in asset impairments).
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).
In connection with these amendments, we paid accrued interest up to the date of the amendments of $3.7 million, in addition to fees of approximately $8.6 million, of which $6.9 million qualified for deferral and will be amortized to interest expense over the new remaining term of the Dollar Term Loan using the effective interest method.
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.
Fluid Power (36.2% of Gates’ net sales for the year ended January 1, 2022) For the year ended (dollars in millions) January 1, 2022 January 2, 2021 Period over period change Net sales $ 1,258.1 $ 992.8 26.7 % Adjusted EBITDA $ 235.2 $ 153.6 53.1 % Adjusted EBITDA margin 18.7 % 15.5 % Net sales in Fluid Power for Fiscal 2021 increased by 26.7%, or $265.3 million, compared to the prior year.
As a result, the Adjusted EBITDA margin for Fiscal 2023 was 21.0%, a 240 basis point increase from the prior year. 37 Table of Contents Fluid Power (38.6% of Gates’ net sales for the year ended December 30, 2023) For the year ended (dollars in millions) December 30, 2023 December 31, 2022 Period over period change Net sales $ 1,379.0 $ 1,380.5 (0.1 %) Adjusted EBITDA $ 286.4 $ 276.6 3.5 % Adjusted EBITDA margin 20.8 % 20.0 % 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.

… 123 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+2 added−2 removed15 unchanged
Biggest changeThe following table summarizes the key terms of the active interest rate derivatives held by the Company: Notional principal amount (millions) Interest rate Payable Receivable Variable Fixed Variable Fixed Variable rate index As of January 1, 2022 Maturity date: —June 2025 $ 870.0 — % 2.5 % — % 1.0 % 1 month LIBOR —June 2023 € 425.0 — % 0.3 % — % — % 3 month EURIBOR As of January 2, 2021 Maturity date: —June 2025 $ 870.0 — % 2.5 % — % 1.0 % 1 month LIBOR —June 2023 € 425.0 — % 0.3 % — % — % 3 month EURIBOR The interest rate profile of the Company’s financial assets and liabilities, after taking into account the effect of the interest rate hedging activities, was as follows: As of January 1, 2022 As of January 2, 2021 Interest-bearing Interest-bearing ( dollars in millions ) Floating rate Fixed rate Non-interest bearing Total Floating rate Fixed rate Non-interest bearing Total Financial assets: Available-for-sale investments $ — $ — $ 0.6 $ 0.6 $ — $ — $ 2.1 $ 2.1 Cash and cash equivalents 203.5 — 454.7 658.2 214.1 — 307.3 521.4 Restricted cash — — 2.7 2.7 — — 2.7 2.7 203.5 — 458.0 661.5 214.1 — 312.1 526.2 Financial liabilities: Debt (657.3) (1,921.9) — (2,579.2) (762.9) (1,957.7) (0.2) (2,720.8) Obligations under finance leases — (3.3) — (3.3) — (3.0) — (3.0) (657.3) (1,925.2) — (2,582.5) (762.9) (1,960.7) (0.2) (2,723.8) $ (453.8) $ (1,925.2) $ 458.0 $ (1,921.0) $ (548.8) $ (1,960.7) $ 311.9 $ (2,197.6) Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.
Biggest changeThe following table summarizes the key terms of the active interest rate derivatives held by the Company: Notional principal amount (millions) Interest rate Payable Receivable Variable Fixed Variable Fixed Variable rate index As of December 30, 2023 Maturity date: —June 2025 $ 870.0 — % 2.5 % 5.4 % — % 1 month Term SOFR —November 2027 $ 385.0 — % 7.6 % 8.9 % — % 1 month Term SOFR As of December 31, 2022 Maturity date: —June 2025 $ 870.0 — % 2.5 % 4.4 % — % 1 month LIBOR —November 2027 $ 385.0 — % 7.6 % 7.8 % — % 1 month Term SOFR The interest rate profile of the Company’s financial assets and liabilities, after taking into account the effect of the interest rate hedging activities, was as follows: As of December 30, 2023 As of December 31, 2022 Interest-bearing Interest-bearing ( dollars in millions ) Floating rate Fixed rate Non-interest bearing Total Floating rate Fixed rate Non-interest bearing Total Financial assets: Available-for-sale investments $ — $ — $ — $ — $ — $ — $ — $ — Cash and cash equivalents 364.4 — 356.2 720.6 222.5 — 355.9 578.4 Restricted cash — — 3.4 3.4 — — 3.0 3.0 364.4 — 359.6 724.0 222.5 — 358.9 581.4 Financial liabilities: Debt (648.9) (1,823.0) — (2,471.9) (668.4) (1,823.0) — (2,491.4) Obligations under finance leases — (1.7) — (1.7) — (2.4) — (2.4) (648.9) (1,824.7) — (2,473.6) (668.4) (1,825.4) — (2,493.8) $ (284.5) $ (1,824.7) $ 359.6 $ (1,749.6) $ (445.9) $ (1,825.4) $ 358.9 $ (1,912.4) Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations under Financing Arrangements and Other Commitments.” 53 Table of Contents Commodity Risk We source a wide variety of materials and components from a network of global suppliers.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations under Financing Arrangements and Other Commitments.” 49 Table of Contents Commodity Risk We source a wide variety of materials and components from a network of global suppliers.
We have established long-term credit ratings of B2 Stable with Moody’s and B+ Stable with Standard & Poor’s. Credit ratings are subject to regular review by the credit rating agencies and may change in response to economic and commercial developments.
We have established long-term credit ratings of B1 Stable with Moody’s and B+ Stable with Standard & Poor’s. Credit ratings are subject to regular review by the credit rating agencies and may change in response to economic and commercial developments.
In addition, we are exposed to currency risk associated with translating our non-U.S. dollar financial statements into U.S. dollars, which is our reporting currency. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar.
In addition, we are exposed to currency risk associated with translating our non-U.S. dollar majority-owned subsidiaries’ financial statements into U.S. dollars, which is our reporting currency. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar.
Translational foreign exchange risks arise predominantly on the potential increase in our significant euro debt when translated to U.S. dollars, as well as on the potential decreases in the value of our earnings, cash balances and other net assets denominated in euro and other currencies when translated to U.S. dollars.
Translational foreign exchange risks arise predominantly on the potential decreases in the value of our earnings, cash balances and other net assets denominated in euro and other currencies when translated to U.S. dollars. The currency profiles of our cash and debt are centrally managed as are decisions about the location of cash.
The interest rate caps are designated as cash flow hedges and involve the receipt of variable rate payments from a counterparty if interest rates rise above the strike rate on the contract in exchange for a premium.
The interest rate caps that we have entered into historically were designated as cash flow hedges and involved the receipt of variable rate payments from a counterparty if interest rates rise above the strike rate on the contract in exchange for a premium.
Two customers of our North America businesses accounted for 13.9% and 10.0%, respectively, of our total trade accounts receivable balance as of January 1, 2022, compared to 11.9% and 16.5%, respectively, as of January 2, 2021. These concentrations are due to the extended payment terms common in the industry in which these businesses operate.
Two customers of our North America businesses accounted for 12.5% and 9.6%, respectively, of our total trade accounts receivable balance as of December 30, 2023, compared to 15.3% and 8.4%, respectively, as of December 31, 2022. These concentrations are due to the extended payment terms common in the industry in which these businesses operate.
The currency profile of cash and debt, after taking into account the effect of the currency swaps and forwards used to manage those profiles, were as follows: (dollars in millions) As of January 1, 2022 As of January 2, 2021 Cash and cash equivalents by currency: —U.S. dollar $ 346.2 $ 199.5 —Chinese Yuan Renminbi 109.7 94.8 —Indian Rupee 14.9 49.6 —Euro 32.5 37.8 —Japanese Yen 42.1 30.6 —Other 112.8 109.1 $ 658.2 $ 521.4 Principal amount of debt by currency: —U.S. dollar $ 1,641.9 $ 1,634.2 —Euro 937.3 1,086.6 $ 2,579.2 $ 2,720.8 As described in note 13 to the audited consolidated financial statements included elsewhere in this annual report, during Fiscal 2021 and Fiscal 2020 we had designated a portion of our Euro Term Loans, as well as a €254.5 million cross currency swap, as hedges of a portion of our net investment in euro-denominated foreign operations.
The currency profile of cash and debt, after taking into account the effect of the currency swaps and forwards used to manage those profiles, were as follows: (dollars in millions) As of December 30, 2023 As of December 31, 2022 Cash and cash equivalents by currency: —U.S. dollar $ 343.9 $ 244.6 —Chinese Yuan Renminbi 105.2 115.9 —Indian Rupee 27.7 17.4 —Euro 41.8 32.2 —Japanese Yen 37.3 29.6 —Other 164.7 138.7 $ 720.6 $ 578.4 Principal amount of debt by currency: —U.S. dollar $ 1,385.9 $ 1,684.9 —Euro 835.4 806.5 —Chinese Yuan Renminbi 250.6 — $ 2,471.9 $ 2,491.4 As described in Note 13 to the audited consolidated financial statements included elsewhere in this annual report, during Fiscal 2023 we executed a USD to Chinese Yuan fixed-to-fixed cross currency swap with a notional principal amount of ¥1,784.0 million, designated as a net investment hedge of certain of our Chinese operations.
We use interest rate derivatives as part of our interest rate risk management strategy to add stability to interest expense and to manage our exposure to interest rate movements.
Interest Rate Risk Our prevailing market risk on interest rates is the potential fluctuation in interest costs and in the fair value of long-term debt resulting from movements in interest rates. We use interest rate derivatives as part of our interest rate risk management strategy to add stability to interest expense and to manage our exposure to interest rate movements.
Removed
The currency profiles of our cash and debt are centrally managed as are decisions about the location of cash.
Added
During Fiscal 2022, we refinanced and replaced our Euro-denominated term loan with new U.S. Dollar term loans and executed additional cross currency swaps that have been designated as net investment hedges in the principal amount of €501.6 million, and as a result, the net investment hedging 48 Table of Contents designated on our Euro-denominated debt no longer exists.
Removed
Changes in the value of these instruments resulting from fluctuations in the euro to U.S. dollar exchange rate are accordingly recorded as foreign currency translation adjustments within other comprehensive income. 52 Table of Contents Interest Rate Risk Our prevailing market risk on interest rates is the potential fluctuation in interest costs and in the fair value of long-term debt resulting from movements in interest rates.
Added
As of December 30, 2023, the aggregated notional principal amount of the cross currency swaps was €756.1 million and ¥1,784.0 million compared to €756.1 million as of December 31, 2022.

Other GTES 10-K year-over-year comparisons