Gates Industrial Corp plcGTES
Gates Industrial Corp plc Segments Disclosure
Segment information
A. Background
The segment information provided in these consolidated financial statements reflects the information that is used by the chief operating decision maker for the purposes of making decisions about allocating resources and in assessing the performance of each segment. The chief executive officer (“CEO”) of Gates serves as the chief operating decision maker. These decisions are based principally on net sales and Adjusted EBITDA (defined below).
B. Operating segments and segment assets
Gates manufactures a wide range of power transmission and fluid power products and components for a large variety of industrial and automotive applications, both in the aftermarket and OEM channels, throughout the world.
Our reportable segments are identified on the basis of our primary product lines, as this is the basis on which information is provided to the CEO for the purposes of allocating resources and assessing the performance of Gates’ businesses. Our operating and reporting segments are therefore Power Transmission and Fluid Power.
Segment asset information is not provided to the chief operating decision maker and therefore segment asset information has not been presented. Due to the nature of Gates’ operations, cash generation and profitability are viewed as the key measures rather than an asset-based measure.
C. Segment net sales and disaggregated net sales
Sales between reporting segments and the impact of such sales on Adjusted EBITDA for each segment are not included in internal reports presented to the CEO and have therefore not been included below.
| For the year ended | |||||||||||||||||
(dollars in millions) | December 31, 2025 | December 28, 2024 | December 30, 2023 | ||||||||||||||
Power Transmission | $ | 2,147.1 | $ | 2,108.1 | $ | 2,191.2 | |||||||||||
Fluid Power | 1,296.1 | 1,300.1 | 1,379.0 | ||||||||||||||
| Net sales | $ | 3,443.2 | $ | 3,408.2 | $ | 3,570.2 | |||||||||||
Our commercial function is organized by region and therefore, in addition to reviewing net sales by our reporting segments, the CEO also reviews net sales information disaggregated by region and by channels.
The following table summarizes our net sales by key geographic region:
| For the year ended | |||||||||||||||||||||||||||||||||||
| December 31, 2025 | December 28, 2024 | December 30, 2023 | |||||||||||||||||||||||||||||||||
(dollars in millions) | Power Transmission | Fluid Power | Power Transmission | Fluid Power | Power Transmission | Fluid Power | |||||||||||||||||||||||||||||
| U.S. | $ | 603.0 | $ | 683.7 | $ | 568.1 | $ | 688.0 | $ | 591.5 | $ | 724.5 | |||||||||||||||||||||||
| North America, excluding the U.S. | 215.6 | 167.2 | 239.8 | 195.0 | 230.1 | 214.3 | |||||||||||||||||||||||||||||
| South America | 92.6 | 41.9 | 104.3 | 38.1 | 110.7 | 43.2 | |||||||||||||||||||||||||||||
| United Kingdom ("U.K.") | 45.5 | 67.9 | 37.0 | 67.8 | 44.4 | 71.4 | |||||||||||||||||||||||||||||
| Luxembourg | 265.8 | 94.3 | 252.7 | 86.6 | 247.8 | 88.9 | |||||||||||||||||||||||||||||
EMEA(1), excluding the U.K. and Luxembourg | 345.7 | 111.4 | 337.3 | 103.8 | 382.3 | 121.6 | |||||||||||||||||||||||||||||
| East Asia & India | 280.2 | 85.0 | 277.8 | 80.6 | 287.1 | 79.7 | |||||||||||||||||||||||||||||
| Greater China | 298.7 | 44.7 | 291.1 | 40.2 | 297.3 | 35.4 | |||||||||||||||||||||||||||||
| Net sales | $ | 2,147.1 | $ | 1,296.1 | $ | 2,108.1 | $ | 1,300.1 | $ | 2,191.2 | $ | 1,379.0 | |||||||||||||||||||||||
(1) Europe, Middle East and Africa (“EMEA”).
The following table summarizes our segment net sales into OEM and Aftermarket channels:
| For the year ended | |||||||||||||||||||||||||||||||||||
| December 31, 2025 | December 28, 2024 | December 30, 2023 | |||||||||||||||||||||||||||||||||
| (dollars in millions) | Power Transmission | Fluid Power | Power Transmission | Fluid Power | Power Transmission | Fluid Power | |||||||||||||||||||||||||||||
Aftermarket | $ | 1,421.4 | $ | 932.4 | $ | 1,393.0 | $ | 910.0 | $ | 1,389.2 | $ | 909.0 | |||||||||||||||||||||||
| OEM | 725.7 | 363.7 | 715.1 | 390.1 | 802.0 | 470.0 | |||||||||||||||||||||||||||||
| Net sales | $ | 2,147.1 | $ | 1,296.1 | $ | 2,108.1 | $ | 1,300.1 | $ | 2,191.2 | $ | 1,379.0 | |||||||||||||||||||||||
D. Measure of segment profit or loss
The CEO uses Adjusted EBITDA, as defined below, to measure the profitability of each segment. Adjusted EBITDA is, therefore, the measure of segment profit or loss presented in Gates’ segment disclosures.
“EBITDA” represents net income for the period before net interest and other expenses (income), income taxes, depreciation and amortization.
“Adjusted EBITDA” 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. During the periods presented, the items excluded from EBITDA in computing Adjusted EBITDA primarily included:
• non-cash charges in relation to share-based compensation;
• inventory adjustments related to certain inventories accounted for on a LIFO basis;
• 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;
• loss on deconsolidation of Russian subsidiary;
• credit (gain) loss related to a customer bankruptcy;
• cybersecurity incident expenses; and
• other expenses (income), excluding foreign currency transaction gain or loss and insurance recoveries.
The following table provides summarized information about the Company’s operations by reportable segment for the years ended December 31, 2025, December 28, 2024 and December 30, 2023:
| For the year ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2025 | December 28, 2024 | December 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Power Transmission | Fluid Power | Total | Power Transmission | Fluid Power | Total | Power Transmission | Fluid Power | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 2,147.1 | $ | 1,296.1 | $ | 3,443.2 | $ | 2,108.1 | $ | 1,300.1 | $ | 3,408.2 | $ | 2,191.2 | $ | 1,379.0 | $ | 3,570.2 | |||||||||||||||||||||||||||||||||||
Adjusted cost of sales (1) | (1,263.2) | (785.8) | (2,049.0) | (1,241.7) | (783.9) | (2,025.6) | (1,333.3) | (870.2) | (2,203.5) | ||||||||||||||||||||||||||||||||||||||||||||
Adjusted selling, general and administrative expenses (2) | (455.9) | (263.8) | (719.7) | (449.7) | (270.8) | (720.5) | (458.2) | (276.9) | (735.1) | ||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and software amortization | 52.0 | 44.0 | 96.0 | 52.1 | 47.0 | 99.1 | 50.4 | 48.4 | 98.8 | ||||||||||||||||||||||||||||||||||||||||||||
Other adjustments (3) | (0.4) | — | (0.4) | (0.1) | — | (0.1) | 10.5 | 6.1 | 16.6 | ||||||||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 479.6 | $ | 290.5 | $ | 770.1 | $ | 468.7 | $ | 292.4 | $ | 761.1 | $ | 460.6 | $ | 286.4 | $ | 747.0 | |||||||||||||||||||||||||||||||||||
(1) Adjusted cost of sales excluded inventory impairments and adjustments primarily related to the reversal of the adjustment to remeasure certain inventories on a LIFO basis, and restructuring related expenses (included in cost of sales).
(2) Adjusted selling, general and administrative expenses excluded acquired intangible assets amortization, share-based compensation expense, and restructuring related expenses (included in SG&A).
(3) Other adjustments primarily relates to net foreign currency transaction (loss) gain and insurance recoveries.
Reconciliation of income from continuing operations before taxes to Adjusted EBITDA:
| For the year ended | |||||||||||||||||
(dollars in millions) | December 31, 2025 | December 28, 2024 | December 30, 2023 | ||||||||||||||
| Income from continuing operations before taxes | 340.2 | 328.0 | 285.3 | ||||||||||||||
| Interest expense | 125.9 | 155.8 | 163.2 | ||||||||||||||
Loss on deconsolidation of Russian subsidiary (1) | — | 12.7 | — | ||||||||||||||
| Depreciation and amortization | 213.8 | 216.9 | 217.5 | ||||||||||||||
Transaction-related expenses (2) | 0.5 | 3.3 | 2.2 | ||||||||||||||
| Asset impairments | 3.5 | — | 0.1 | ||||||||||||||
| Restructuring expenses | 26.3 | 6.5 | 11.6 | ||||||||||||||
| Share-based compensation expense | 27.2 | 28.8 | 27.4 | ||||||||||||||
Inventory adjustments (included in cost of sales)(3) | 15.6 | 22.3 | 7.4 | ||||||||||||||
| 6.9 | 1.8 | 0.4 | |||||||||||||||
| 11.4 | 2.9 | 1.0 | |||||||||||||||
| Credit (gain) loss related to customer bankruptcy (included in SG&A) | — | (0.1) | 11.4 | ||||||||||||||
Other expenses (income), excluding foreign currency transaction gain or loss and insurance recoveries (4) | 4.0 | (17.8) | 14.1 | ||||||||||||||
Cybersecurity incident insurance recovery and expenses (5) | (5.2) | — | 5.2 | ||||||||||||||
| Other items not directly related to current operations | — | — | 0.2 | ||||||||||||||
| Adjusted EBITDA | $ | 770.1 | $ | 761.1 | $ | 747.0 | |||||||||||
(1) In July 2022, as a result of the conflict between Russia and Ukraine, Gates suspended our operations in Russia. As of September 28, 2024, we deconsolidated the Russian subsidiary upon loss of control and recognized a deconsolidation loss.
(2) Transaction-related expenses relate primarily to advisory fees and other costs recognized in respect of major corporate transactions, including the acquisition of businesses, and equity and debt transactions.
(3) Inventory adjustments includes the reversal of the adjustment to remeasure certain inventories on a LIFO basis.
(4) Other expenses (income) excludes foreign currency transaction losses and insurance recoveries of $4.8 million for the year ended December 31, 2025; foreign currency transaction gain of $6.5 million for the year ended December 28, 2024; and foreign currency transaction gain of $2.5 million for the year ended December 30, 2023.
(5) In July 2025, we received insurance recoveries related to a previously disclosed cybersecurity incident that occurred in February 2023 for which we previously excluded $5.2 million of expenses from Adjusted EBITDA.
E. Selected geographic information
| (dollars in millions) | As of December 31, 2025 | As of December 28, 2024 | |||||||||
| Property, plant and equipment, net by geographic location | |||||||||||
| U.S. | $ | 146.7 | $ | 154.9 | |||||||
| Rest of North America | 140.2 | 116.3 | |||||||||
| U.K. | 28.6 | 30.4 | |||||||||
| Rest of EMEA | 163.9 | 151.1 | |||||||||
| East Asia and India | 39.0 | 36.4 | |||||||||
| Greater China | 63.3 | 67.9 | |||||||||
| South America | 27.3 | 22.5 | |||||||||
| $ | 609.0 | $ | 579.5 | ||||||||
F. Information about major customers
Gates has a significant concentration of sales in the U.S., which accounted for 38.8% of Gates’ net sales by destination from continuing operations during Fiscal 2025, compared to 38.9% during Fiscal 2024 and 38.9% during Fiscal 2023. During Fiscal 2025, Fiscal 2024 and Fiscal 2023, no single customer accounted for more than 10% of Gates’ net sales. Two customers of our North America businesses accounted for 13.7% and 8.4%, respectively, of our total trade accounts receivable balance as of December 31, 2025, compared to 13.7% and 6.1%, respectively, as of December 28, 2024. These concentrations are due to the extended payment terms common in the industry in which these businesses operate.
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About Segments Disclosures
Segment disclosures break a company into its reportable operating units, revealing revenue, profit, and asset allocation that consolidated financial statements obscure. Under ASC 280, segments must match how the chief operating decision maker views the business, providing a window into internal management structure and resource allocation priorities.
Key signals: compare segment margins to identify which units drive profitability and which destroy value. Watch for changes in the number of reportable segments — segment aggregation or disaggregation often coincides with strategic shifts or attempts to obscure declining performance. Intersegment elimination patterns reveal internal pricing practices. The reconciliation between segment totals and consolidated figures exposes corporate overhead allocation and unallocated items. Geographic revenue concentration highlights regulatory and currency exposure. Compare segment-level capital expenditure against segment revenue to assess where management is investing for future growth versus harvesting existing assets.