Gates Industrial Corp plc (Form: 10-Q, Received: 05/03/2018 16:34:17)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file number 001-38366

Gates Industrial Corporation plc

(Exact Name of Registrant as Specified in its Charter)



England and Wales		98-1395184
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)



1551 Wewatta Street, Denver, Colorado		80202
(Address of principal executive offices)		(Zip Code)

(303) 744-4876

( Registrant’s telephone number, including area code )

Not Applicable

( Former name, former address and former fiscal year, if changed since last report )

Securities registered pursuant to Section 12(b) of the Act:



Title of each class		Name of each exchange on which registered
Ordinary Shares, $0.01 par value		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒ (Do not check if a smaller reporting company)	Smaller reporting company	☐
		Emerging growth company	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 1, 2018, there were 289,756,379 ordinary shares of $0.01 par value outstanding.

TABLE OF CONTENTS



Part I – Financial Information

Item 1.	Unaudited Condensed Consolidated Financial Statements	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41
Item 4.	Controls and Procedures	42

Part II – Other Information

Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 6.	Exhibits	43
Signatures		44

Forward-looking Statements

This Quarterly Report on Form 10-Q (this “quarterly report” or “report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that reflect our current views with respect to, among other things, our operations and financial performance. Forward-looking statements include all statements that are not historical facts. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “predicts,” “intends,” “trends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those expressed in our forward-looking statements, including but not limited to the factors described in the section entitled “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2017 (the “annual report”), as filed with the Securities and Exchange Commission (the “SEC”). These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report and in our other periodic filings. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

ABOUT THIS QUARTERLY REPORT

Financial Statement Presentation

Gates Industrial Corporation plc is a public limited company that was organized under the laws of England and Wales on September 25, 2017. It is the financial reporting entity following the completion of certain reorganization transactions completed prior to its initial public offering in January 2018, as described further in note 1 to the accompanying condensed consolidated financial statements.

This quarterly report includes certain historical consolidated financial and other data for Omaha Topco Limited (“Omaha Topco”), which was the financial reporting entity prior to the completion of the reorganization transactions referred to above. Omaha Topco was formed by The Blackstone Group L.P. primarily as a vehicle to finance the acquisition in July 2014 of the Gates business.

Certain monetary amounts, percentages and other figures included elsewhere in this quarterly report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables or charts may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.

All amounts in this quarterly report are expressed in U.S. dollars, unless indicated otherwise.

Certain Definitions

As used in this quarterly report, unless otherwise noted or the context requires otherwise:


•	“Gates,” the “Company,” “we,” “us” and “our” refer (1) prior to the completion of the reorganization transactions completed immediately prior to the initial public offering, to Omaha Topco and its consolidated subsidiaries and (2) after the completion of the reorganization transactions, to Gates Industrial Corporation plc and its consolidated subsidiaries, as the case may be;


•	“Blackstone” or “our Sponsor” refer to investment funds affiliated with The Blackstone Group L.P., our current majority owners.

PART 1 — FINANCIAL INFORMATION

Item 1: Financial Statements (unaudited)

Gates Industrial Corporation plc

Unaudited Condensed Consolidated Statements of Operations



	Three months ended
(dollars in millions, except per share amounts)	March 31, 2018			April 1, 2017
Net sales	$	852.0		$	730.2
Cost of sales	516.1			443.4
Gross profit	335.9			286.8
Selling, general and administrative expenses	208.6			188.5
Transaction-related costs	4.7			2.0
Impairment of intangibles and other assets	0.3			—
Restructuring (benefits) expenses	(0.3		)	1.8
Other operating expenses	4.3			0.1
Operating income from continuing operations	118.3			94.4
Interest expense	59.8			55.2
Other expenses	17.4			0.7
Income from continuing operations before taxes	41.1			38.5
Income tax expense	11.7			12.5
Net income from continuing operations	29.4			26.0
Loss (gain) on disposal of discontinued operations, net of tax, respectively, of $0 and $0	0.1			(0.3		)
Net income	29.3			26.3
Non-controlling interests	(5.1		)	(7.5		)
Net income attributable to shareholders	$	24.2		$	18.8

Earnings per share
Basic
Earnings per share from continuing operations	$	0.09		$	0.08
Earnings per share from discontinued operations	—			—
Net income per share	$	0.09		$	0.08

Diluted
Earnings per share from continuing operations	$	0.09		$	0.07
Earnings per share from discontinued operations	—			0.01
Net income per share	$	0.09		$	0.08

The accompanying notes form an integral part of these condensed consolidated financial statements.

Gates Industrial Corporation plc

Unaudited Condensed Consolidated Statements of Comprehensive Income



	Three months ended
(dollars in millions)	March 31, 2018			April 1, 2017
Net income	$	29.3		$	26.3
Other comprehensive income
Foreign currency translation:
—Net translation gain on foreign operations, net of tax benefit, respectively of $1.7 and $2.8	77.0			119.6
—Loss on net investment hedges, net of tax expense, respectively, of $0 and $0	(20.9		)	(17.9		)
Total foreign currency translation movements	56.1			101.7
Cash flow hedges (interest rate caps):
—Gain (loss) arising in the period, net of tax expense, respectively, of $0 and $0	9.7			(1.0		)
—Reclassification to net income, net of tax expense, respectively, of $0.4 and $0.5	2.0			2.2
Total cash flow hedges movements	11.7			1.2
Available-for-sale investments:
—Net unrealized loss, net of tax benefit, respectively, of $0 and $0.1	—			(0.2		)
Total available-for-sale investments	—			(0.2		)
Post-retirement benefits:
—Actuarial loss, net of tax expense, respectively, of $0 and $0	(0.1		)	—
—Reclassification of actuarial (gain) loss to net income, net of tax expense, respectively, of $0 and $0	(0.2		)	0.1
Total post-retirement benefit movements	(0.3		)	0.1
Other comprehensive income	67.5			102.8
Comprehensive income for the period	$	96.8		$	129.1

Comprehensive income attributable to shareholders:
—Arising from continuing operations	$	75.1		$	110.5
—Arising from discontinued operations	0.1			(0.3		)
	75.0			110.8
Comprehensive income attributable to non-controlling interests	21.8			18.3
	$	96.8		$	129.1

The accompanying notes form an integral part of these condensed consolidated financial statements.

Gates Industrial Corporation plc

Unaudited Condensed Consolidated Balance Sheets



(dollars in millions, except share numbers and per share amounts)	As of March 31, 2018			As of December 30, 2017
Assets
Current assets
Cash and cash equivalents	$	328.5		$	564.4
Trade accounts receivable, net	799.6			713.8
Inventories	492.0			457.1
Taxes receivable	7.0			14.1
Prepaid expenses and other assets	91.5			76.8
Total current assets	1,718.6			1,826.2
Non-current assets
Property, plant and equipment, net	738.9			686.2
Goodwill	2,131.3			2,085.5
Pension surplus	60.2			57.7
Intangible assets, net	2,123.3			2,126.8
Taxes receivable	33.1			32.7
Other non-current assets	34.7			38.6
Total assets	$	6,840.1		$	6,853.7
Liabilities and equity
Current liabilities
Debt, current portion	$	33.7		$	66.4
Trade accounts payable	423.2			392.0
Taxes payable	34.4			29.0
Accrued expenses and other current liabilities	190.2			210.4
Total current liabilities	681.5			697.8
Non-current liabilities
Debt, less current portion	3,013.6			3,889.3
Post-retirement benefit obligations	157.6			157.1
Taxes payable	87.7			100.6
Deferred income taxes	509.5			517.1
Other non-current liabilities	75.1			63.4
Total liabilities	4,525.0			5,425.3
Commitments and contingencies (Note 18)
Shareholders’ equity
—Shares, par value of $0.01 each - authorized shares: 3,000,000,000; outstanding shares: 289,756,379 (December 30, 2017: authorized shares: 3,000,000,000; outstanding shares: 245,474,605)	2.9			2.5
—Additional paid-in capital	2,412.1			1,622.6
—Accumulated other comprehensive loss	(696.6		)	(747.4		)
—Retained earnings	161.1			136.9
Total shareholders’ equity	1,879.5			1,014.6
Non-controlling interests	435.6			413.8
Total equity	2,315.1			1,428.4
Total liabilities and equity	$	6,840.1		$	6,853.7

The accompanying notes form an integral part of these condensed consolidated financial statements.

Gates Industrial Corporation plc

Unaudited Condensed Consolidated Statements of Cash Flows



	Three months ended
(dollars in millions)	March 31, 2018			April 1, 2017
Cash flows from operating activities
Net income	$	29.3		$	26.3
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization	55.0			52.4
Non-cash currency transaction loss (gain) on net debt and hedging instruments	4.7			(1.3		)
Premium paid on redemption of long-term debt	27.0			—
Other net non-cash financing costs	6.4			8.6
Share-based compensation expense	1.6			0.8
Decrease in post-employment benefit obligations (net)	(1.2		)	(0.2		)
Deferred income taxes	(11.1		)	(12.1		)
Other operating activities	0.8			0.7
Changes in operating assets and liabilities, net of effects of acquisitions:
—Increase in accounts receivable	(78.8		)	(60.7		)
—Increase in inventories	(29.0		)	(14.8		)
—Increase in accounts payable	23.3			23.8
—Increase in prepaid expenses and other assets	(1.3		)	(1.9		)
—(Decrease) increase in taxes payable	(2.4		)	5.6
—Decrease in other liabilities	(50.8		)	(39.7		)
Net cash used in operations	(26.5		)	(12.5		)
Cash flows from investing activities
Purchases of property, plant and equipment	(55.9		)	(12.6		)
Purchases of intangible assets	(4.6		)	(1.3		)
Net cash paid under corporate-owned life insurance policies	(8.0		)	(8.3		)
Proceeds from the sale of property, plant and equipment	—			0.7
Other investing activities	(0.9		)	(0.1		)
Net cash used in investing activities	(69.4		)	(21.6		)
Cash flows from financing activities
Issue of shares, net of cost of issuance	799.1			0.6
Deferred offering costs	(3.2		)	—
Buy-back of shares	—			(1.3		)
Proceeds from long-term debt	—			150.0
Payments of long-term debt	(920.1		)	(7.0		)
Premium paid on redemption of long-term debt	(27.0		)	—
Debt issuance costs paid	—			(3.2		)
Dividends paid to non-controlling interests	—			(5.9		)
Other financing activities	6.2			—
Net cash (used in) provided by financing activities	(145.0		)	133.2
Effect of exchange rate changes on cash and cash equivalents and restricted cash	5.1			7.8
Net (decrease) increase in cash and cash equivalents and restricted cash	(235.8		)	106.9
Cash and cash equivalents and restricted cash at the beginning of the period	566.0			528.8
Cash and cash equivalents and restricted cash at the end of the period	$	330.2		$	635.7
Supplemental schedule of cash flow information
Interest paid	$	73.4		$	67.7
Income taxes paid, net	$	25.5		$	19.6
Non-cash accrued capital expenditures	$	2.6		$	1.2
Accrued deferred offering costs	$	5.1		$	—

The accompanying notes form an integral part of these condensed consolidated financial statements.

Gates Industrial Corporation plc

Unaudited Condensed Consolidated Statements of Shareholders’ Equity



(dollars in millions)	Share capital		Additional paid-in capital			Accumulated other comprehensive loss			Retained (deficit) earnings			Total shareholders’ equity			Non- controlling interests			Total equity
As of December 31, 2016	$	2.5	$	1,619.0		$	(915.9	)	$	(14.3	)	$	691.3		$	377.1		$	1,068.4

Net income	—		—			—			18.8			18.8			7.5			26.3
Other comprehensive income	—		—			92.0			—			92.0			10.8			102.8
Total comprehensive income	—		—			92.0			18.8			110.8			18.3			129.1
Other changes in equity:
—Issue of shares	—		0.6			—			—			0.6			—			0.6
—Buy-back of shares	—		(1.3		)	—			—			(1.3		)	—			(1.3		)
—Share-based compensation	—		0.8			—			—			0.8			—			0.8
—Dividends paid to non-controlling interests	—		—			—			—			—			(5.9		)	(5.9		)
As of April 1, 2017	$	2.5	$	1,619.1		$	(823.9	)	$	4.5		$	802.2		$	389.5		$	1,191.7



(dollars in millions)	Share capital		Additional paid-in capital			Accumulated other comprehensive loss			Retained earnings		Total shareholders’ equity			Non- controlling interests		Total equity
As of December 30, 2017	$	2.5	$	1,622.6		$	(747.4	)	$	136.9	$	1,014.6		$	413.8	$	1,428.4

Net income	—		—			—			24.2		24.2			5.1		29.3
Other comprehensive income	—		—			50.8			—		50.8			16.7		67.5
Total comprehensive income	—		—			50.8			24.2		75.0			21.8		96.8
Other changes in equity:
—Issue of shares	0.4		840.8			—			—		841.2			—		841.2
—Share-based compensation	—		1.4			—			—		1.4			—		1.4
—Cost of shares issued	—		(52.7		)	—			—		(52.7		)	—		(52.7		)
As of March 31, 2018	$	2.9	$	2,412.1		$	(696.6	)	$	161.1	$	1,879.5		$	435.6	$	2,315.1

The accompanying notes form an integral part of these condensed consolidated financial statements.

Gates Industrial Corporation plc

Notes to the Unaudited Condensed Consolidated Financial Statements

1. Introduction

A. Background

Gates Industrial Corporation plc (the “Company”) is a public limited company that was organized under the laws of England and Wales on September 25, 2017. Prior to the completion of the initial public offering of the Company’s shares in January 2018, the Company undertook certain reorganization transactions such that Gates Industrial Corporation plc became the indirect owner of all of the equity interests in Omaha Topco Limited (“Omaha Topco”), and has become the holding company of the Gates business. The previous owners of Omaha Topco were various investment funds managed by The Blackstone Group L.P. (“Blackstone” or our “Sponsor”), and Gates management equity holders. These equity owners of Omaha Topco received depositary receipts representing ordinary shares in the Company in consideration for their equity in Omaha Topco, at a ratio of 0.76293 of our ordinary shares for each outstanding ordinary share of Omaha Topco. All share and per share amounts in these condensed consolidated financial statements have been retrospectively adjusted to reflect the effect of this split. The reorganization was accounted for as a transaction between entities under common control and the net assets were recorded on the historical cost basis, in a manner similar to a pooling of interests, when Omaha Topco was contributed into the Company. Gates Industrial Corporation plc had no significant business transactions or activities prior to the date of the reorganization transactions, and as a result, the historical financial information for periods prior to those transactions reflects that of Omaha Topco.

In these condensed consolidated financial statements and related notes, all references to “Gates,” “we,” “us,” and “our” refer, (1) prior to the completion of the reorganization transactions completed immediately prior to the initial public offering, to Omaha Topco and its consolidated subsidiaries and (2) after the completion of the reorganization transactions, to Gates Industrial Corporation plc and its consolidated subsidiaries, as the case may be.

B. Accounting periods

The Company prepares its annual consolidated financial statements for the period ending on the Saturday nearest December 31. Accordingly, the condensed consolidated balance sheet is presented as of March 31, 2018 and December 30, 2017 and the related condensed consolidated statements of operations, comprehensive income, cash flows, and shareholders’ equity are presented for the 91 day period from December 31, 2017 to March 31, 2018 , with comparative information for the 91 day period from January 1, 2017 to April 1, 2017 .

C. Basis of preparation

The condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are presented in U.S. dollars unless otherwise indicated. The condensed consolidated financial statements and related notes contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position as of March 31, 2018 and the results of its operations and cash flows for the periods ended March 31, 2018 and April 1, 2017 . Interim period results are not necessarily indicative of the results to be expected for the full fiscal year.

These condensed consolidated financial statements are unaudited and have been prepared on substantially the same basis as Gates’ audited annual consolidated financial statements and related notes for the year ended December 30, 2017 . The condensed consolidated balance sheet as of December 30, 2017 has been derived from those audited financial statements.

The accounting policies used in preparing these condensed consolidated financial statements are the same as those applied in the prior year, except for the adoption on the first day of the 2018 fiscal year of the following new Accounting Standard Updates (each, an “ASU”) , all of which were adopted using the method prescribed by the respective ASU, unless otherwise specified.


•	ASU 2014-09 “ Revenue From Contracts With Customers ” (Topic 606): Revenue Recognition


•	ASU 2016-08 “ Revenue from Contracts with Customers ” (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)


•	ASU 2016-10 “ Revenue from Contracts with Customers ” (Topic 606): Identifying Performance Obligations and Licensing


•	ASU 2016-12 “ Revenue from Contracts with Customers ” (Topic 606): Narrow-Scope Improvements and Practical Expedients


•	ASU 2016-20 “ Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers ”


•	ASU 2017-13 “ Revenue from Contracts with Customers ” (Topic 606): Amendments to SEC Paragraphs


•	ASU 2017-14 “ Income Statement – Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606) ”

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2014-09 “ Revenue from Contracts with Customers ” (Topic 606) (“Topic 606”). Topic 606 supersedes the revenue recognition requirements in Topic 605, “ Revenue Recognition ” (Topic 605) (“Topic 605”), and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled in exchange for those goods or services. The standards update provides a single, principles-based, five-step model to be applied to all contracts with customers. The five steps are: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The ASU also sets out requirements to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Subsequent to issuing this ASU, the FASB issued several amendments, listed above, which provide clarification, additional guidance, practical expedients and technical corrections.

The Company adopted the requirements of Topic 606 as of December 31, 2017, the first day of our 2018 fiscal year, utilizing the modified retrospective method of transition. We have therefore not made any changes to the comparative information which continues to be reported under the prior guidance of Topic 605. As part of the implementation process, t he Company comprehensively reviewed its relationships with its customers and analyzed a number of areas of potential change under Topic 606, including the treatment and calculation of warranty expenses, rebates, branded products, and consignment sales. Management concluded that the impact of Topic 606 on each of these areas on the Company's financial statements was not significant for any of the periods presented or for any of the annual periods that will be included in the Company's 2018 annual consolidated financial statements. No significant changes in net sales or other items in the condensed consolidated financial statements have therefore been made for the three months ended March 31, 2018 in relation to the adoption of Topic 606.

Gates derives its net sales primarily from the sale of 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 first-fit channels, throughout the world. Our products are sold in more than 100 countries across our four commercial regions: (1) the Americas; (2) Europe, Middle East & Africa (“EMEA”); (3) Greater China; and (4) East Asia & India. We have a long-standing presence in each of these regions, including our emerging markets, which include China, Southeast Asia, Eastern Europe and South America. We sell to a large variety of customers in many sectors of the industrial and consumer markets, with no significant exposure to any one customer or market.

In the substantial majority of our agreements with customers, we consider accepted customer purchase orders, which in some cases are governed by master sales agreements, to represent the contracts with our customers. Revenue from the sale of goods under these contracts is measured at the invoiced amount, net of estimated returns, early settlement discounts and rebates. Taxes collected from customers relating to product sales and remitted to government authorities are excluded from revenues. Where a customer has the right to return goods, future returns are estimated based on historical returns profiles. Settlement discounts that may apply to unpaid invoices are estimated based on the settlement histories of the relevant customers. Our transactions prices often include variable consideration, usually in the form of rebates that may apply to issued invoices. The reduction in the transaction price for variable consideration requires that we make estimations of the expected total qualifying sales to the relevant customers. These estimates, including an analysis for potential constraint on variable consideration, take into account factors such as the nature of the rebate program, historical information and expectations of customer and consumer behavior. Overall, the transaction price is reduced to reflect our estimate of the amount of consideration to which we are entitled based on the terms of the contract.

The Company allocates the transaction price to each distinct product based on their relative standalone selling price. The product price as specified on the accepted purchase order is considered to be the standalone selling price.

In substantially all of our contracts with customers, our performance obligations are satisfied at a point in time, rather than over a period of time, when control of the product is transferred to the customer. This occurs typically at shipment. In determining whether control has transferred and the customer is consequently able to control the use of the product for their own benefit, the Company considers if there is a present right to payment, legal title has been transferred, and whether the risks and rewards of ownership have transferred to the customer. The majority of our revenue therefore continues to be recognized consistently with Topic 605, when products are shipped from our manufacturing or distribution facilities.

As part of our adoption of Topic 606, we elected to use the following practical expedients:


(i)	to exclude disclosures of transaction prices allocated to remaining performance obligations when the Company expects to recognize such revenue for all periods prior to the date of initial application of Topic 606;


(ii)	to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less, which is the case in the substantial majority of the Company’s contracts with customers;


(iii)	not to assess whether a contract has a significant financing component (as the Company’s standard payment terms are less than one year);


(iv)	not to assess whether promised goods are performance obligations if they are immaterial in the context of the contract with the customer;


(v)	to exclude from the measurement of the transaction price all taxes assessed by a governmental authority and collected by the Company from a customer; and


(vi)	to account for shipping or handling activities occurring after control has passed to the customer as a fulfillment cost rather than as a performance obligation.


•	ASU 2016-15 “ Statement of Cash Flows ” (Topic 230): Classification of Certain Cash Receipts and Cash Payments


•	ASU 2016-18 “ Statement of Cash Flows ” (Topic 230): Restricted Cash

In 2016, the FASB issued two ASUs that clarify the operating, investing and financing cash flow classifications when receiving or paying cash in certain situations including debt prepayments, distributions from equity method investees and proceeds from settlement of corporate-owned life insurance policies.

In addition, the new requirement states that an entity should include restricted cash in the cash and cash equivalents line when reconciling the beginning-of-period and end-of-period amounts in the statement of cash flows.

In accordance with the transition requirements of these ASUs, the presentation changes to the condensed consolidated statement of cash flows have been made retrospectively with comparative information restated accordingly. This resulted in the reclassification of a cash outflow of $8.3 million in the first three months of 2017 related to the payment of premiums paid under our corporate-owned life insurance policies from cash flow from operating activities to cash flows from investing activities. A similar amount is presented as an investing cash outflow in first three months of 2018. In addition, cash and cash equivalents for the purposes of the condensed consolidated statement of cash flows includes restricted cash of $1.7 million as of March 31, 2018 and $1.6 million as of December 30, 2017, and $1.6 million as of both April 1, 2017 and December 31, 2016 .


•	ASU 2017-07 “ Compensation-Retirement Benefits ” (Topic 715): Improving the Presentation of Net Periodic Pension Costs and Net Periodic Post-retirement Benefit Cost

In March 2017, the FASB issued an ASU which requires that an employer report the service cost component of its net periodic pension and other post-retirement costs in the same line item as other compensation costs arising from services rendered by the relevant employees during the period. The other components of net periodic benefit cost (which include the interest cost, expected return on plan assets, gains or losses on settlements and curtailments, the amortization of any prior service cost or credit and prior year actuarial gains or losses) are required to be presented in the income statement separately from the service cost component and outside of operating income.

Following adoption of this ASU, Gates continues to present the service cost component of our net periodic pension and other post-retirement benefit cost in the lines within operating income to which the relevant employees' other compensation costs are reported. All other components are now included in the other expense (income) line, outside of operating income. In accordance with the transition requirements of this ASU, these presentation changes to the statement of operations have been amended retrospectively. We have adopted the practical expedient of using the amounts disclosed in our historical financial statements as the estimation basis for applying these retrospective presentation requirements.

The following ASUs that were also adopted on the first day of the 2018 fiscal year did not have, and we believe will not have, a significant impact on Gates' results, financial position or disclosures:


•	ASU 2016-01 “ Financial Instruments ” (Topic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities


•	ASU 2016-16 “ Income Taxes ” (Topic 740): Intra-entity Transfers of Assets other than Inventory


•	ASU 2017-01 “ Business Combinations ” (Topic 805): Clarifying the definition of a business


•	ASU 2017-09 “ Stock Compensation ” (Topic 718): Scope of Modification Accounting


•	ASU 2018-03 “ Technical Corrections and Improvements to Financial Instruments - Overall ” (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities

This ASU provides technical corrections and clarifications on various items included in ASU 2016-01, which we have adopted as of the beginning of the 2018 fiscal year. Consistent with our adoption of ASU 2016-01, none of these technical corrections or clarifications are currently expected to have an impact on Gates. While the amendments are effective for the current fiscal year, they are only effective for interim periods beginning after June 15, 2018.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 30, 2017 , prepared in accordance with U.S. GAAP, included the Company’s Annual Report on Form 10-K.

Certain amounts in the prior period’s condensed consolidated financial statements have been reclassified to conform to the current year presentation.

2. Recent accounting pronouncements not yet adopted

The following recent accounting pronouncements are relevant to Gates’ operations but have not yet been adopted. Unless otherwise indicated, management has not yet completed its evaluation of the impact of the adoption of these pronouncements.


•	ASU 2016-02 “ Leases ” (Topic 842)

In February 2016, the FASB issued an ASU which introduces a lessee model that will bring most leases of property, plant and equipment onto the balance sheet. It requires a lessee to recognize a lease obligation (present value of future lease payments) and also a “right of use asset” for all leases, although certain short-term leases are exempted from the standard. The ASU introduces two models for the subsequent measurement of the lease asset and liability, depending on whether the lease qualifies as a “finance lease” or an “operating lease”. This distinction focuses on whether or not effective control of the asset is being transferred from the lessor to the lessee.

The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The impact on our consolidated financial statements of adopting this ASU, which will affect the recognition, measurement and presentation of leases, is expected to be material given the number and value of leases held, but is still early in the process of being evaluated.


•	ASU 2016-13 “ Financial Instruments ” (Topic 326): Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued an ASU which broadens the information that an entity must consider when developing its expected credit loss estimate for assets. The financial asset must be measured at the net amount expected to be collected.

The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The impact on our consolidated financial statements of adopting this ASU, which may affect the recognition, measurement and presentation of financial assets, is still being evaluated.


•	ASU 2017-12 “ Derivatives and Hedging ” (Topic 815): Targeted Improvements to Accounting for Hedging Activities

In August 2017, the FASB issued an ASU with the objective of improving the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The amendments in ASU 2017-12 require an entity to present the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported. The new approach no longer separately measures and reports hedge ineffectiveness.

The amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2018. Early application is permitted in any interim period after issuance of ASU 2017-12. An entity should apply a cumulative effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income (“OCI”) and retained earnings as of the beginning of the fiscal year that the entity adopts. The amended presentation and disclosure guidance is required only prospectively. We expect the adoption of this standard update to affect the disclosure and presentation of our derivative and hedging activities, but we have not yet quantified the impact to our financial statements.


•	ASU 2018-02 “ Income Statement – Reporting Comprehensive Income ” (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the FASB issued an ASU to address concerns about the guidance in current U.S. GAAP that requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment date. This concern stemmed from the U.S. federal government’s enactment of H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018,” known as the Tax Cuts and Jobs Act (the “Tax Act”), on December 22, 2017. The amendments in ASU 2018-02 allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act.

The amendments are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, and the amendments should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act is recognized. The impact on our consolidated financial statements of adopting this standard update, which may affect the recognition, measurement and presentation of taxes, is still being evaluated.


•	ASU 2018-05 "Income Taxes" (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update)

This ASU adds additional paragraphs to Topic 740, Income Taxes, that contain SEC guidance related to Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act.

3. Acquisitions

Description and financial effect of acquisitions

In June 2017, Gates purchased 100% of GTF Engineering and Services UK Limited, the owner of the majority of the net assets of Techflow Flexibles, for $36.7 million . Techflow Flexibles is a fully integrated engineering, manufacturing and commercial operation based in the United Kingdom that specializes in high-pressure flexible hoses.

On October 2, 2017, Gates completed the acquisition of Atlas Hydraulics for $74.0 million , net of cash acquired. Atlas Hydraulics is a fully-integrated product engineering, manufacturing, and commercial business headquartered in Ontario, Canada. With locations in Canada, the U.S. and Mexico, the company specializes in the design, manufacture, and supply of hydraulic tube and hose assemblies.

Gates incurred aggregate costs related directly to these acquisitions of $3.0 million , all of which are included in the transaction-related costs line in the statement of operations.

The following is the record of the fair value of net assets acquired and liabilities assumed:



(dollars in millions)	Techflow Flexibles		Atlas Hydraulics
Assets acquired
Accounts receivable	$	1.7	$	10.3
Inventories	4.2		21.2
Prepaid expenses and other receivables	1.7		0.5
Taxes receivable	—		2.7
Property, plant and equipment	13.0		24.5
Intangible assets	3.8		23.0
Total assets	24.4		82.2

Liabilities assumed
Accounts payable	2.6		5.5
Accrued expenses	4.8		2.4
Other current liabilities	0.3		10.5
Taxes payable	1.9		—
Deferred income taxes	0.6		11.6
Total liabilities	10.2		30.0
Net assets acquired	$	14.2	$	52.2

Goodwill has been recognized as follows:



(dollars in millions)	Techflow Flexibles			Atlas Hydraulics
Consideration, net of cash acquired	$	36.7		$	74.0
Net assets acquired	(14.2		)	(52.2		)
Goodwill	$	22.5		$	21.8

The goodwill of $22.5 million arising from the acquisition of Techflow Flexibles relates largely to the expected enhancement to Gates’ ability to make and supply long-length and large-diameter hoses, primarily for the oil & gas exploration and production industries. None of the goodwill recognized is expected to be deductible for income tax purposes.

The goodwill of $21.8 million arising from the acquisition of Atlas Hydraulics relates primarily to the expansion of Gates’ presence in industrial markets through increased manufacturing capacity and geographic reach. None of the goodwill recognized is expected to be deductible for income tax purposes.

Pro forma information has not been presented for these acquisitions due to their size relative to Gates.

4. Segment information

A. Background

Topic 280 “ Segment Reporting ” requires segment information provided in the consolidated financial statements to reflect the information that was provided to 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.

The segment information provided in these condensed 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. These decisions are based on net sales and Adjusted EBITDA (defined below).

B. Operating Segments

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 first-fit 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.

C. Disaggregated revenue

The following table summarizes our net sales by key geographic region:



	Net Sales
	Three months ended
(dollars in millions)	March 31, 2018		April 1, 2017
North America	$	396.0	$	345.1
EMEA	231.3		189.0
East Asia & India	98.3		90.2
Greater China	92.7		73.4
South America	33.7		32.5
Net Sales	$	852.0	$	730.2

The following table summarizes further our net sales into emerging and developed markets:



	Net Sales
	Three months ended
(dollars in millions)	March 31, 2018		April 1, 2017
Developed	$	562.2	$	487.0
Emerging	289.8		243.2
Net Sales	$	852.0	$	730.2

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 expense and other expenses, income taxes, depreciation and amortization derived from financial information prepared in accordance with U.S. GAAP.

Adjusted EBITDA represents EBITDA before specific items that are considered to hinder comparison of the performance of our businesses either year-over-year or with other businesses. During the periods presented, the specific items excluded from EBITDA in computing Adjusted EBITDA primarily included:


•	the non-cash compensation charge in relation to share-based compensation;


•	transaction-related costs incurred in relation to business combinations and major corporate transactions, including acquisition integration activities;


•	the effect on cost of sales of fair value adjustments to the carrying amount of inventory acquired in business combinations;


•	impairments, comprising impairments of goodwill and significant impairments or write downs of other assets;


•	restructuring costs;


•	the net gain or loss on disposals and on the exit of businesses; and


•	fees paid to our private equity sponsor for monitoring, advisory and consulting services.

E. Net sales and Adjusted EBITDA – continuing operations

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 base measure.



	Net Sales
	Three months ended
(dollars in millions)	March 31, 2018		April 1, 2017
Power Transmission	$	546.0	$	485.6
Fluid Power	306.0		244.6
Continuing operations	$	852.0	$	730.2



	Adjusted EBITDA
	Three months ended
(dollars in millions)	March 31, 2018		April 1, 2017
Power Transmission	$	125.3	$	107.5
Fluid Power	58.6		45.5
Continuing operations	$	183.9	$	153.0

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 above.

Reconciliation of Adjusted EBITDA to net income from continuing operations:



	Three months ended
(dollars in millions)	March 31, 2018			April 1, 2017
Adjusted EBITDA	$	183.9		$	153.0
Depreciation and amortization	55.0			52.4
Share-based compensation	1.6			0.8
Transaction-related costs ⁽¹⁾	4.7			2.0
Impairment of intangibles and other assets	0.3			—
Restructuring (benefits) expenses	(0.3		)	1.8
Sponsor fees (included in other operating expenses)	1.9			1.5
Other operating expenses	2.4			0.1
Operating income from continuing operations	118.3			94.4
Interest expense	59.8			55.2
Other expenses	17.4			0.7
Income before income taxes	41.1			38.5
Income tax expense	11.7			12.5
Net income from continuing operations	$	29.4		$	26.0


⁽¹⁾	Transaction-related costs relate primarily to advisory costs recognized in respect of our initial public offering, the acquisition of businesses and costs related to other corporate transactions such as debt refinancings.

5. Restructuring initiatives

Gates continues to undertake various restructuring activities to streamline its operations, consolidate and take advantage of available capacity and resources, and ultimately achieve net cost reductions. Restructuring activities include efforts to integrate and rationalize Gates’ businesses and to relocate manufacturing operations to lower cost locations. A majority of the accrual for restructuring costs is expected to be utilized during 2018 and 2019 .

Restructuring costs for the three months ended March 31, 2018 were a net benefit of $0.3 million . Restructuring costs of $1.8 million were recognized during the three months ended April 1, 2017 , including $1.2 million in relation to severance costs, largely in our corporate division and in Europe.

Restructuring costs recognized in the condensed consolidated statements of operations for each segment were as follows:



	Three months ended
(dollars in millions)	March 31, 2018			April 1, 2017
Power Transmission	$	(0.4	)	$	1.0
Fluid Power	0.1			0.8
Continuing operations	$	(0.3	)	$	1.8

The following summarizes the restructuring reserves activity for the three month periods ended March 31, 2018 and April 1, 2017, respectively:



(dollars in millions)	As of March 31, 2018			As of April 1, 2017
Balance as of the beginning of the period	$	8.6		$	5.0
Net (benefit) charge for the period	(1.0		)	0.3
Utilized during the period	(3.1		)	(2.0		)
Foreign currency translation	0.1			—
Balance as of the end of the period	$	4.6		$	3.3

Restructuring reserves are included in the accompanying condensed consolidated balance sheet as follows:



(dollars in millions)	As of March 31, 2018		As of April 1, 2017
Accrued expenses and other current liabilities	$	4.2	$	3.1
Other non-current liabilities	0.4		0.2
	$	4.6	$	3.3

6. Income taxes

For interim income tax reporting Gates estimates its annual effective tax rate and applies this effective tax rate to its year to date pre-tax income. The tax effects of unusual or infrequently occurring items, including the effects of changes in tax laws or rates, are reported in the interim period in which they occur.

For the three months ended March 31, 2018 , the Company had an income tax expense of $11.7 million on pre-tax income of $41.1 million , which resulted in an effective income tax rate of 28.5% compared with an income tax expense of $12.5 million on pre-tax income of $38.5 million , which resulted in an effective income tax rate of 32.5% for the three months ended April 1, 2017 . The decrease in the 2018 effective rate is due primarily to the beneficial impact of the jurisdictional mix of earnings. The decrease was offset partially by the discrete tax impacts of $21.1 million in non-operating expenses for which no corresponding tax benefit was recognized.

On December 22, 2017, the U.S. government enacted comprehensive legislation commonly referred to as the Tax Act. In the fourth quarter of 2017, we made a reasonable estimate to account for the income tax effects of the Tax Act. We will continue to update our calculations as additional required information is prepared and analyzed, interpretations and assumptions are refined, and additional guidance is issued.

The Tax Act established new provisions for global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”) that taxes certain payments between U.S. Corporations and their subsidiaries. We are subject to both the GILTI and BEAT provisions beginning January 1, 2018. For the period ended March 31, 2018, we have reported the estimated impacts of both GILTI and BEAT, including partial utilization of our foreign tax credit carryforwards, in the annual effective tax rate. However, due to the complexity of these provisions, we continue to monitor additional regulatory and administrative guidance to further refine the impacts.

7. Earnings per share

Basic income per share represents net income attributable to shareholders divided by the weighted average number of shares outstanding during the period. Diluted income per share considers the effect of potential shares, unless the inclusion of the potential shares would have an anti-dilutive effect. The treasury stock method is used to determine the potential dilutive shares resulting from assumed exercises of equity related instruments.

The computation of net income per share is presented below:



	Three months ended
(dollars in millions, except share numbers and per share amounts)	March 31, 2018		April 1, 2017
Net income attributable to shareholders	$	24.2	$	18.8

Weighted average number of shares outstanding	274,876,458		245,603,089
Dilutive effect of share-based awards (number of shares)	9,427,991		4,285,142
Diluted weighted average number of shares outstanding	284,304,449		249,888,231

Basic net income per share	$	0.09	$	0.08
Diluted net income per share	$	0.09	$	0.08

For the three months ended March 31, 2018 , shares totaling 180,538 , compared with 0 shares for the three months ended April 1, 2017 , were excluded from the diluted income per share calculation because they were anti-dilutive.

8. Inventories



(dollars in millions)	As of March 31, 2018		As of December 30, 2017
Raw materials and supplies	$	141.0	$	128.0
Work in progress	37.5		32.8
Finished goods	313.5		296.3
Total inventories	$	492.0	$	457.1

9. Goodwill



(dollars in millions)	Power Transmission		Fluid Power		Total
Cost and carrying amount
As of December 30, 2017	$	1,430.2	$	655.3	$	2,085.5
Foreign currency translation	31.9		13.9		45.8
As of March 31, 2018	$	1,462.1	$	669.2	$	2,131.3

10. Intangible assets



	As of March 31, 2018							As of December 30, 2017
(dollars in millions)	Cost		Accumulated amortization and impairment			Net		Cost		Accumulated amortization and impairment			Net
Finite-lived:
—Customer relationships	$	2,082.1	$	(462.0	)	$	1,620.1	$	2,051.1	$	(424.4	)	$	1,626.7
—Technology	91.0		(86.4		)	4.6		90.8		(86.2		)	4.6
—Capitalized software	52.8		(23.6		)	29.2		48.3		(22.2		)	26.1
	2,225.9		(572.0		)	1,653.9		2,190.2		(532.8		)	1,657.4
Indefinite-lived:
—Brands and trade names	513.4		(44.0		)	469.4		513.4		(44.0		)	469.4
Total intangible assets	$	2,739.3	$	(616.0	)	$	2,123.3	$	2,703.6	$	(576.8	)	$	2,126.8

During the three months ended March 31, 2018 , the amortization expense recognized in continuing operations in respect of intangible assets was $32.9 million , compared with $32.9 million for the three months ended April 1, 2017 . In addition, movements in foreign currency exchange rates resulted in an increase of $24.6 million in the three months ended March 31, 2018 , compared with an increase of $32.7 million in the three months ended April 1, 2017 , in the net carrying value of total intangible assets.

11. Derivative financial instruments

Gates is exposed to certain risks relating to its ongoing business operations. From time to time, we use derivative financial instruments, principally foreign currency swaps, forward foreign currency contracts and interest rate caps (options), to reduce our exposure to foreign currency risk and interest rate risk. Gates does not hold or issue derivatives for speculative purposes and monitors closely the credit quality of the institutions with which it transacts.

Gates recognizes derivative instruments as either assets or liabilities in the condensed consolidated balance sheet. Gates designates certain of its currency swaps as net investment hedges and designates its interest rate caps as cash flow hedges. The effective portion of the gain or loss on the designated derivative instrument is recognized in OCI and reclassified into net income in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative instrument representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current period net income.

All other derivative instruments not designated in an effective hedging relationship are considered economic hedges and their change in fair value is recognized in net income in each period.

The following table sets out the fair value loss recognized in OCI in relation to the instruments designated as net investment hedging instruments:



	Three months ended
(dollars in millions)	March 31, 2018			April 1, 2017
Net fair value loss recognized in OCI in relation to:
—Euro-denominated debt	$	(15.2	)	$	(12.0	)
—Designated cross currency swaps	(5.7		)	(5.9		)
Total net fair value loss	$	(20.9	)	$	(17.9	)

The closing fair value of the designated currency swaps as of March 31, 2018 , was a liability of $45.6 million , compared with a liability of $38.9 million as of December 30, 2017 .

During the first three months of 2018 , there was a $9.7 million gain, compared with a $1.0 million loss in the prior year period, recognized in OCI in relation to interest rate caps. In addition, $2.4 million in relation to the interest rate caps was reclassified from OCI to net income during the first three months of 2018 , compared with $2.7 million in the prior year period.

The closing fair value of the interest rate caps as of March 31, 2018 was an asset of $5.6 million , compared with a liability of $5.6 million as of December 30, 2017 .

Management does not designate its currency forward contracts, which are used primarily in respect of operational currency exposures related to payables, receivables and material procurement, as hedging instruments for the purposes of hedge accounting under Topic 815 “ Derivatives and Hedging ”. During the first three months of 2018 , a net loss of $0.1 million was recognized in selling, general and administrative expenses on the fair valuation of these currency contracts, compared with a net gain of $0.2 million in the prior year period.

The fair values of derivative financial instruments held by Gates were as follows:



	As of March 31, 2018													As of December 30, 2017
(dollars in millions)	Prepaid expenses and other assets		Other non- current assets		Accrued expenses and other current liabilities			Other non- current liabilities			Net			Prepaid expenses and other assets		Other non- current assets		Accrued expenses and other current liabilities			Other non- current liabilities			Net
Derivatives designated as hedging instruments:
—Currency swaps	$	5.5	$	—	$	—		$	(51.1	)	$	(45.6	)	$	3.2	$	—	$	—		$	(42.1	)	$	(38.9	)
—Interest rate caps	2.0		4.3		(0.7		)	—			5.6			—		0.6		(3.8		)	(2.4		)	(5.6		)

Derivatives not designated as hedging instruments:
—Currency swaps	0.2		—		—			—			0.2			—		—		—			—			—
—Currency forward contracts	0.6		—		(1.0		)	—			(0.4		)	0.5		—		(1.6		)	—			(1.1		)
	$	8.3	$	4.3	$	(1.7	)	$	(51.1	)	$	(40.2	)	$	3.7	$	0.6	$	(5.4	)	$	(44.5	)	$	(45.6	)

A. Currency derivatives

As of March 31, 2018 , the notional principal amount of outstanding foreign exchange contracts that are used to manage the currency profile of Gates’ cash was $31.7 million , compared with $0 as of December 30, 2017 , none of which have been designated as hedging instruments during the current period. As of March 31, 2018 , the notional amount of outstanding currency forward contracts that are used to manage operational foreign exchange exposures was $131.5 million , compared with $99.2 million as of December 30, 2017 , none of which have been designated as hedging instruments during the current period. In addition, Gates held cross currency swaps that have been designated as net investment hedges. As of March 31, 2018 , the notional principal amount of these contracts was $270.0 million , compared with $270.0 million as of December 30, 2017 .

B. Interest rate caps

Gates uses interest rate caps as part of its interest rate risk management strategy to add stability to interest expense and to manage its exposure to interest rate movements. Interest rate caps designated as cash flow hedges 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. As of March 31, 2018 , the notional amount of the interest rate cap contracts outstanding was $2.2 billion , compared with $2.2 billion as of December 30, 2017 . Contracts with a notional amount of $1.0 billion run through June 30, 2019 and a further contract for $0.2 billion runs through June 30, 2020. The remaining contract, with a notional amount of $1.0 billion , is for the period June 28, 2019 through June 30, 2020.

12. Fair value measurement

A. Fair value hierarchy

We account for certain assets and liabilities at fair value. Topic 820 “ Fair Value Measurements and Disclosures ” establishes the following hierarchy for the inputs that are used in fair value measurement:


•	“Level 1” inputs are unadjusted quoted prices in active markets for identical assets or liabilities.


•	“Level 2” inputs are those other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).


•	“Level 3” inputs are not based on observable market data (unobservable inputs).

Assets and liabilities that are measured at fair value are categorized in one of the three levels on the basis of the lowest-level input that is significant to its valuation.

B. Financial instruments not held at fair value

Certain financial assets and liabilities are not measured at fair value; however, items such as cash and cash equivalents, restricted cash, revolving credit facilities and bank overdrafts generally attract interest at floating rates and accordingly their carrying amounts are considered to approximate fair value. Due to their short maturities, the carrying amounts of accounts receivable and accounts payable are also considered to approximate their fair values.

The carrying amount and fair value of Gates’ debt is set out below:



	As of March 31, 2018				As of December 30, 2017
(dollars in millions)	Carrying amount		Fair value		Carrying amount		Fair value
Current	$	33.7	$	33.3	$	66.4	$	66.2
Non-current	3,013.6		3,045.0		3,889.3		3,970.7
	$	3,047.3	$	3,078.3	$	3,955.7	$	4,036.9

Debt is comprised principally of borrowings under the secured credit facilities and the unsecured senior notes. Loans under the secured credit facilities pay interest at floating rates, subject to a 1% LIBOR floor on the Dollar Term Loan and a 0% EURIBOR floor on the Euro Term Loan. Their principal amounts, derived from a market price, discounted for illiquidity, are considered to approximate fair value. The unsecured senior notes have fixed interest rates, are traded between “Qualified Institutional Buyers” and their fair value is derived from quoted market prices.

C. Assets and liabilities measured at fair value on a recurring basis

The following table categorizes the assets and liabilities that are measured at fair value on a recurring basis:



(dollars in millions)	Quoted prices in active markets (Level 1)		Significant observable inputs (Level 2)			Total
As of March 31, 2018
Available-for-sale securities	$	2.5	$	—		$	2.5
Derivative assets	$	—	$	12.6		$	12.6
Derivative liabilities	$	—	$	(52.8	)	$	(52.8	)

As of December 30, 2017
Available-for-sale securities	$	2.4	$	—		$	2.4
Derivative assets	$	—	$	4.3		$	4.3
Derivative liabilities	$	—	$	(49.9	)	$	(49.9	)

Available-for-sale securities represent equity securities that are traded in an active market and therefore are measured using quoted prices in an active market. Derivative assets and liabilities included in Level 2 represent foreign currency exchange forward and swap contracts, and interest rate cap contracts.

We value our foreign currency exchange derivatives using models consistent with those used by a market participant that maximize the use of market observable inputs including forward prices for currencies.

We value our interest rate cap contracts using a widely accepted discounted cash flow valuation methodology that reflects the contractual terms of each derivative, including the period to maturity. The methodology derives the fair values of the caps using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation are based on an expectation of future interest rates derived from observable market-based interest rate curves and implied volatilities. In addition, credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk.

To comply with the provisions of Topic 820, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.

Transfers between Levels of the Fair Value Hierarchy

During the periods presented, there were no transfers between Levels 1 and 2, and Gates had no assets or liabilities measured at fair value on a recurring basis using Level 3 inputs.

D. Assets measured at fair value on a non-recurring basis

Gates has non-recurring fair value measurements related to certain assets, including goodwill, intangible assets, and property, plant, and equipment. No significant impairment was recognized during either the three months ended March 31, 2018 or April 1, 2017 .

13. Debt

Long-term debt, including the current portion and bank overdrafts, is analyzed as follows:



(dollars in millions)	As of March 31, 2018			As of December 30, 2017
Secured debt:
—Dollar Term Loan	$	1,725.0		$	1,729.4
—Euro Term Loan	801.3			785.6
Unsecured debt:
—Dollar Senior Notes	568.0			1,190.0
—Euro Senior Notes	—			282.5
—Other loans	0.3			0.4
Total principal of debt	3,094.6			3,987.9
Deferred issuance costs	(55.5		)	(73.2		)
Accrued interest	8.2			41.0
Total carrying value of debt	3,047.3			3,955.7
Debt, current portion	33.7			66.4
Debt, less current portion	$	3,013.6		$	3,889.3

Gates’ secured debt is jointly and severally, irrevocably and fully and unconditionally guaranteed by certain of its subsidiaries and are secured by liens on substantially all of their assets.

Gates is subject to covenants, representations and warranties under certain of its debt facilities. During the periods covered by these condensed consolidated financial statements, we were in compliance with the applicable financial covenants. Also under the agreements governing our debt facilities, our ability to engage in activities such as incurring certain additional indebtedness, making certain investments and paying certain dividends is dependent, in part, on our ability to satisfy tests based on measures determined under those agreements.

Debt redemptions

During the first three months of 2018 , Gates redeemed in full its outstanding €235.0 million Euro Senior Notes, plus interest accrued up to and including January 31, 2018 of $0.7 million . The Euro Senior Notes were redeemed at a price of 102.875% and a redemption premium of $8.4 million was therefore paid in addition to the principal of $291.7 million .

In addition, on February 8 and February 9, 2018, Gates made partial redemptions of the Dollar Senior Notes with a principal of $522.0 million and $100.0 million , respectively. Both of these calls were made at a price of 103.0% , incurring redemption premiums of $15.6 million and $3.0 million , respectively. Interest accrued of $2.0 million and $0.4 million , respectively, was also paid on these dates.

All of the above prepayments, totaling $913.7 million in principal, $27.0 million in redemption premium and $3.1 million in accrued interest, were funded primarily by the net proceeds from our initial public offering of $799.1 million , with the remainder of the funds coming from excess cash on hand. As a result of these redemptions, the recognition of $15.4 million of deferred financing costs was accelerated and recognized in interest expense in the first three months of 2018.

In addition, in connection with the reorganization transactions completed in connection with to our initial public offering, a wholly-owned U.S. subsidiary of Gates Global LLC, entered into an intercompany agreement pursuant to which it became an obligor under the notes for U.S. federal income tax purposes and agreed to make future payments due on the Dollar Senior Notes. As a result, interest on the Dollar Senior Notes is U.S. source income.

Dollar and Euro Term Loans

Gates’ secured credit facilities include a Dollar Term Loan credit facility and a Euro Term Loan credit facility that were drawn on July 3, 2014. The maturity date for each of the term loan facilities is March 31, 2024, with a springing maturity of April 15, 2022 if more than $500.0 million of the Dollar Senior Notes remain in issue at that time. These term loan facilities bear interest at a floating rate, which for U.S. dollar debt can be either a base rate as defined in the credit agreement plus an applicable margin, or at Gates’ option, LIBOR plus an applicable margin.

On January 29, 2018, the applicable margin on each of the term loans was lowered by 0.25% following the successful completion of our initial public offering. The Dollar Term Loan interest rate is currently LIBOR, subject to a floor of 1.00% , plus a margin of 2.75% and as of March 31, 2018 , borrowings under this facility bore interest at a rate of 5.05% per annum. As of March 31, 2018 , the Euro Term Loan bears interest at Euro LIBOR, which is currently below 0% , subject to a floor of 0% , plus a margin of 3.00% . The next term loan interest rate re-set date is on June 29, 2018.

Both term loans are subject to quarterly amortization payments of 0.25% , based on the original principal amount less certain prepayments with the balance payable on maturity. During the first three months of 2018 , Gates made quarterly amortization payments against the Dollar Term Loan and the Euro Term Loan of $4.3 million and $2.0 million , respectively.

Under the terms of the credit agreement, Gates is obliged to offer annually to the term loan lenders an “excess cash flow” amount as defined under the agreement, based on the preceding year’s final results. Based on our 2017 results, the leverage ratio as defined under the credit agreement was below the threshold above which payments are required, and therefore no excess cash flow payment was required to be made in 2018 .

During the first three months of 2018 , a transactional foreign exchange loss of $17.7 million , compared with a $5.4 million loss for the prior year period, was recognized in respect of the Euro Term Loan. Of these losses, $7.5 million , compared with $0 for the prior year period, was recognized in other expense and a $10.2 million loss, compared with a $5.4 million loss for the prior year period, was recognized in OCI as part of this facility is designated as a net investment hedge of certain of Gates’ Euro investm e nts. In the first three months of 2018 , this loss recognized in other expense was substantially offset by a gain on Euro-denominated intercompany loans.

As of March 31, 2018 , the principal amount outstanding under the Dollar Term Loan was $1,725.0 million and the Euro Term Loan was $801.3 million ( €651.9 million ).

Unsecured Senior Notes

As of March 31, 2018 , there were $568.0 million of Dollar Senior Notes outstanding. These notes are scheduled to mature on July 15, 2022 and bear interest at an annual fixed rate of 6.00% with semi-annual interest payments. As noted above, during the first three months of 2018, Gates redeemed in full its outstanding €235.0 million Euro Senior Notes and made partial redemptions of the Dollar Senior Notes totaling $622.0 million .

Up to the date of their redemption, a transactional foreign exchange loss of $9.2 million , compared with a $6.6 million loss in the prior year period, was recognized in respect of the Euro Senior Notes. Of these losses, $4.2 million , compared with $0 for the prior year period, was recognized in other expense and $5.0 million , compared with $6.6 million for the prior year period, was recognized in OCI for the period during which this facility was designated as a net investment hedge of certain of Gates’ Euro investments.

Gates may redeem the Dollar Senior Notes, at its option, in whole at any time or in part from time to time, at the following redemption prices (expressed as a percentage of the principal amount), plus accrued and unpaid interest to the redemption date:



	Dollar Senior Note Redemption price
During the year commencing:
—July 15, 2018	101.500	%
—July 15, 2019 and thereafter	100.000	%

In the event of a change of control over the Company, each holder will have the right to require Gates to repurchase all of such holder’s notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of repurchase, except to the extent that Gates has previously elected to redeem the notes.

Revolving credit facility

Gates also has a secured revolving credit facility, maturing on January 29, 2023, that provides for multi-currency revolving loans up to an aggregate principal amount of $185.0 million , with a letter of credit sub-facility of $20.0 million . In January 2018, the maturity date of this facility was extended to January 29, 2023, with a springing maturity of April 15, 2022 if more than $500.0 million of the Dollar Senior Notes remain in issue at that time. In addition, as part of this amendment, the facility size was increased from $125.0 million to $185.0 million .

As of both March 31, 2018 and December 30, 2017 , there were $0 drawings for cash under the revolving credit facility and there were no letters of credit outstanding.

Debt under the revolving credit facility bears interest at a floating rate, which can be either a base rate as defined in the credit agreement plus an applicable margin or, at Gates’ option LIBOR, plus an applicable margin.

Asset-backed revolver

Gates has a revolving credit facility backed by certain of its assets in North America. The facility allows for loans of up to a maximum of $325.0 million ( $322.0 million as of March 31, 2018 , compared with $293.7 million as of December 30, 2017 , based on values of the secured assets on those dates) with a letter of credit sub-facility of $150.0 million within this maximum. In January 2018, the maturity date of this facility was extended to January 29, 2023, with a springing maturity of April 15, 2022 if more than $500.0 million of the Dollar Senior Notes remain in issue at that time.

As of both March 31, 2018 and December 30, 2017 , there were $0 drawings for cash under the asset-backed revolver. Debt under the facility bears interest at a floating rate, which can be either a base rate as defined in the credit agreement plus an applicable margin or, at Gates’ option, LIBOR, plus an applicable margin. The letters of credit outstanding under the asset-backed revolver as of March 31, 2018 amounted to $58.4 million , compared with $58.0 million as of December 30, 2017 .

14. Post-retirement benefits

Gates operates defined benefit pension plans in certain of the countries in which it operates, in particular, in the U.S. and U.K. All of the defined benefit pension plans are closed to new entrants. In addition to the funded defined benefit pension plans, Gates has unfunded defined benefit obligations to certain current and former employees.

Gates also provides other post-retirement benefits, principally health and life insurance coverage, on an unfunded basis to certain of its employees in the U.S. and Canada.

Net periodic benefit cost

The components of the net periodic benefit cost for pensions and other post-retirement benefits were as follows:



	Three months ended March 31, 2018									Three months ended April 1, 2017
(dollars in millions)	Pensions			Other post-retirement benefits			Total			Pensions			Other post-retirement benefits		Total
Reported in operating income:
—Employer service cost	$	1.4		$	—		$	1.4		$	1.3		$	—	$	1.3
Reported outside of operating income:
—Interest cost	6.0			0.6			6.6			7.8			0.7		8.5
—Expected return on plan assets	(5.8		)	—			(5.8		)	(7.0		)	—		(7.0		)
—Amortization of net actuarial (gain) loss	—			(0.2		)	(0.2		)	0.1			—		0.1
—Settlements	0.4			—			0.4			—			—		—
Net periodic benefit cost	$	2.0		$	0.4		$	2.4		$	2.2		$	0.7	$	2.9

Contributions

During the three months ended March 31, 2018 , Gates contributed $2.2 million , compared with $1.8 million for the three months ended April 1, 2017 , to its defined benefit pension plans and $1.3 million , compared with $1.3 million for the three months ended April 1, 2017 , to its other post-retirement benefit plans. For 2018 as a whole, Gates expects to contribute approximately $6.3 million to its defined benefit pension plans and approximately $6.1 million to its other post-retirement benefit plans.

Amounts reclassified from accumulated other comprehensive income

During the three months ended March 31, 2018 , $0.2 million of actuarial gains, compared with $0.1 million actuarial losses during the three months ended April 1, 2017 , were reclassified from other comprehensive income to the selling, general and administrative expenses line item in the condensed consolidated statements of operations.

Settlements

In September 2017, Gates completed an annuity purchase for most of the retirees in its largest U.S. defined benefit pension plan. The $154.0 million purchase price, funded from plan assets, settled $155.1 million of the pension benefit obligation. The net post-retirement benefit obligation has therefore reduced by $1.1 million . In connection with this transaction, a settlement gain of $3.9 million was recognized as part of the net periodic benefit cost.

15. Equity

In January 2018, we completed an initial public offering of 38,500,000 shares at $19.00 each. Shortly thereafter, the underwriters of the initial public offering exercised their over-allotment option for a further 5,775,000 shares, also at $19.00 each. Movements in the Company's number of shares in issue for the three month periods ended March 31, 2018 and April 1, 2017, respectively, were as follows:



(number of shares)	As of March 31, 2018	As of April 1, 2017
Balance as of the beginning of the period	245,474,605	245,627,952
Issuance of shares	44,275,000	80,107
Exercise of share options	6,774	—
Buy back of shares	—	(187,680	)
Balance as of the end of the period	289,756,379	245,520,379

The Company has one class of authorized and issued shares, with a par value of $0.01 . Each share carries equal voting rights but no right to fixed income.

16. Analysis of accumulated other comprehensive income (loss)

Changes in accumulated other comprehensive income (loss) by component (net of tax) are as follows:



(dollars in millions)	Available-for- sale investments			Post- retirement benefit			Cumulative translation adjustment			Cash flow hedges			Accumulated OCI attributable to shareholders			Non- controlling interests			Accumulated OCI
As of December 31, 2016	$	(0.2	)	$	(6.5	)	$	(884.1	)	$	(25.1	)	$	(915.9	)	$	(55.4	)	$	(971.3	)
Foreign currency translation	—			—			90.8			—			90.8			10.9			101.7
Cash flow hedges movements	—			—			—			1.2			1.2			—			1.2
Available-for-sale investment movements	(0.1		)	—			—			—			(0.1		)	(0.1		)	(0.2		)
Post-retirement benefit movements	—			0.1			—			—			0.1			—			0.1
Other comprehensive (loss) income	(0.1		)	0.1			90.8			1.2			92.0			10.8			102.8
As of April 1, 2017	$	(0.3	)	$	(6.4	)	$	(793.3	)	$	(23.9	)	$	(823.9	)	$	(44.6	)	$	(868.5	)



(dollars in millions)	Available-for- sale investments			Post- retirement benefit			Cumulative translation adjustment			Cash flow hedges			Accumulated OCI attributable to shareholders			Non- controlling interests			Accumulated OCI
As of December 30, 2017	$	(0.3	)	$	13.2		$	(742.8	)	$	(17.5	)	$	(747.4	)	$	(25.5	)	$	(772.9	)
Foreign currency translation	—			—			39.4			—			39.4			16.7			56.1
Cash flow hedges movements	—			—			—			11.7			11.7			—			11.7
Post-retirement benefit movements	—			(0.3		)	—			—			(0.3		)	—			(0.3		)
Other comprehensive (loss) income	—			(0.3		)	39.4			11.7			50.8			16.7			67.5
As of March 31, 2018	$	(0.3	)	$	12.9		$	(703.4	)	$	(5.8	)	$	(696.6	)	$	(8.8	)	$	(705.4	)

17. Related party transactions

A. Entities affiliated with Blackstone

On July 3, 2014, Blackstone Management Partners L.L.C. (“BMP”) and Blackstone Tactical Opportunities Advisors L.L.C., affiliates of our Sponsor (the “Managers”), entered into a Transaction and Monitoring Fee Agreement (the “Former Transaction and Monitoring Fee Agreement”) with Omaha Topco. Under this agreement, we paid the Managers at the closing of the acquisition of Gates by Blackstone $56.8 million as a transaction fee as consideration for the Managers undertaking due diligence investigations and financial and structural analysis and providing corporate strategy and other advice and negotiation assistance.

In addition, under this agreement, Omaha Topco and certain of its direct and indirect subsidiaries (collectively the “Monitoring Service Recipients”) engaged the Managers to provide certain monitoring, advisory and consulting services in the following areas:


•	advice regarding financings and relationships with lenders and bankers;


•	advice regarding the selection, retention and supervision of independent auditors, outside legal counsel, investment bankers and other advisors or consultants;


•	advice regarding environmental, social and governance issues pertinent to our affairs;


•	advice regarding the strategic direction of our business; and


•	such other advice directly related to or ancillary to the above advisory services as we may reasonably request.

In consideration of these oversight services, Gates agreed to pay BMP an annual fee of 1% of a covenant EBITDA measure defined under the agreements governing our senior secured credit facilities. In addition, the Monitoring Service Recipients agreed to reimburse the Managers for any related out-of-pocket expenses incurred by the Managers and their affiliates. During the first three months of 2018 , Gates incurred $1.9 million , compared with $1.5 million during the prior year period, in respect of these oversight services and out-of-pocket expenses, of which there was no amount owing at March 31, 2018 or December 30, 2017 .

The Former Transaction and Monitoring Fee Agreement also contemplated that Gates would pay to the Managers a milestone payment upon the consummation of an initial public offering. In January 2018, we and the Managers terminated this agreement and entered into a new Monitoring Fee Agreement (the “New Monitoring Fee Agreement”) with the Managers that is substantially similar to the terminated agreement, except that the New Monitoring Fee Agreement does not require the payment of a milestone payment in connection with the initial public offering and it terminates upon the earlier to occur of (i) the second anniversary of the closing date of the initial public offering and (ii) the date our Sponsor beneficially owns less than 5% of our ordinary shares and such shares have a fair market value of less than $25.0 million . Following termination, the Managers will refund us any portion of the monitoring fee previously paid in respect of fiscal quarters that follow the termination date.

In addition, we have entered into a Support and Services Agreement with BMP. Under this agreement, the Company and certain of its direct and indirect subsidiaries reimburse BMP for customary support services provided by Blackstone’s portfolio operations group to the Company at BMP’s direction. BMP will invoice the Company for such services based on the time spent by the relevant personnel providing such services during the applicable period and Blackstone’s allocated costs of such personnel. During the periods presented, no amounts were paid or outstanding under this agreement. In connection with the initial public offering in January 2018, we and BMP terminated this agreement and we entered into a new agreement with the Managers that is substantially similar to the existing agreement, except that it terminates on the date our Sponsor beneficially owns less than 5% of our ordinary shares and such shares have a fair market value of less than $25.0 million , or such earlier date as may be chosen by Blackstone.

In connection with our initial public offering, Blackstone Advisory Partners L.P. received underwriting fees of $3.2 million .

During the periods presented, through to November 2, 2017, Blackstone held a controlling interest in Alliance Automotive Group (“Alliance”), a wholesale distributor of automotive parts in France and the United Kingdom. Net sales by Gates to affiliates of Alliance for the three months ended March 31, 2018 , were $0 million , compared with $8.2 million for the three months ended April 1, 2017 .

B. Equity method investees

Sales to and purchases from equity method investees were as follows:



	Three months ended
(dollars in millions)	March 31, 2018			April 1, 2017
Sales	$	0.6		$	0.5
Purchases	$	(2.5	)	$	(2.6	)

Amounts outstanding in respect of these transactions were payables of $0.3 million as of March 31, 2018 , compared with $0.2 million as of December 30, 2017 . During the first three months of March 31, 2018 , we received dividends of $0.4 million from our equity method investees, compared with $0.3 million in the prior year period.

C. Non-Gates entities controlled by non-controlling shareholders

Sales to and purchases from non-Gates entities controlled by non-controlling shareholders were as follows:



	Three months ended
(dollars in millions)	March 31, 2018			April 1, 2017
Sales	$	16.0		$	12.9
Purchases	$	(5.3	)	$	(5.7	)

Amounts outstanding in respect of these transactions were as follows:



(dollars in millions)	As of March 31, 2018			As of December 30, 2017
Receivables	$	2.1		$	1.2
Payables	$	(0.4	)	$	(0.2	)

18. Commitments and contingencies

A. Performance bonds, letters of credit and bank guarantees

As of March 31, 2018 , letters of credit were outstanding against the asset-backed revolving facility amounting to $58.4 million , compared with $58.0 million as of December 30, 2017 . Gates had additional outstanding performance bonds, letters of credit and bank guarantees amounting to $3.4 million , compared with $3.4 million as of December 30, 2017 .

B. Contingencies

Gates is, from time to time, party to general legal proceedings and claims, which arise in the ordinary course of business. Gates is also, from time to time, party to legal proceedings and claims in respect of environmental obligations, product liability, intellectual property and other matters which arise in the ordinary course of business and against which management believes Gates has meritorious defenses available.

While it is not possible to quantify the financial impact or predict the outcome of all pending claims and litigation, management does not anticipate that the outcome of any current proceedings or known claims, either individually or in aggregate, will materially affect Gates’ financial position, results of operations or cash flows.

C. Warranties

The following summarizes the movements in the warranty liability for the three month periods ended March 31, 2018 and April 1, 2017, respectively:



(dollars in millions)	As of March 31, 2018			As of April 1, 2017
Balance as of the beginning of the period	$	14.1		$	14.3
Charge for the period	4.4			4.6
Payments made	(3.2		)	(3.6		)
Released during the period	(0.2		)	—
Foreign currency translation	0.1			0.2
Balance as of the end of the period	$	15.2		$	15.5

19. Subsequent events

On April 26, 2018, we signed a share purchase agreement to acquire Rapro, a Turkey-based business that engineers, manufactures and sells molded and branched hoses and other products, the majority of which are sold into replacement markets. Rapro’s annual sales are approximately $23 million and it operates out of two facilities in Izmir, Turkey, with its products serving heavy-duty, commercial and light-vehicle applications. This bolt-on acquisition accelerates our growth strategy within the Fluid Power product line, expanding our product range and geographic coverage to accelerate our growth in replacement channels, particularly in emerging markets.

Item 2: Management’s Discussion and Analysis

of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our condensed consolidated financial statements and related notes thereto included elsewhere in this quarterly report. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in “Forward-Looking Statements” above.

Our Company

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 as specified components, with the majority of our revenues coming from replacement channels. Our products are used in applications across numerous end markets, which include construction, agriculture, energy, automotive, transportation, general industrial, consumer products and many others. 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 for over a century since Gates’ founding in 1911. Within the diverse end markets we serve, our highly engineered products are critical components in applications for which the cost of downtime is high relative to the cost of our products, resulting in the willingness of end users to pay a premium for superior performance and availability. These applications subject our products to normal wear and tear, resulting in a natural replacement cycle that drives 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. 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.

Business Trends

Our revenue has historically been highly correlated with industrial activity and utilization, and not with any single end market given the diversification of our business and high exposure to replacement channels. Our products are used in applications across numerous end markets across both our replacement and first-fit channels, including construction, agriculture, energy, automotive, transportation, general industrial, consumer products and many others. This diversification limits our exposure to trends in any given end market. In addition, a majority of our sales are generated from customers in replacement channels, who serve primarily a large base of installed equipment that follows a natural maintenance cycle that is somewhat less susceptible to various trends that affect our end markets. Such trends include infrastructure investment and construction activity, agricultural production and related commodity prices, commercial and passenger vehicle production, miles driven and fleet age, evolving regulatory requirements related to emissions and fuel economy and oil and gas prices and production. Key indicators of our performance include industrial production, industrial sales and manufacturer shipments.

During the three months ended March 31, 2018 , sales into replacement channels accounted for approximately 60% of our total net sales. Our replacement sales cover a very broad range of applications and industries and accordingly, are highly correlated with industrial activity and utilization and not a single end market. Replacement products are principally sold through distribution partners that may carry a very broad line of products or may specialize in products associated with a smaller set of end market applications.

During the three months ended March 31, 2018 , sales into first-fit channels accounted for approximately 40% of our total net sales. First-fit sales are to a variety of industrial and automotive customers. Our industrial first-fit customers cover a diverse range of industries and applications and many of our largest first-fit customers manufacture construction and agricultural equipment. Among our automotive first-fit customers, a majority of our net sales are to emerging market customers, where we believe our first-fit presence provides us with a strategic advantage in developing those markets and ultimately increasing our higher margin replacement channel sales. First-fit automotive sales in developed markets represented approximately 9% of our total net sales in the three months ended March 31, 2018 , with first-fit automotive sales in North America contributing less than 3% of total sales. As a result of the foregoing factors, we do not believe that our historical revenues have had any meaningful correlation to global automotive production but are positively correlated to industrial production.

Results for the three months ended March 31, 2018 compared with the results for the three months ended April 1, 2017

Summary Gates Performance



	Three months ended
(dollars in millions)	March 31, 2018			April 1, 2017
Net sales	$	852.0		$	730.2
Cost of sales	516.1			443.4
Gross profit	335.9			286.8
Selling, general and administrative expenses	208.6			188.5
Transaction-related costs	4.7			2.0
Impairment of intangibles and other assets	0.3			—
Restructuring (benefits) expenses	(0.3		)	1.8
Other operating expenses	4.3			0.1
Operating income	118.3			94.4
Interest expense	59.8			55.2
Other expenses	17.4			0.7
Income before taxes	41.1			38.5
Income tax expense	11.7			12.5
Net income from continuing operations	$	29.4		$	26.0

Adjusted EBITDA ⁽¹⁾	$	183.9		$	153.0
Adjusted EBITDA margin (%)	21.6		%	21.0		%


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

Net sales

Net sales during the first three months of 2018 were $852.0 million , up by 16.7% , or $121.8 million , compared with net sales during the prior year period of $730.2 million . Our net sales in the first three months of 2018 were positively impacted by movements in average currency exchange rates of $42.2 million compared with the prior year period, due principally to the strengthening of the Euro ($23.4 million) and the Chinese Renminbi ($6.8 million) against the U.S. dollar. In addition, the acquisitions of Techflow Flex ibles and Atlas Hydraulics in the second half of 2017 contributed $34.1 million to our first quarter 2018 net sales. Excluding these impacts, core sales in creased by $45.5 million , or 6.2% , during the three months ended March 31, 2018 compared with the prior year period. This increase was due primarily to higher volumes of $34.2 million, with some benefit coming also from favorable pricing.

Core sales in our Power Transmission and Fluid Power businesses grew by 5.8% and 7.2% in the first three months of 2018 and 2017 , respectively. This growth was mostly driven by industrial end markets, which have continued to perform well across all regions, driving over half of our core growth in dollars in the first three months of 2018 compared with the prior year period. North America, Europe, Middle East & Africa ("EMEA") and China were the primary contributors to this industrial growth, particularly to industrial first-fit customers. Sales to industrial first-fit customers grew by 13.7% (or $17.4 million) on a core basis in the first three months of 2018 compared with the prior year period. Sales through our industrial replacement channels increased by 5.3% (or $11.5 million) on a core basis compared with the prior year period, with the regional growth coming primarily from EMEA and North America. Core growth in our construction and agricultural end markets was 14.2% and 10.8% for the first three months of 2018 and 2017 , respectively. Sales into the construction end market grew in all of our commercial regions, and we saw particular strength in emerging markets. Growth in agriculture was driven primarily by North America. Overall, core sales into emerging and developed markets grew by 11.9% and 3.3% in the first three months of 2018 and 2017 , respectively.

Cost of sales

Cost of sales for the first three months of 2018 was $516.1 million , an increase of 16.4% , or $72.7 million , compared with $443.4 million in the prior year period. The increase was driven primarily by the acquisition of businesses in the second half of 2017, which contributed $27.1 million to the increase from the prior year, in addition to the impacts from higher volumes of $20.0 million, movements in average currency exchange rates of $25.4 million and, to a lesser extent, a combination of wage and material inflation of $7.2 million. These increases were offset partially by procurement cost savings of $4.2 million and productivity improvements of $3.6 million.

Gross profit

Gross profit for the first three months of 2018 was $335.9 million , up 17.1% from $286.8 million during the prior year period, driven by the factors described above. The increase reflected the benefits from higher volumes of $14.2 million, higher selling prices of $12.6 million and a $16.8 million positive impact from movements in average currency exchange rates. Wage and material inflation of $7.2 million was more than offset by procurement cost savings and productivity improvements of $4.2 million and $3.6 million, respectively.

Our gross profit margin improved by 10 basis points to 39.4% during the first three months of 2018 , up from 39.3% during the prior year period. The benefit from higher volumes on a partially fixed cost base and benefits from procurement cost savings and productivity improvements were offset somewhat by the dilutive impact of the recent acquisitions, as well as by inflation. The acquisitions, which did not impact the prior year period, had a 80 basis point dilutive impact on the gross margin for the first three months of 2018.

Selling, general and administrative expenses

Selling, general and administrative (“SG&A”) expenses for the first three months of 2018 were $208.6 million compared with $188.5 million during the prior year period. This increase of $20.1 million was driven primarily by the adverse impact of movements in average currency exchange rates of $7.6 million and by investments in our commercial and corporate functions of $4.5 million. A further $3.6 million of the increase related to the recent acquisitions, which did not impact the prior year period.

Transaction-related costs

Transaction-related costs for the first three months of 2018 were $4.7 million compared with $2.0 million during the prior year period. Expenses in the first three months of 2018 included $4.0 million related to our initial public offering and a further $0.3 million related to the extension in January 2018 of the maturity dates of our two revolving credit facilities. The transaction-related costs incurred in the prior year period related to professional fees incurred as part of the debt refinancing initiated during March 2017.

Restructuring (benefits) expenses

No significant net restructuring costs were recognized during the first three months of 2018 . Restructuring costs of $1.8 million were recognized during the prior year period, including $1.2 million in relation to severance costs, largely in the U.S. and Europe.

Interest expense

Interest expense for the first three months of 2018 was $59.8 million compared with $55.2 million for the prior year period. Our interest expense may be analyzed as follows:



	Three months ended
(dollars in millions)	March 31, 2018		April 1, 2017
Debt:
Dollar Term Loan	$	21.8	$	28.5
Euro Term Loan	6.0		2.2
Dollar notes	12.1		15.9
Euro notes	1.3		3.6
	41.2		50.2
Amortization of deferred issuance costs	18.0		4.3
Other interest expense	0.6		0.7
	$	59.8	$	55.2

Details of the bank and other loans are presented in note 13 to the unaudited condensed consolidated financial statements included elsewhere in this report. Interest expense includes the amortization of the deferred premium on our interest rate caps.

Interest expense during the first three months of 2018 increased over the prior year period due primarily to the acceleration of $15.4 million of deferred financing cost amortization as a consequence of the debt payments made during the first three months of 2018. Partially offsetting this increase was the interest saving from the reduced principal amounts outstanding, which we expect to benefit our future interest expense by approximately $54 million per year. The interest expense in the first three months of 2018 benefited further from margin reductions negotiated in 2017.

Other expenses

Other expense for the first three months of 2018 was $17.4 million , which increased from $0.7 million in the prior year period. This increase was driven primarily by the payment of $27.0 million of redemption premiums on repayment of the Euro Senior Notes and Dollar Senior Notes in January and February of 2018. Partially offsetting these premiums were net foreign currency gains of $9.4 million on net debt and hedging instruments, including a $5.8 million gain on a derivative used to lock in the exchange rate used to repay the Euro Senior Notes. We also benefited from a $0.6 million reduction in net adjustments related to post-retirement benefit obligations, due primarily to lower net interest on the reduced net obligation during the first three months of 2018 as compared with the prior year period. Our other expense may be analyzed as follows:



	Three months ended
(dollars in millions)	March 31, 2018			April 1, 2017
Interest income on bank deposits	$	(1.1	)	$	(1.1	)
Foreign currency (gain) loss on net debt and hedging instruments	(9.4		)	0.2
Premiums paid on debt redemptions	27.0			—
Net adjustments related to post-retirement benefits	1.0			1.6
Other	(0.1		)	—
	$	17.4		$	0.7

Income tax expense

For interim income tax reporting we estimate our annual effective tax rate and apply this effective tax rate to our year to date pre-tax income. The tax effects of unusual or infrequently occurring items, including the effects of changes in tax laws or rates, are reported in the interim period in which they occur.

For the first three months of 2018 , we had income tax expense of $11.7 million on pre-tax income of $41.1 million , resulting in an effective tax rate of 28.5% compared with an income tax expense of $12.5 million on pre-tax income of $38.5 million , which resulted in an effective income tax rate of 32.5% for the prior year pe riod. The decrease in the 2018 effective rate is due primarily to the beneficial impact of the jurisdictional mix of earnings. The decrease was offset partially by the discrete tax impacts of $21.1 million in non-operating expenses for which no corresponding tax benefit was recognized.

On December 22, 2017, the U.S. government enacted comprehensive legislation commonly referred to as the Tax Act. In the fourth quarter of 2017, we made a reasonable estimate to account for the income tax effects of the Tax Act, however, we continue to update our calculations as additional required information is prepared and analyzed, interpretations and assumptions are refined, and additional guidance is issued.

Adjusted EBITDA

Adjusted EBITDA for the first three months of 2018 was $183.9 million , an increase of 20.2% or $30.9 million , compared with the prior year period Adjusted EBITDA of $153.0 million . The Adjusted EBITDA margin was 21.6% , a 60 basis point increase from the prior year period margin of 21.0% . The increase in Adjusted EBITDA was driven primarily by higher sales of $121.8 million , which resulted in additional gross profit of $49.1 million as described above. Partially offsetting this increase were higher SG&A costs as noted above.

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 ( 64.1% of Gates’ net sales for the first three months of 2018 )



	Three months ended
(dollars in millions)	March 31, 2018			April 1, 2017			Period over Period Change
Net sales	$	546.0		$	485.6		12.4	%
Adjusted EBITDA	$	125.3		$	107.5		16.6	%
Adjusted EBITDA margin (%)	22.9		%	22.1		%

Net sales in Power Transmission for the first three months of 2018 were $546.0 million , an increase of 12.4% , or $60.4 million , when compared with the prior year period net sales of $485.6 million . Excluding the positive impact of movements in average currency exchange rates of $32.4 million , core sales increased by 5.8%, or $28.0 million , compared with the prior year period. The majority of this increase was due to higher sales volumes.

Core growth in Power Transmission's net sales was positive in all of our end markets, with mid to high single digit growth coming from energy, general industrial, automotive and industrial transportation. On a regional basis, we saw the highest growth rates in South America at 14.7% and greater China at 18.4%.

Our Power Transmission Adjusted EBITDA for the first three months of 2018 was $125.3 million , an increase of 16.6% or $17.8 million , compared with the prior year period Adjusted EBITDA of $107.5 million . The increase in Adjusted EBITDA was driven primarily by higher sales of $60.4 million , which was the primary driver of a $26.8 million increase in gross profit. Adjusted EBITDA margin for the first three months of 2018 was 22.9% , a 80 basis point improvement over the prior year period adjusted EBITDA margin of 22.1% . Gross profit margin accounted for approximately 50 of the 80 basis point expansion. The additional expansion resulted from SG&A leverage.

Fluid Power ( 35.9% of Gates’ net sales for the first three months of 2018 )



	Three months ended
(dollars in millions)	March 31, 2018			April 1, 2017			Period over Period Change
Net sales	$	306.0		$	244.6		25.1	%
Adjusted EBITDA	$	58.6		$	45.5		28.8	%
Adjusted EBITDA margin (%)	19.2		%	18.6		%

Net sales in Fluid Power for the first three months of 2018 were $306.0 million , an increase of 25.1% , or $61.4 million , compared with net sales during the prior year period of $244.6 million . Excluding the positive impact of movements in average currency exchange rates of $9.8 million and the benefit of $34.1 million from businesses acquired in the second half of 2017, core sales increased by 7.2%, or $17.5 million , compared with the prior year period. This increase was due primarily to higher volumes and pricing in substantially equal parts.

Core sales growth was driven primarily by industrial end markets, particularly construction, agriculture and general industrial. We continued to see strong demand for hydraulics products, particularly in mobile industrial applications. Fluid Power had core growth across all of its commercial regions, with East Asia & India growing by 21.9% and North America, the largest region, growing by 6.7% compared with the prior year period. We saw particular strength in emerging market countries, which collectively grew by more than 20%.

Adjusted EBITDA for the first three months of 2018 was $58.6 million , an increase of 28.8% , or $13.1 million , compared with the prior year period Adjusted EBITDA of $45.5 million . This increase was driven by the higher core growth as well as an impact of $3.4 million from the businesses acquired in 2017. Positive movements in foreign currency exchange rates contributed a further $1.5 million of the increase. Adjusted EBITDA margin increased by 60 basis points, driven primarily by SG&A leverage.

Liquidity and Capital Resources

Treasury Responsibilities and Philosophy

Our primary liquidity and capital resource needs are for working capital, debt service requirements, capital expenditures, facility expansions and acquisitions. We expect to finance our future cash requirements with cash on hand, cash flows from operations and, where necessary, borrowings under our revolving credit facilities. We have historically relied on our cash flow from operations and various debt and equity financings for liquidity.

From time to time, we enter into currency derivative contracts to manage currency transaction exposures. Similarly from time to time we may enter into interest rate derivatives to maintain the desired mix of floating and fixed rate debt.

As market conditions warrant, we and our majority equity holders, Blackstone and its affiliates, may from time to time, seek to repurchase debt securities that we have issued or loans that we have borrowed in privately negotiated or open market transactions, by tender offer or otherwise. Subject to any applicable limitations contained in the agreements governing our indebtedness, any such purchases may be funded by existing cash balances or the incurrence of new secured or unsecured debt, including borrowings under our credit facilities. The amounts involved in any such purchase transactions, individually or in the aggregate, may be material. Any such purchases may relate to a substantial amount of a particular tranche of debt, with a corresponding reduction in the trading liquidity of that debt. In addition, any such purchases made at prices below the “adjusted issue price” (as defined for U.S. federal income tax purposes) may result in taxable cancellation of indebtedness income to us, which amounts may be material, and result in related adverse tax consequences to us.

It is our policy to retain sufficient liquidity throughout the capital expenditure cycle to maintain our financial flexibility. We do not anticipate any material long-term deterioration in our overall liquidity position in the foreseeable future. Management believes that the current level of working capital is sufficient for Gates’ present requirements.

Cash Flow

Three months ended March 31, 2018 compared with the three months ended April 1, 2017 :

Cash used in operations was $26.5 million during the first three months of 2018 compared with $12.5 million during the prior year period. Operating cash inflow before movements in operating assets and liabilities was $112.5 million during the first three months of 2018 compared with $75.2 million during the prior year period, an increase of $37.3 million that was due largely to the improved operational performance of Gates which flowed through to operating income. Movements in operating assets and liabilities during the first three months of 2018 gave rise to a decrease of $139.0 million in cash compared with a decrease of $87.7 million in the prior year period. This decrease, or further spend of cash, was driven primarily by the build of working capital due to increased demand.

Net cash used in investing activities during the first three months of 2018 was $69.4 million , compared with $21.6 million in the prior year period. Capital expenditure increased by $46.6 million from $13.9 million in the first three months of 2017 to $60.5 million in the first three months of 2018 , driven primarily by expenditures on the expansion of one of our existing facilities and on two new facilities that are being built to expand production capacity in our Fluid Power segment.

Net cash used in financing activities was $145.0 million during the first three months of 2018 , compared with $133.2 million net cash provided by financing activities in the prior year period. This net outflow in the first three months of 2018 related primarily to the flow of cash resulting from our initial public offering and the use of the funds therefrom to redeem debt. We redeemed $920.1 million of our debt and paid premiums thereon of $27.0 million . This outflow was funded primarily by a net inflow of cash from the initial public offering of $799.1 million . In contrast, the net cash inflow from financing activities in the prior year period was driven by the receipt of proceeds of $150.0 million from a debt issue as part of the debt refinancing that was completed in April 2017.

Indebtedness

As of March 31, 2018 , our long-term debt consisted principally of two term loans, two unsecured notes and two revolving credit facilities.

Our long-term debt as of March 31, 2018 and December 30, 2017 may be analyzed as follows:



	Carrying amount				Principal amount
(dollars in millions)	As of March 31, 2018		As of December 30, 2017		As of March 31, 2018		As of December 30, 2017
Bank and other loans:
—Secured
Term Loans (U.S. dollar and Euro denominated)	$	2,481.2	$	2,467.8	$	2,526.3	$	2,515.0
—Unsecured
Senior Notes (U.S. dollar and Euro denominated)	565.8		1,487.5		568.0		1,472.5
Other debt	0.3		0.4		0.3		0.4
	$	3,047.3	$	3,955.7	$	3,094.6	$	3,987.9

Details of our long-term debt are presented in note 13 to our unaudited condensed consolidated financial statements included elsewhere in this quarterly report.

During January 2018, upon completion of our initial public offering, the applicable margins on each of the term loans was reduced by a further 0.25%, as agreed as part of the refinancing completed in November 2017.

During the first quarter of 2018 , Gates redeemed in full its outstanding €235.0 million of Euro Senior Notes and made partial redemptions of the Dollar Senior Notes. All of these prepayments, totaling $913.7 million in principal, $27.0 million in redemption premiums and $3.1 million in accrued interest, were funded by the net proceeds from our initial public offering of approximately $799.1 million , with the remainder of the funds coming from excess cash on hand.

In addition, in connection with the reorganization transactions completed in connection with our initial public offering, a wholly-owned U.S. subsidiary of Gates Global LLC, entered into an intercompany agreement pursuant to which it became an obligor under the Dollar Senior Notes for U.S. federal income tax purposes and agreed to make future payments due on the Dollar Senior Notes. As a result, interest on the Dollar Senior Notes is U.S. source income.

Dollar and Euro Term Loans

Gates’ secured credit facilities include a Dollar Term Loan credit facility and a Euro Term Loan credit facility that were drawn on July 3, 2014. These facilities mature on March 31, 2024, with a springing maturity of April 15, 2022 if more than $500 million of the Dollar Senior Notes remain in issue at that time.

These term loan facilities bear interest at a floating rate. As of March 31, 2018 , borrowings under the Dollar Term Loan facility, which currently bears interest at LIBOR, subject to a floor of 1.00% , plus a margin of 2.75% , bore interest at a rate of 5.05% per annum. As of March 31, 2018 , the Euro Term Loan bore interest at Euro LIBOR, which is currently below 0%, subject to a floor of 0% , plus a margin of 3.00% .

Both term loans are subject to quarterly amortization payments of 0.25%, based on the original principal amount less certain prepayments with the balance payable on maturity. During the first three months of 2018 , we made quarterly amortization payments against the Dollar Term Loan and the Euro Term Loan of $4.3 million and $2.0 million , respectively.

During the first three months of 2018 , a transactional foreign exchange loss of $17.7 million , compared with a $5.4 million loss for the prior year period, was recognized in respect of the Euro Term Loan. Of these losses, $7.5 million , compared with $0 for the prior year period, was recognized in other expense and a $10.2 million loss, compared with a $5.4 million loss for the prior year period, was recognized in OCI as part of this facility is designated as a net investment hedge of certain of Gates’ Euro investments. In the first three months of 2018 , the loss recognized in other expense was offset substantially by a gain on a Euro-denominated intercompany receivable.

As of March 31, 2018 , the principal amount outstanding under the Dollar Term Loan was $1,725.0 million and the principal amount outstanding under the Euro Term Loan was $801.3 million ( €651.9 million ).

Unsecured Senior Notes

Following the full redemption of the Euro Senior Notes and partial redemption of the Dollar Senior Notes, as described above, there are no longer any Euro Senior Notes outstanding and as of March 31, 2018 , there were $568.0 million of Dollar Senior Notes outstanding. These Dollar Senior Notes are scheduled to mature on July 15, 2022 and bear interest at an annual fixed rate of 6.00% with semi-annual interest payments.

Revolving Credit Facility

Gates also has a secured revolving credit facility, maturing on January 29, 2023, that provides for multi-currency revolving loans up to an aggregate principal amount of $185.0 million , with a letter of credit sub-facility of $20.0 million . In January 2018, the maturity date of this facility was extended to January 29, 2023, with a springing maturity of April 15, 2022 if more than $500 million of the Dollar Senior Notes remain in issue at that time. In addition, as part of this amendment, the facility size was increased from $125.0 million to $185.0 million.

As of both March 31, 2018 and December 30, 2017 , there were $0 drawings for cash under the revolving credit facility and there were no letters of credit outstanding.

Asset-Backed Revolver

In January 2018, the maturity date of this facility was extended to January 29, 2023, with a springing maturity of April 15, 2022 if more than $500 million of the Dollar Senior Notes remain in issue at that time.

As of March 31, 2018 and December 30, 2017 , there were $0 drawings for cash under the asset-backed revolver. The letters of credit outstanding under the asset-backed revolver were $58.4 million and $58.0 million as of March 31, 2018 and December 30, 2017 , respectively.

Non-guarantor subsidiaries

The majority of the Company’s U.S. subsidiaries are guarantors of the senior secured credit facilities.

For the first three months of 2018 , before intercompany eliminations, our non-guarantor subsidiaries represented approximately 69% of our revenues and 65% of our EBITDA as defined in the financial covenants attaching to the senior secured credit facilities. As of March 31, 2018 , before intercompany eliminations, our non-guarantor subsidiaries represented approximately 96% of our total assets and approximately 117% of our total liabilities. After adjusting for intercompany loans payable and receivable by Finco Omaha Limited, a non-guarantor intermediate holding company, our non-guarantor subsidiaries represented approximately 51% of our total assets and approximately 39% of our total liabilities. The intercompany loan asset and liability held by Finco Omaha Limited largely offset each other.

Net Debt

During the first three months of 2018 , our net debt decreased by $672.5 million from $3,391.3 million as of December 30, 2017 to $2,718.8 million as of March 31, 2018 . The primary driver of this decrease was the net cash proceeds of $799.1 million received from our initial public offering. Partially offsetting this decrease in net debt was cash used in operating activities during the first three months of 2018 of $26.5 million , capital expenditure of $60.5 million and the payment of the debt redemption premiums of $27.0 million .

Movements in foreign currency had an unfavorable net impact of $21.9 million on net debt during the first three months of 2018 , the majority of the movement relating to the impact on our Euro-denominated debt of the strengthening of the Euro against the U.S. dollar. Partially offsetting this was a decrease in deferred financing costs of $17.7 million, $15.4 million of which resulted from the full and partial redemption of the Euro Senior Notes and Dollar Senior Notes.

Borrowing Headroom

As of March 31, 2018 , our asset-backed revolving credit facility had a borrowing base of $322.0 million , being the maximum amount the Company 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 $58.4 million . We also have a secured revolving credit facility that provides for multi-currency revolving loans up to an aggregate principal amount of $185.0 million . We had no drawings against uncommitted borrowing facilities (bank overdrafts) but we had outstanding performance bonds, letters of credit and bank guarantees amounting to $3.4 million (in addition to those outstanding under the revolving credit facility).

Overall, therefore, our committed borrowing headroom was $445.2 million , in addition to cash balances of $328.5 million .

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. 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).

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

During the periods presented, the items excluded from EBITDA in arriving at Adjusted EBITDA primarily included:


•	the non-cash charges in relation to share-based compensation;


•	transaction-related costs incurred in relation to business combinations and major corporate transactions, including acquisition integration activities;


•	the effect on cost of sales of fair value adjustments to the carrying amount of inventory acquired in business combinations;


•	impairments, comprising impairments of goodwill and significant impairments or write downs of other assets;


•	restructuring costs;


•	the net gain or loss on disposals and on the exit of businesses; and


•	fees paid to our private equity sponsor for monitoring, advisory and consulting services.

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.

We exclude from Adjusted EBITDA those acquisition-related costs that are required to be expensed in accordance with Topic 805 “ Business Combinations, ” in particular, the effect on cost of sales of the uplift to the carrying amount of inventory held by Gates at the date of its acquisition by Blackstone, and costs associated with major corporate transactions because we do not believe that they relate to our performance. Other items are excluded from Adjusted EBITDA because they are individually or collectively significant items that are not considered to be representative of the performance of our businesses. During the periods presented we excluded restructuring costs that reflect specific actions taken by management to improve Gates’ future profitability; the net gain or loss on disposals of assets other than in the ordinary course of operations and gains and losses incurred in relation to non-Gates businesses disposed of in prior periods; and impairments of goodwill and significant impairments of other assets, representing the excess of their carrying amounts over the amounts that are expected to be recovered from them in the future.

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.

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



	Three months ended
(dollars in millions)	March 31, 2018			April 1, 2017
Net income	$	29.4		$	26.0
Income tax expense	11.7			12.5
Net interest and other expenses	77.2			55.9
Amortization	32.9			32.9
Depreciation	22.1			19.5
EBITDA	173.3			146.8
Share-based compensation	1.6			0.8
Transaction-related costs	4.7			2.0
Impairment of intangibles and other assets	0.3			—
Restructuring (benefits) expenses	(0.3		)	1.8
Other operating expenses	2.4			0.1
Sponsor fees	1.9			1.5
Adjusted EBITDA	$	183.9		$	153.0

Adjusted EBITDA Margin

Adjusted EBITDA margin is a non-GAAP measure that represents Adjusted EBITDA expressed as a percentage of sales. We use Adjusted EBITDA margin to measure the success of our businesses in managing our cost base and improving profitability.



	Three months ended
(dollars in millions)	March 31, 2018			April 1, 2017
Net sales	$	852.0		$	730.2
Adjusted EBITDA	$	183.9		$	153.0
Adjusted EBITDA margin (%)	21.6		%	21.0		%

Core growth reconciliations

Core sales growth is a non-GAAP measure that represents net sales for the period excluding the impacts of movements in foreign currency rates and the first-year impacts of acquisitions and disposals. 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 the impact of an acquisition or disposal. Management believes that this measure is therefore useful for securities analysts, investors and other interested parties to assist in their assessment of the trading performance of our businesses. The closest GAAP measure is net sales.



(dollars in millions)	Power Transmission			Fluid Power			Total
Net sales for the three months ended March 31, 2018	$	546.0		$	306.0		$	852.0
Impact on net sales of movements in currency rates	32.4			9.8			42.2
Impact on net sales of acquisitions	—			34.1			34.1
Core sales for the three months ended March 31, 2018	$	513.6		$	262.1		$	775.7

Net sales for the three months ended April 1, 2017	485.6			244.6			730.2
Increase in net sales on a core basis (core sales)	$	28.0		$	17.5		$	45.5

Core sales growth (%)	5.8		%	7.2		%	6.2		%

Net Debt

Management uses net debt, rather than the narrower measure of net cash and cash equivalents which forms the basis for the condensed consolidated cash flow statement, as a measure of our liquidity and in assessing the strength of our balance sheet.

Management analyzes the key cash flow items driving the movement in net debt to better understand and assess Gates’ cash performance and utilization in order to maximize the efficiency with which resources are allocated. The analysis of cash movements in net debt also allows management to more clearly identify the level of cash generated from operations that remains available for distribution after servicing our debt and post-employment benefit obligations and after the cash impacts of acquisitions and disposals.

Net debt represents the net total of:


•	the carrying amount of our debt (bank overdrafts and bank and other loans); and


•	the carrying amount of cash and cash equivalents.

Net debt may be analyzed as follows:



(dollars in millions)	As of March 31, 2018		As of December 30, 2017
Long-term debt:
—Bank and other loans	$	3,047.3	$	3,955.7
Cash and cash equivalents	328.5		564.4
Net debt	$	2,718.8	$	3,391.3

Adjusted EBITDA adjustments for ratio calculation purposes

Our 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 quarterly report, which financial measures are determined at the Gates Global LLC level and adjust for certain additional items such as severance costs, the pro forma impacts of acquisitions and the pro forma impacts of cost-saving initiatives. These additional adjustments during the last 12 months, as calculated pursuant to such agreements, result in a net benefit to Adjusted EBITDA for ratio calculation purposes o f $12.8 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. Gates Global LLC, an indirect subsidiary of Gates Industrial Corporation plc, is the borrower under our revolving credit facility and our term loan facility and the issuer of our outstanding notes. 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 quarterly report is additional cash and cash equivalents held by the Company of $1.5 million and $8.3 million as of March 31, 2018 and December 30, 2017 , respectively.

Item 3: Quantitative and Qualitative Disclosures about Market Risk

Our market risk includes the potential loss arising from adverse changes in foreign currency exchange rates, interest rates and commodity prices. From time to time, we use derivative financial instruments, principally foreign currency swaps, forward foreign currency contracts and interest rate caps (options), to reduce our exposure to foreign currency risk and interest rate risk. We do not hold or issue derivatives for speculative purposes and monitor closely the credit quality of the institutions with which we transact. Our objective in managing these risks is to reduce fluctuations in earnings and cash flows associated with changes in foreign currency exchange rates and interest rate movements. For a discussion of quantitative and qualitative disclosures about market risk, please refer to our annual report from which our exposure to market risk has not materially changed.

Item 4: Controls and Procedures

Disclosure Controls and Procedures

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. The Company’s management, with the participation of the Company’s Chief Executive Officer, and the Company’s Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Company’s Chief Executive Officer and the Company’s Chief Financial Officer concluded that, as of March 31, 2018 , the Company’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1: Legal Proceedings

Information regarding legal proceedings is incorporated into this Part II, Item 1 from note 18 of the notes to the condensed consolidated financial statements in Part 1, Item 1 of this Quarterly Report on From 10-Q.

Item 1A: Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in the section entitled “Risk Factors” in Gates’ annual report, which could materially affect the Company’s business, financial condition, operating results or liquidity or future results. The risks described in the annual report are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that it currently deems to be immaterial also may materially adversely affect its results of operations, financial condition or liquidity. There have been no material changes to the risk factors disclosed in the annual report.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

In connection with the closing of our initial public offering on January 29, 2018, we issued 245,474,605 ordinary shares in consideration for the ordinary shares and certain indebtedness of a newly formed subsidiary of Omaha Topco, and our Sponsor, together with the other owners of Omaha Topco prior to the initial public offering, received depositary receipts representing such ordinary shares. Such securities were issued in reliance on the exemption contained in Section 4(a)(2) of the Securities Act, as transactions by issuers not involving a public offering. No general solicitation or underwriters were involved in such issuances.

Item 6: Exhibits



Exhibit No.	Description
3.1	Certificate of Incorporation of Gates Industrial Corporation plc (incorporated by reference from Exhibit 3.1 to the registrant’s Amendment No. 1 to its Registration Statement on Form S-1, filed on January 8, 2018 (File No. 333-222310)).
3.2	Articles of Association of Gates Industrial Corporation plc (incorporated by reference from Exhibit 3.1 to the registrant’s Current Report on Form 8-K, filed on January 29, 2018 (File No. 001-38366)).
10.1	Gates Corporation Supplemental Retirement Plan, amended and restated effective March 8, 2018*†
10.2	Form of Option Agreement under the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan*†
10.3	Form of Time-Based Restricted Stock Agreement under the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan*†
10.4	Form of Time-Based Restricted Stock Unit Agreement under the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan (Non-Employee Director)*†
31.1	Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2	Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1	Certification by the Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

* Filed herewith.

** Furnished herewith.

† Management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	GATES INDUSTRIAL CORPORATION PLC
	(Registrant)
	By:
			Name: David H. Naemura
			Title: Chief Financial Officer

Date: May 3, 2018

GATES CORPORATION

SUPPLEMENTAL RETIREMENT PLAN

(Amended and Restated Effective March 8, 2018)

GATES CORPORATION SUPPLEMENTAL RETIREMENT PLAN

(AMENDED AND RESTATED EFFECTIVE MARCH 8, 2018)

TABLE OF CONTENTS

PAGE



INTRODUCTION		1
ARTICLE 1. DEFINITIONS		2
1.1	Account	2
1.2	Administrator	2
1.3	Base Salary Deferral Contribution	2
1.4	Beneficiary	2
1.5	Board	2
1.6	Bonus Deferral Contribution	2
1.7	Cash Deferral Elections	2
1.8	Change in Control	2
1.9	Code	2
1.10	Company	2
1.11	Compensation	2
1.12	Director	3
1.13	Director Fee	3
1.14	Director-Fee Deferral Contribution	3
1.15	Disability	3
1.16	Distribution Date	3
1.17	Effective Date	3
1.18	Election Form	4
1.19	Eligible Employee	4
1.20	Employer Contributions	4
1.21	401(k) Plan	4
1.22	Parent Company	4
1.23	Participant	4
1.24	Plan	4
1.25	Plan Year	4
1.26	Regulation or Regulations	4
1.27	RSU	4
1.28	RSU Deferral Contribution	4
1.29	Separation from Service	4
1.30	Specified Date	4
1.31	Trust or Trust Agreement	4
1.32	Trust Fund	5
1.33	Trustee	5



ARTICLE 2. ELIGIBILITY AND PARTICIPATION		5
2.1	Eligible Employees	5
2.2	Directors	5
2.3	Notification of Eligibility	5
2.4	Participation	5
ARTICLE 3. CONTRIBUTIONS		5
3.1	Cash Contributions	5
3.2	Equity Contributions	7
3.3	Employer Contributions	7
3.4	Election of Payment Terms for Contributions	8
3.5	Investment of Account	9
3.6	Vesting of Accounts	10
3.7	Record Keeping	10
3.8	Obligation Limited to Account	10
ARTICLE 4. PAYMENT OF ACCOUNTS		10
4.1	Payment Upon Distribution Event	10
4.2	Administration of Payments	10
4.3	Payment Upon Death	10
4.4	Method of Payment	10
4.5	Designation of Beneficiary	11
4.6	Small Account Distribution	11
4.7	Permitted Acceleration of Payments	11
4.8	Delay of Payments Subject to Code Section 162(m)	11
ARTICLE 5. TRUST AND FUNDING		11
5.1	Participants’ Rights Unsecured	12
5.2	Trust Agreement	12
ARTICLE 6. GENERAL PROVISIONS		12
6.1	No Contract of Employment	12
6.2	Facility of Payment	12
6.3	Withholding Taxes	12
6.4	Nonalienation	12
6.5	Construction	12
6.6	Limitations on Liability	13
6.7	Administrative Expenses	13
ARTICLE 7. AMENDMENT OR TERMINATION		13

GATES CORPORATION SUPPLEMENTAL RETIREMENT PLAN

(AMENDED AND RESTATED EFFECTIVE MARCH 8, 2018)

INTRODUCTION

The Gates Deferred Compensation Plan (the “ Plan ”) was established by the Board of Directors of Gates Corporation (“ Gates ”) effective June 1, 1998, as a means for providing employer contributions for certain employees who are not accruing benefits under The Gates Restoration Plan and whose contributions under The Gates Matchmaker Plan are limited by the application of the dollar limit on compensation for qualified plan contributions under Internal Revenue Code Section 401(a)(17).

Effective January 1, 2005, the Plan was amended and restated to reflect the requirements of Internal Revenue Code Section 409A. The Plan was subsequently amended and restated effective January 1, 2012 to reflect new contribution formulas for certain executive Participants and to reflect the transfer of liabilities and accounts with respect to certain executives who participated in the Gates Industrial and Automotive segment of Gates’ business from the Tomkins Industries, Inc. Restoration Plan to the Plan. Also effective January 1, 2012, the Plan was renamed as “The Gates Corporation Supplemental Retirement Plan.” Gates then amended and restated the Plan effective June 15, 2017 to accommodate employee deferrals of base salary and performance-based cash bonus compensation, and to make certain other clarifying changes, including the removal of references to the Tomkins Industries, Inc. and Tomkins Restoration Plan Accounts, as all such Accounts were fully distributed on or before December 31, 2016.

Gates has determined to amend and restate the Plan to accommodate Board of Director deferrals of Director compensation, including certain equity grants, and to make certain other clarifying changes. The Plan amendment and restatement is effective March 8, 2018, and the Plan name will reflect the amendment and restatement date.

The Plan is intended to constitute a nonqualified unfunded deferred compensation plan for a select group of management employees or highly compensated employees under Title I of the Employee Retirement Income Security Act of 1974, as amended. All benefits payable under the Plan may be paid out of the general assets of Gates, or, Gates may establish and fund a trust in order to aid in providing benefits due under the Plan.

ARTICLE 1.
DEFINITIONS

1.1

Account means the Account established and maintained for each Participant and which reflects contributions to the Plan and investment earnings or losses on such contributions pursuant to Section 3.5. Effective June 15, 2017, an Employee-Participant’s Account may include Base-Salary Deferral Contributions, Bonus Deferral Contributions, and Employer Contributions. Effective March 8, 2018, a Director-Participant’s Account may include Director-Fee Deferral Contributions and RSU Deferral Contributions.

1.2

Administrator means the Compensation Committee of the Board. The Compensation Committee may designate a management committee to carry out the day-to-day administration of the Plan, and references to Administrator in this Plan refer to either the Compensation Committee or such management committee, as appropriate, per any such delegations. The Administrator’s interpretations, determinations, regulations and calculations will be final and binding on all persons concerned.


1.3	Base-Salary Deferral Contribution means the contribution of a specified amount of an Employee-Participant’s annual base salary.


1.4	Beneficiary means the individual, trust or other recipient to whom a deceased Participant’s benefits are payable, as provided in Section 4.3.


1.5	Board means the Board of Directors of Parent Company.


1.6	Bonus Deferral Contribution means the contribution of a specified amount of an Employee-Participant’s performance-based cash bonus.


1.7	Cash Deferral Elections means the election to make a Base-Salary Deferral Contribution, a Bonus Deferral Contribution, or a Director-Fee Deferral Contribution.


1.8	Change in Control means a change in the ownership or effective control of Gates Industrial Corporation plc or in the ownership of a substantial portion of the assets of such entity, as such terms are defined under Code Section 409A and controlling Regulations.


1.9	Code means the Internal Revenue Code of 1986, as amended from time to time.


1.10	Company means Gates Corporation, a Delaware corporation, or any predecessor or successor corporation by merger, purchase, or otherwise.

1.11

Compensation means total cash remuneration paid to an Eligible Employee for services rendered to the Company (or paid as salary continuation during sick time, vacation, holiday or other such purposes), determined prior to any reduction pursuant to Section 3.1, a cafeteria plan as described in Section 125 of the Code, or a qualified transportation fringe under Section 132(f) of the Code, including base pay, overtime, shift differentials, commissions and bonuses and excluding all other forms of special pay and differential wage payments (as defined in Section 3401(h)(2) of the Code). Notwithstanding the foregoing, Compensation will not include:


(a)	amounts that are excluded from compensation within the meaning of Section 415(c)(3) of the Code and Section 1.415(c)-(2) of the regulations thereunder;


(b)	amounts paid after termination of employment (other than amounts paid for the final payroll period);


(c)	vacation pay in lieu of vacation taken;


(d)	accrued vacation paid upon termination or retirement;


(e)	other special awards and payments;


(f)	shares of stock, restricted stock, or restricted stock units;


(g)	stock options, stock appreciation rights, or any other form of equity-based compensation; and


(h)	signing bonuses.

Where permitted by applicable law, amounts (except cost-of-living differentials) paid to an Eligible Employee who is employed by a foreign affiliate (as defined in Code Section 3121(1)) will be included in Compensation, provided such affiliate has entered into an agreement as specified in Code Section 3121(1) that covers Eligible Employees residing in that country.


1.12	Director means any non-employee individual who is a member of the Board receiving compensation for services on the Board.


1.13	Director Fee means the annual cash retainer and any annual chairperson or committee chairperson fee provided to Directors.


1.14	Director- Fee Deferral Contribution means the contribution of a specified amount of a Director-Participant’s Director Fees.


1.15	Disability means the Participant is determined by a physician to be totally disabled because he or she:


(a)	is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months;


(b)	has, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, been receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company or an affiliate of the Company; or


(c)	has been determined to be totally disabled by the Social Security Administration.


1.16	Distribution Date means the earliest of the following to occur with respect to a Participant:


(a)	the first day of the month following the Participant’s Disability;


(b)	the first day of the seventh month following the Participant’s Separation from Service, except on account of death, presumed death, or Disability;


(c)	the first day of the month following the Participant’s death or presumed death;


(d)	a Change in Control; or


(e)	the Participant’s Specified Date.


1.17	Effective Date of this restatement means March 8, 2018. The original effective date of the Plan was June 1, 1998.


1.18	Election Form means an agreement entered into by an Eligible Employee or Director to defer certain compensation pursuant to the terms of the Plan and the parameters provided in such form of election.


1.19	Eligible Employee has the meaning set forth in Section 2.1.


1.20	Employer Contributions means the contributions credited to an Employee-Participant’s Account as provided in Section 3.3.


1.21	401(k) Plan means The Gates Matchmaker Plan, as amended from time to time.


1.22	Parent Company means Gates Industrial Corporation plc, a public limited company incorporated under the laws of England and Wales, and the indirect parent company of the Company.

1.23

Participant means an individual who either (i) has an Account in the Plan or (ii) who has executed an Election Form in accordance with Section 2.4. An individual will be a Participant until the Participant’s Account has been fully distributed from the Plan. Participants who are Employees are referred to as Employee-Participants and Participants who are Directors are referred to as Director-Participants .


1.24	Plan means the Gates Corporation Supplemental Retirement Plan (Amended and Restated Effective March 8, 2018) and as amended from time to time.


1.25	Plan Year means the 12-month period beginning on January 1 and ending on December 31.


1.26	Regulation or Regulations means the rules, regulations, interpretations and procedures promulgated under the Code, as modified from time to time.


1.27	RSU means any form of restricted share unit award, performance-based or otherwise, including any dividends thereon, pursuant to the terms of the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan, which is payable to a Director in shares upon vesting, that a Director-Participant may elect to defer into the Plan.


1.28	RSU Deferral Contribution means the contribution of a specified amount of a Director-Participant’s RSU.

1.29

Separation from Service means the termination of employment or service of the Participant as an employee or Director of the Company, and includes termination by way of resignation, removal, death or presumed death, or Disability. Separation from Service will not include a transfer from the Company to an affiliate of the Company. Separation from Service will also not include the date on which a Participant begins an approved leave of absence, whether with or without pay; provided that, failure to return from such leave of absence on a timely basis will result in a Separation from Service on the date that is the earlier of (a) 12 months following the date on which the approved leave began; or (b) the date on which the Participant was scheduled to return, subject to mutually approved extensions. In the event of a conflict or an inconsistency between this definition and the definition of “separation from service” or similar term provided in Code Section 409A or related Regulations, the definition of Code Section 409A and related Regulations will govern.


1.30	Specified Date means a date elected by the Participant provided the Participant specifies a date at least two years from the end of the Plan Year to which the election relates. The Participant must make the election in accordance with Section 3.4(a)(1) or 3.4(a)(2), as applicable.


1.31	Trust or Trust Agreement means a trust agreement, amended from time to time, entered into between the Company and the Trustee to carry out the provisions of the Plan. The Trust will be a “rabbi trust” established in accordance with Internal Revenue Service Revenue Procedure 92‑64.


1.32	Trust Fund means the cash and other assets held and administered by Trustee pursuant to the Trust to carry out the provisions of the Plan.


1.33	Trustee means the designated Trustee acting at any time under the Trust.

ARTICLE 2.

ELIGIBILITY AND PARTICIPATION


2.1	ELIGIBLE EMPLOYEES . The Administrator, in its sole discretion, may select from time to time those employees who are eligible to participate in the Plan with respect to any Plan Year (an “ Eligible Employee ”). The Administrator must make its selection from among employees:


(a)	who have the title of Vice President (or a Vice President equivalent) or above;


(b)	who are eligible to participate in the 401(k) Plan;


(c)	who are not accruing benefits under The Gates Restoration Plan; and


(d)	who, based on the Administrator’s projection for the Plan Year, are expected to earn Compensation in excess of the dollar limitation on compensation for qualified plans for the Plan Year under Code Section 401(a)(17).


2.2	DIRECTORS . Directors are eligible to participate in the Plan upon Board appointment.

2.3

NOTIFICATION OF ELIGIBILITY . Eligible Employees or Directors will be notified of their eligibility for participation in the Plan either (i) upon commencement of employment or service, or (ii) as soon as practicable after the Administrator has made its selection, whichever is applicable, and in no event later than the second to the last day before the first Plan Year for which the Eligible Employee or Director is eligible to participate. The Administrator may determine at any time that an employee who was an Eligible Employee in one or more prior Plan Years is no longer an Eligible Employee for upcoming Plan Years. In such event, the Administrator will advise the employee no later than the second to the last day of the Plan Year that the employee is not an Eligible Employee for the upcoming Plan Year.

2.4

PARTICIPATION . An individual will participate in the Plan upon completing and executing an Election Form. An Election Form with an electronic signature will be treated as “executed,” provided the Participant adopts the contents of the electronic form as provided therein. As a condition of participation, an Eligible Employee or a Director may be required by the Administrator to provide such information as the Administrator may deem necessary to properly administer the Plan.

ARTICLE 3.

CONTRIBUTIONS


3.1	CASH CONTRIBUTIONS .


(a)	Cash Deferral Elections .


(1)	Base-Salary Deferral Contributions . Each Eligible Employee may make a Base-Salary Deferral Contribution. Base-Salary Deferral Contributions may not exceed 80% of the Employee-Participant’s annual base salary for the Plan Year.


(2)	Bonus Deferral Contributions . Each Eligible Employee may make a Bonus Deferral Contribution. Bonus Deferral Contributions may not exceed 80% of the Employee-Participant’s performance-based cash bonus for the Plan Year.


(3)	Director-Fee Deferral Contributions . Each Director may make a Director -Fee Deferral Contribution with respect to Director Fees payable on or after July 1, 2018. Director -Fee Deferral Contributions must be at least 20%, and may be up to 100%, of the Director-Participant’s Director Fee for the Plan Year.


(b)	Election Procedure .


(1)	Election Timing in First Year of Eligiblity .

(A)

Base-Salary Deferral Contributions . An Eligible Employee will have 30 days from the date such Eligible Employee is notified by the Administrator of such employee’s eligibility to Participate in the Plan to submit his or her Election Form for the then-current Plan Year with respect to Base-Salary Deferral Contributions, but in any event no later than the second to the last day of the first Plan Year for which the Eligible Employee is first eligible. The election will be effective as soon as administratively practicable.

(B)

Bonus Deferral Contribution . An Eligible Employee will have 30 days from the date such Eligible Employee is notified by the Administrator of such employee’s eligibility to Participate in the Plan to submit his or her Election Form for the then-current Plan Year with respect to Bonus Deferral Contributions, but in any event no later than six months before the end of the period in which the performance-based cash bonus is earned. Employees who become Eligible after such date, or who deliver the Election Form after such date, will be required to wait until the following Plan Year to make such an election.

(C)

Director-Fee Deferral Contributions . A Director will have 30 days from the date such Director is notified by the Administrator of such Director’s eligibility to Participate in the Plan to submit his or her Election Form for the then-current Plan Year with respect to Director-Fee Deferral Contributions, but in any event no later than the second to the last day of the first Plan Year for which the Director is first eligible. The election will be effective for Director Fees earned in the next succeeding full calendar quarter following the date the election is submitted.


(2)	Election Timing for Subsequent Plan Years . After the initial year of eligibility, Cash Deferral Elections in each subsequent plan year must be made during the election window provided by the Administrator, but in any event no later than the day prior to the beginning of the upcoming Plan Year.


(3)	No Evergreen . Participants must affirmatively make a Cash Deferral Election for each Plan Year by timely submitting an Election Form. If a Participant fails to make a new Cash Deferral Election for the upcoming Plan Year, the prior Plan Year’s Cash Deferral Election will not evergreen.


(4)	Irrevocable . Once an Election Form has been submitted, the Cash Deferral Election submitted via such form will become irrevocable for the upcoming Plan Year.


(c)	Timing of Contributions . The Administrator will cause the withholding and corresponding Account contribution of the appropriate amount of a Participant’s annual base salary, performance-

based cash bonus, or Director Fee, as applicable, at the time or times such amount otherwise would be paid to the Participant. Notwithstanding the foregoing, if the first compensation payment to a Participant for a Plan Year in which the Participants has made a withholding election includes payment for service of a prior Plan year, for administrative ease the new election will apply to the entire payment.


3.2	EQUITY CONTRIBUTIONS .

(a)

RSU Deferral Contributions . Each Director may make an RSU Deferral Contribution for RSUs granted after the Effective Date, that would otherwise be payable to the Director upon vesting, in accordance with the timing and procedural requirements set forth in Section 3.4. A Director-Participant electing to defer his or her RSU under the Plan must elect to defer 100% of his or her RSU for the Plan Year.


(b)	Election Procedure .

(1)

Initial Election Timing . In the Director’s first year of eligibility, a Director may submit his or her Election Form for the then-current Plan Year with respect to RSU Deferral Contributions on or before the 30th day after the RSU grant is made. The election will be effective for a fraction of the RSUs, where the numerator of such fraction is the number of days from the date of the election until the date of vesting (but in no event may the numerator be greater than the denominator), and the denominator of such fraction is the number of days from the date of grant of the RSUs until the date of vesting.


(2)	Election Timing for Subsequent Plan Years . After the initial year of eligibility, an election to make a RSU Deferral Contribution in each subsequent plan year must be made during the election window provided by the Administrator, but in any event no later than the day prior to the beginning of the upcoming Plan Year.


(3)	No Evergreen . Participants must affirmatively make an RSU Deferral Contribution for each Plan Year by timely submitting an Election Form. If a participants fails to make a new RSU Deferral Contribution election for each RSU grant, a prior Plan Year’s RSU Deferral Contribution election will not evergreen.


(4)	Irrevocable . Once an Election Form has been submitted, the RSU Deferral Contribution election will become irrevocable for that grant.


(c)	Timing of Contributions . A Director-Participant’s RSU contribution shall be credited to his or her Account as soon as administratively practicable after the date on which the RSU is settled by the Company. Notwithstanding any other provision, any deferral and subsequent distribution of an RSU hereunder is conditioned upon the Director-Participant’s vesting in the underlying RSU.


3.3	EMPLOYER CONTRIBUTIONS .


(a)	Amount of Employer Contribution . The Company will credit to an Employee-Participant’s Account an Employer Contribution for each Plan Year equal to 6% of the Employee-Participant’s Compensation for the Plan Year that is in excess of the dollar limit in effect for the Plan Year under Code Section 401(a)(17).

(b)

Timing of Employer Contributions . The Employer Contribution will be credited to an Employee-Participant’s Account on the last day of the Plan Year. An Employee-Participant must be employed on the last day of the Plan Year to be entitled to an Employer Contribution for such Plan Year. Notwithstanding the foregoing, in the event of a Change in Control, the Company may, in its sole and absolute discretion, make an Employer Contribution for a partial Plan Year and may

elect to make a 6% Employer Contribution based on the Employee-Participant’s Compensation prorated to the date of the Change in Control, or based on the Employee-Participant’s annualized Compensation for the full year.


3.4	ELECTION OF PAYMENT TERMS FOR CONTRIBUTIONS .


(a)	Time of Distribution . Within the timeframe specified by the Administrator, the Participant must submit an Election Form specifying the time (either a Specified Date or the first day of the seventh month following Separation from Service) on which such Participant’s Account should be distributed.

(1)

Employee-Participant . An Employee-Participant may specify only one payment date for all Base-Salary Deferral Contributions and Bonus Deferral Contributions made in a single Plan Year. An Employee-Participant may specify only one payment date for the Employer Contribution made in a single Plan Year. The payment date for the Base-Salary Deferral Contributions and Bonus Deferral Contributions, on the one hand, and the payment date for the Employer Contribution, on the other hand, may be different.


(2)	Director-Participant . A Director-Participant may specify only one payment date for all Director-Fee Deferral Contributions made in a single Plan Year and one payment date for all RSU Deferral Contributions made in the same Plan Year. The payment dates for the Director-Fee Deferral Contributions and the RSU Deferral Contributions may be different.


(b)	Form of Distribution . Within the time frame specified by the Administrator the Participant must submit an Election Form specifying the form of distribution for the Participant’s Account. The Participant may choose either a single lump sum payment or annual installments over a designated period between two and five years.

(1)

Employee-Participant . An Employee-Participant may specify only one form of distribution for all Base-Salary Deferral Contributions and Bonus Deferral Contributions made in a single Plan Year. An Employee-Participant may specify only one form of distribution for the Employer Contribution made in a single Plan Year. The forms of distribution for the Base-Salary Deferral Contributions and Bonus Deferral Contributions, on the one hand, and the form of distribution for the Employer Contribution, on the other hand, may be different.


(2)	Director-Participant . A Director-Participant may specify only one form of distribution for all Director-Fee Deferral Contributions made in a single Plan Year and one form of distribution for all RSU Deferral Contributions made in the same Plan Year. The forms of distribution for the Director-Fee Deferral Contributions and the RSU Deferral Contributions may be different.


(c)	Default Payment Terms . If a Participant fails to properly designate the time or form of distribution of his or her Account within the timeframe specified by the Administrator, then the Participant’s Account attributable to that year’s contributions will be distributed in a single lump sum payment upon the first to occur of the Participant’s Distribution Date.


(d)	No Evergreen . Participants must affirmatively elect payment terms each Plan Year. If a Participant does not indicate the timing and form of distribution for an upcoming Plan year, the default payment terms of subsection (c) above will apply.


(e)	Subsequent Changes to Payment Terms . A Participant may not accelerate the time or schedule of any payment under the Plan, except as provided in the Regulations. A Participant may delay a distribution date so long as the following conditions are satisfied:


(1)	the change must be made no later than 12 months prior to the date of the first scheduled payment; and


(2)	the first payment must be deferred for a period of at least five years from the date the payment would otherwise have been made.

If the Participant’s subsequent election does not satisfy the conditions specified in this subsection, the prior election will be used to determine the timing and form of payment. Moreover, a subsequent election must satisfy Section 1.30 as if the subsequent election was made on the date of Participant’s Election Form. Elections under this subsection will not affect the timing of distributions made on account of Disability, death or presumed death.


3.5	INVESTMENT OF ACCOUNT .


(a)	The Administrator shall cause cash contributions to be invested in the appropriate fund as soon as practicable after such contributions are withheld. RSU Deferral Contributions are not available for Director-Participant investment direction. Account balances shall remain invested from the date of investment until the date of payment.

(b)

Prior to January 1, 2012, for each month in a Plan Year, a Participant’s Account was credited with investment earnings at a rate equal to 1/12 of the rate published as Moody’s Composite Average Yield on Long-Term Corporate Bonds as of November of the preceding Plan Year. Such rate was applied to the Participant’s Account balance as of the first day of the month reduced by any payments made from the Participant’s Account during the month.


(c)	Effective on and after January 1, 2012 and prior to June 15, 2017, a Participant’s Account was invested as follows:

(1)

If the Participant had an account in the 40l(k) Plan, such Participant’s Account was deemed to be invested in accordance with the investment elections in effect for future contributions under the 401(k) Plan (including any default election in effect under the terms of the 401(k) Plan) unless and until the Participant made a different investment election for his or her Account, in accordance with procedures prescribed by the Administrator.


(2)	If the Participant did not have an account in the 401(k) Plan, such Participant’s Account was deemed to be invested in accordance with the default investment election under the terms of the 401(k) Plan unless and until the Participant made a different investment election for his or her Account, in accordance with procedures prescribed by the Administrator.


(d)	Effective on and after June 15, 2017, each Employee-Participant may invest his or her Account in the investments available under the Plan in accordance with procedures prescribed by the Administrator. In the absence of such election, such Employee-Participant’s Account will be deemed to be invested in the Plan’s Money Market fund.


(e)	Effective on and after March 8, 2018, each Director-Participant may invest his or her Account attributable to his or her Director Fee Deferral Contributions in the investments available under the Plan in accordance with procedures prescribed by the Administrator. In the absence of such

election, such Director-Participant’s Account will be deemed to be invested in the Plan’s Money Market fund.


3.6	VESTING OF ACCOUNTS .


(a)	Employee-Participant . An Employee-Participant will be 100% vested in his or her Account at all times.


(b)	Director-Participant . A Director-Participant will be 100% vested in his or her Account with respect to Director-Fee Deferral Contributions at all times. A Director-Participant’s Account attributable to an RSU Deferral Contribution will become vested in accordance with the terms of the underlying RSU.


3.7	RECORD KEEPING . The Administrator will maintain, or cause to be maintained, records showing the individual balance of each Participant’s Account. The Administrator may make available benefit statements reflecting the current amount in the Participant’s Account to be available and distributed to each Participant on an ongoing basis.


3.8	OBLIGATION LIMITED TO ACCOUNT . The Company will have no additional obligation to the Participant under this Plan beyond the amounts credited to the Participant's Account(s) in accordance with this Article 3.

ARTICLE 4.

PAYMENT OF ACCOUNTS

4.1

PAYMENT UPON DISTRIBUTION EVENT . Except as otherwise provided in this Article 4, the Participant (or the Participant’s Beneficiary, in the event of the Participant’s death or presumed death) will be entitled to receive all amounts credited to his or her Account in accordance with the terms of his or her elections, payable in accordance with Section 4.2, upon the Participant’s Distribution Date. Except with respect to RSU Deferral Contributions, distributions will be made solely in cash.

4.2

ADMINISTRATION OF PAYMENTS . Distribution of a lump sum or the first installment will be made or commence as soon as is reasonably practical following the Distribution Date, but in no event later than the last day of the calendar year of the Distribution Date. Subsequent installments, if any, will be made on the succeeding anniversary dates of the Distribution Date, or as soon as is reasonably practicable thereafter, but in no event later than the last day of the calendar year of the anniversary of the Distribution Date. Where a distribution is made in the form of installments, the amount of each installment will be calculated by dividing the Participant’s Account balance, including any earnings or losses, as of the date of the distribution by the number of installments remaining. For purposes of Section 409A, each installment payment will be treated as a separate payment.

4.3

PAYMENT UPON DEATH . In the event of a Participant’s death or presumed death, the Participant’s Account will be distributed to the Participant’s Beneficiary in a single lump sum as soon as practicable following the date of death or presumed death, regardless of the form of benefit elected. Notwithstanding the foregoing, and except as otherwise provided in Section 4.5, if the Participant’s Account is being paid in installments, and the Participant dies after payment has begun but prior to receipt of all remaining installments, the Participant’s Beneficiary will continue to receive payment at the same time and in the same manner as the Participant would have received payment. In the event of the Beneficiary’s death prior to receipt of lump-sum payment or all remaining installments, the payment will be made to the Beneficiary’s estate in a single lump sum.


4.4	METHOD OF PAYMENT . Payment of a Participant’s Account will be made in accordance with the method or methods specified in the Participant’s Election Form or Election Forms.

4.5

DESIGNATION OF BENEFICIARY . Each Participant may file with the Administrator a written designation of one or more persons, trusts or other recipients as the Beneficiary who will be entitled to receive the Participant’s Account under the Plan upon the Participant’s death or presumed death. A Participant may, from time to time, revoke or change a Beneficiary designation without the consent of any prior Beneficiary by filing a new designation with the Administrator. The last such designation received by the Administrator will be controlling; provided however, that no designation, or change or revocation thereof, will be effective unless received by the Administrator prior to the Participant’s death or presumed death, and in no event will it be effective as of a date prior to such receipt. If no such Beneficiary designation is in effect at the time of the Participant’s death or presumed death, or if no designated Beneficiary survives the Participant, the Participant’s Account will be paid to the Participant’s surviving spouse, if any, and otherwise to the estate of the Participant. Any benefits payable to the estate of the Participant will be paid in a lump sum.

4.6

SMALL ACCOUNT DISTRIBUTION . Notwithstanding anything herein to the contrary, if the Participant’s total Account attributable to either (i) total Cash Deferral Elections (and earnings or losses) or (ii) vested RSU Deferral Contributions, does not exceed $50,000 on the date on which the Participant becomes entitled to a distribution of his or her Account, such Account will constitute a Small Account . A Small Account will be paid in a single lump sum regardless of the Participant’s elections with respect to his or her Cash Deferral Elections and/or RSU Deferral Contributions (as applicable) under Section 3.4(b).

4.7

PERMITTED ACCELERATION OF PAYMENTS . To the extent permitted by Code Section 409A and related Regulations and except as otherwise provided in Section 4.2, the Administrator, in its sole discretion, may commence distribution to the Participant, the Participant’s Beneficiary or other appropriate payee the portion of the Participant’s Account authorized for distribution in accordance with Code Section 409A and related Regulations, including the following:


(a)	de minimis cash-out payments that result in the termination of the entirety of a Participant’s interest in the Plan, if:


(1)	the payment is made on or before the later of December 31 of the Plan Year in which occurs the Participant’s Separation from Service or the date that is 2½ months after the Participant’s Separation from Service and


(2)	the payment is not greater than $10,000;


(b)	payment to Participant to pay the Federal Insurance Contributions Act tax imposed under Code Section 3101 and 3121(v)(2) on compensation deferred under the Plan, grossed up as permitted under applicable Regulations; and


(c)	on account of all or any portion of the Participant’s benefits under the Plan becoming taxable to the Participant or Beneficiary prior to actual receipt because the Plan fails to meet the requirements of Code Section 409A.

4.8

DELAY OF PAYMENTS SUBJECT TO CODE SECTION 162(m) . Notwithstanding anything herein to the contrary, a payment otherwise payable under this Plan will be delayed if the Company reasonably anticipates that the Company’s deduction with respect to such payment otherwise would be eliminated or limited by application of Code Section 162(m). In the event of such delay in payment, actual payment will be made at the earliest date the Company anticipates that the deduction of the payment amount will not be limited or eliminated by the application of Code Section 162(m), or upon the Participant’s Distribution Date, if sooner.

ARTICLE 5.

TRUST AND FUNDING

5.1

PARTICIPANTS’ RIGHTS UNSECURED . The right of the Participant or his or her Beneficiary to receive a distribution hereunder will be an unsecured claim against the general assets of the Company, and neither the Participant nor his or her Beneficiary will have any rights in or against any amount credited to his or her Account or any other specific assets of the Company, except as otherwise provided in the Trust. Nothing contained in the Plan, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between the Plan and the Company or any other person.

5.2

TRUST AGREEMENT . The Company may establish a Trust for the purpose of retaining assets set aside by the Company pursuant to the Trust Agreement for payment of all or a portion of the amounts payable pursuant to the Plan. Any benefits not paid from the Trust will be paid solely from the Company’s general funds, and any benefits paid from the Trust will be credited against the Company’s liability to the Participants under the Plan. No special or separate fund, other than the Trust Agreement, will be established and no other segregation of assets will be made to assure the payment of any benefits hereunder. All Trust Funds will be subject to the claims of general creditors of the Company in the event the Company is insolvent (as that term is defined in the Trust Agreement). The obligations of the Company to pay benefits under the Plan constitute an unfunded, unsecured promise to pay and Participants will have no greater rights than general creditors of the Company. Trust assets will not, at any time, be located outside of the United States or be transferred outside of the United States, whether or not such assets are available to satisfy claims of general creditors.

ARTICLE 6.

GENERAL PROVISIONS


6.1	NO CONTRACT OF EMPLOYMENT . The establishment of the Plan will not be construed as conferring any legal rights upon any person for a continuation of employment, nor will it interfere with the rights of the Company to discharge any person and to treat any person without regard to the effect which such treatment might have upon the person as a Participant of the Plan.

6.2

FACILITY OF PAYMENT . In the event that the Administrator will find that a Participant is unable to care for the Participant’s affairs because of illness or accident, the Administrator may direct that any benefit payment due the Participant, unless claim will have been made therefor by a duly appointed legal representative, be paid to the Participant’s spouse, a child, a parent or other blood relative, or to a person with whom the Participant resides, and any such payment so made will be a complete discharge of the liabilities of the Plan therefor.

6.3

WITHHOLDING TAXES . The Administrator will have the right to cause deductions from each payment to be made under the Plan for any required withholding taxes. In the event employment tax liability is assessed on amounts paid or payable under this Plan, the Administrator will have the right to cause deductions from the payment or from the Participant’s other Compensation any required employee portion of the employment tax liability.

6.4

NONALIENATION . Subject to any applicable law, no benefit under the Plan will be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to do so will be void, nor will any such benefit be in any manner liable for or subject to garnishment, attachment, execution or levy, or liable for or subject to the debts, contracts, liabilities, engagements or torts of the Participant or any liability for alimony or other payments for the support of a spouse or former spouse, or for any other relative of any Participant.

6.5

CONSTRUCTION . The Plan is intended to constitute an unfunded deferred compensation arrangement for a select group of management or highly compensated employees. Except to the extent superseded by federal law, all rights hereunder will be governed by and construed in accordance with the laws of the State of Colorado. The Plan will be construed to effectuate its purpose and the Company’s intent that the Plan be

exempt from the Employee Retirement Income Security Act of 1974, as amended and that amounts deferred hereunder not be subject to federal income tax until distributed.

Except as otherwise provided by law, any action to enforce a right or obligation hereunder will be brought in a court of competent jurisdiction in the City of Denver and State of Colorado.

The Plan is intended to comply with Code Section 409A and will be administered to conform to the requirements of Code Section 409A and controlling Treasury Regulations. If any term, provision or operation of the Plan will violate Code Section 409A, the Administrator will construe the Plan as if it did not contain the offending term or provision or did not permit the offending operation and the remaining provisions of the Plan will not be affected thereby.

6.6

LIMITATIONS ON LIABILITY . Notwithstanding any of the preceding provisions of the Plan, neither Company, any affiliate of the Company, nor any individual acting as employee or agent of the Company will be liable to any Participant, former Participant or other person for any claim, loss, liability or expense incurred in connection with the Plan. Neither the Company, any affiliate of the Company, nor the Administrator undertakes any responsibility to any Participant for the tax consequences of a particular Participant’s election to defer Compensation under this Plan.


6.7	ADMINISTRATIVE EXPENSES . All expenses of administering this Plan will be paid by the Company and no part of the expenses or taxes on the Company or an affiliate of the Company will be charged against any Participant’s Account or any benefits distributed under the Plan.

ARTICLE 7.

AMENDMENT OR TERMINATION

The Company reserves the right to modify or to amend, in whole or in part, or to terminate this Plan any time by action of its Board, taken at a meeting held either in person or by telephone or other electronic means, or by unanimous written consent in lieu of a meeting. In addition, the Administrator may approve amendments provided such amendments:


(a)	are required because of statute, regulations, or rulings of a judicial body;


(b)	are considered desirable design changes as a result of statute, regulations, or rulings of a judicial body provided such amendments do not significantly increase the cost of the Plan or significantly affect benefit levels under the Plan;


(c)	are considered necessary or desirable to facilitate the administration of the Plan, provided such amendments do not significantly increase the cost of the Plan or significantly affect benefit levels under the Plan; or


(d)	are considered desirable, provided such design amendments do not significantly increase the cost of the Plan or significantly affect benefit levels under the Plan.

However, no modification, amendment or termination of the Plan will adversely affect the right of any Participant to receive the benefits granted under the Plan by the Company in respect to such Participant as of the date of modification, amendment or termination. Notwithstanding the foregoing, no amendment may accelerate the time or schedule of any payment under the Plan unless such change is permitted under Code Section 409A, or any guidance or regulations issued thereunder.

IN WITNESS WHEREOF,

GATES CORPORATION



By:
Its:
Date:

Exhibit 10.2

OPTION GRANT NOTICE

UNDER THE

GATES INDUSTRIAL CORPORATION PLC

2018 OMNIBUS INCENTIVE PLAN

Gates Industrial Corporation plc (the “ Company ”), pursuant to its 2018 Omnibus Incentive Plan, as it may be amended and restated from time to time (the “ Plan ”), hereby grants to the Participant set forth below the number of Options (each Option representing the right to purchase one Ordinary Share) set forth below, at an Exercise Price per share as set forth below. The Options are subject to all of the terms and conditions as set forth herein, in the Option Agreement (attached hereto), and in the Plan, all of which are incorporated herein in their entirety. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Plan.


Participant :	[ Insert Participant Name ]


Date of Grant :	[ Insert Grant Date ]


Vesting Commencement Date :	[ Insert Vesting Commencement Date ]


Number of Options :	[ Insert Number of Options ]


Exercise Price :	[ Insert Exercise Price ]


Option Period Expiration Date :	[ Insert Expiration Date ]


Type of Option :	Non-qualified Stock Option


Vesting Schedule :	Provided that the Participant has not undergone a Termination prior to the time of each applicable vesting date (or event):


•	25% of the Options will vest and become exercisable on the first anniversary of the Vesting Commencement Date;


•	25% of the Options will vest and become exercisable on the second anniversary of the Vesting Commencement Date;


•	25% of the Options will vest and become exercisable on the third anniversary of the Vesting Commencement Date; and


•	The remaining unvested Options will vest and become exercisable on the fourth anniversary of the Vesting Commencement Date;

provided , however , that the Options shall fully vest and become exercisable in the following circumstances:

(i) if the Participant undergoes a Termination as a result of such Participant’s death or Disability; or

(ii) immediately prior to a Change in Control.

* * *

GATES INDUSTRIAL CORPORATION PLC

___________________________________

By:

Title:

THE UNDERSIGNED PARTICIPANT ACKNOWLEDGES RECEIPT OF THIS OPTION GRANT NOTICE, THE OPTION AGREEMENT AND THE PLAN, AND, AS AN EXPRESS CONDITION TO THE GRANT OF OPTIONS HEREUNDER, AGREES TO BE BOUND BY THE TERMS OF THIS OPTION GRANT NOTICE, THE OPTION AGREEMENT AND THE PLAN.

PARTICIPANT ¹

_______________________________

______________________________

¹ To the extent that the Company has established, either itself or through a third-party plan administrator, the ability to accept this award electronically, such acceptance shall constitute the Participant's signature hereto.

OPTION AGREEMENT

UNDER THE

GATES INDUSTRIAL CORPORATION PLC

2018 OMNIBUS INCENTIVE PLAN

Pursuant to the Option Grant Notice (the “ Grant Notice ”) delivered to the Participant (as defined in the Grant Notice), and subject to the terms of this Option Agreement (this “ Option Agreement ”) and the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan, as it may be amended and restated from time to time (the “ Plan ”), Gates Industrial Corporation plc (the “ Company ”) and the Participant agree as follows. Capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Plan.

1. Grant of Option . Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Participant the number of Options provided in the Grant Notice (with each Option representing the right to purchase one Ordinary Share), at an Exercise Price per share as provided in the Grant Notice. The Company reserves all rights with respect to the granting of additional Options hereunder and makes no implied promise to grant additional Options.

2. Vesting . Subject to the conditions contained herein and in the Plan, the Options shall vest as provided in the Grant Notice.

3. Exercise of Options Following Termination . Unless otherwise provided by the Committee, in the event of: (a) a Participant’s Termination by the Service Recipient for Cause, all outstanding Options granted to such Participant shall immediately terminate and expire; (b) a Participant’s Termination due to death or Disability, each outstanding unvested Option granted to such Participant shall immediately fully vest and become exercisable, and each outstanding vested Option shall remain exercisable for one year thereafter (but in no event beyond the expiration of the Option Period); (c) a Participant’s voluntary Termination of employment, each outstanding unvested Option granted to such Participant shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for 60 days thereafter (but in no event beyond the expiration of the Option Period); and (d) a Participant’s Termination for any other reason, each outstanding unvested Option granted to such Participant shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for 90 days thereafter (but in no event beyond the expiration of the Option Period).

4. Method of Exercising Options . The Options may be exercised by the delivery of notice of the number of Options that are being exercised accompanied by payment in full of the Exercise Price applicable to the Options so exercised. Such notice shall be delivered either (a) in writing to the Company at its principal office or at such other address as may be established by the Committee, to the attention of the Company’s General Counsel; or (b) to a third-party plan administrator as may be arranged for by the Company or the Committee from time to time for purposes of the administration of outstanding Options under the Plan, in the case of either (a) or (b), as communicated to the Participant by the Company from time to time. Payment of the aggregate Exercise Price may be made using any of the methods described in Section 7(d)(i) or (ii) of the Plan.

5. Issuance of Ordinary Shares . Following the exercise of an Option hereunder, as promptly as practical after receipt of such notification and full payment of such Exercise Price and any required income or other tax withholding amount (as provided in Section 9 hereof), the Company shall issue or transfer, or cause such issue or transfer, to the Participant the number of Ordinary Shares with respect to which the Options have been so exercised, and shall either (a) deliver, or cause to be delivered, to the Participant a certificate or certificates therefor, registered in the Participant’s name or (b) cause such Ordinary Shares to be credited to the Participant’s account at the third-party plan administrator.

6. Company; Participant .

(a) The term “Company” as used in this Option Agreement with reference to employment shall include the Company and its Subsidiaries.

(b) Whenever the word “Participant” is used in any provision of this Option Agreement under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the

Options may be transferred by will or by the laws of descent and distribution, the word “Participant” shall be deemed to include such person or persons.

7. Non-Transferability . The Options are not transferable by the Participant except to Permitted Transferees in accordance with Section 13(b) of the Plan. Except as otherwise provided herein, no assignment or transfer of the Options, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise, shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the Options shall terminate and become of no further effect.

8. Rights as Shareholder . The Participant or a Permitted Transferee of the Options shall have no rights as a shareholder with respect to any Ordinary Share covered by an Option until the Participant shall have become the holder of record or the beneficial owner of such Ordinary Share, and no adjustment shall be made for dividends or distributions or other rights in respect of such Ordinary Share for which the record date is prior to the date upon which the Participant shall become the holder of record or the beneficial owner thereof.

9. Tax Withholding . The provisions of Section 13(d) of the Plan are incorporated herein by reference and made a part hereof.

10. Notice . Every notice or other communication relating to this Option Agreement between the Company and the Participant shall be in writing, and shall be mailed to or delivered to the party for whom it is intended at such address as may from time to time be designated by such party in a notice mailed or delivered to the other party as herein provided; provided that, unless and until some other address be so designated, all notices or communications by the Participant to the Company shall be mailed or delivered to the Company at its principal executive office, to the attention of the Company’s General Counsel, and all notices or communications by the Company to the Participant may be given to the Participant personally or may be mailed to the Participant at the Participant’s last known address, as reflected in the Company’s records. Notwithstanding the above, all notices and communications between the Participant and any third-party plan administrator shall be mailed, delivered, transmitted or sent in accordance with the procedures established by such third-party plan administrator and communicated to the Participant from time to time.

11. No Right to Continued Service . This Option Agreement does not confer upon the Participant any right to continue as an employee or service provider to the Company.

12. Binding Effect . This Option Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

13. Waiver and Amendments . Except as otherwise set forth in Section 12 of the Plan, any waiver, alteration, amendment or modification of any of the terms of this Option Agreement shall be valid only if made in writing and signed by the parties hereto; provided, however , that any such waiver, alteration, amendment or modification is consented to on the Company’s behalf by the Committee. No waiver by either of the parties hereto of their rights hereunder shall be deemed to constitute a waiver with respect to any subsequent occurrences or transactions hereunder unless such waiver specifically states that it is to be construed as a continuing waiver.

14. Clawback/Forfeiture . Notwithstanding anything to the contrary contained herein or in the Plan, if the Participant has engaged in or engages in any Detrimental Activity, then the Committee may, in its sole discretion, take actions permitted under the Plan, including: (i) canceling the Options; or (ii) requiring that the Participant forfeit any gain realized on the exercise of the Options or the disposition of any Ordinary Shares received upon exercise of the Options, and repay such gain to the Company. In addition, if the Participant receives any amount in excess of what the Participant should have received under the terms of this Option Agreement for any reason (including without limitation by reason of a financial restatement, mistake in calculations or other administrative error), then the Participant shall be required to repay any such excess amount to the Company. Without limiting the foregoing, all Options shall be subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with applicable law.

15. Governing Law . This Option Agreement shall be construed and interpreted in accordance with the laws of the State of Colorado, without regard to the principles of conflicts of law thereof. Notwithstanding anything contained in this Option Agreement, the Grant Notice or the Plan to the contrary, if any suit or claim is instituted by the Participant or the Company relating to this Option Agreement, the Grant Notice or the Plan, the Participant hereby submits to the exclusive jurisdiction of and venue in the courts of Colorado.

16. Plan . The terms and provisions of the Plan are incorporated herein by reference. In the event of a conflict or inconsistency between the terms and provisions of the Plan and the provisions of this Option Agreement (including the Grant Notice), the Plan shall govern and control.

Exhibit 10.3

RESTRICTED STOCK GRANT NOTICE

UNDER THE

GATES INDUSTRIAL CORPORATION PLC

2018 OMNIBUS INCENTIVE PLAN

TIME-BASED VESTING AWARD

Gates Industrial Corporation plc (the “Company”), pursuant to its 2018 Omnibus Incentive Plan, as it may be amended and restated from time to time (the “Plan”), hereby grants to the Participant set forth below the number of shares of Restricted Stock set forth below. The shares of Restricted Stock are subject to all of the terms and conditions as set forth herein, in the Restricted Stock Agreement (attached hereto), and in the Plan, all of which are incorporated herein in their entirety. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Plan.


Participant :	[ Insert Participant Name ]


Vesting Commencement Date :	[ Insert Grant Date ]


Number of Shares of Restricted Stock :	[ Insert No. of Shares of Restricted Stock Granted ]


Vesting Schedule :	Provided the Participant has not undergone a Termination at the time of each applicable vesting date (or event):


•	25% of the shares of Restricted Stock will vest on the first anniversary of the Vesting Commencement Date;


•	25% of the shares of Restricted Stock will vest on the second anniversary of the Vesting Commencement Date;


•	25% of the shares of Restricted Stock will vest on the third anniversary of the Vesting Commencement Date; and


•	The remaining unvested shares of Restricted Stock will vest on the fourth anniversary of the Vesting Commencement Date;

provided , however , that the Restricted Stock shall fully vest in the following circumstances:

(i) if the Participant undergoes a Termination as a result of such Participant’s death or Disability; or

(ii) immediately prior to a Change in Control.

* * *

GATES INDUSTRIAL CORPORATION PLC

________________________________

By:

Title:

THE UNDERSIGNED PARTICIPANT ACKNOWLEDGES RECEIPT OF THIS RESTRICTED STOCK GRANT NOTICE, THE RESTRICTED STOCK AGREEMENT AND THE PLAN, AND, AS AN EXPRESS CONDITION TO THE GRANT OF SHARES OF RESTRICTED STOCK HEREUNDER, AGREES TO BE BOUND BY THE TERMS OF THIS RESTRICTED STOCK GRANT NOTICE, THE RESTRICTED STOCK AGREEMENT AND THE PLAN.

PARTICIPANT ¹

_______________________________

______________________________

TIME-BASED RESTRICTED STOCK AGREEMENT

UNDER THE

GATES INDUSTRIAL CORPORATION PLC

2018 OMNIBUS INCENTIVE PLAN

Pursuant to the Restricted Stock Grant Notice (the “ Grant Notice ”) delivered to the Participant (as defined in the Grant Notice), and subject to the terms of this Restricted Stock Agreement (this “ Restricted Stock Agreement ”) and the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan, as it may be amended and restated from time to time (the “ Plan ”), Gates Industrial Corporation plc (the “ Company ”) and the Participant agree as follows. Capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Plan.

1. Grant of Shares of Restricted Stock . Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Participant the number of shares of Restricted Stock provided in the Grant Notice. The Company reserves all rights with respect to the granting of additional shares of Restricted Stock hereunder and makes no implied promise to grant additional shares of Restricted Stock. As a condition of grant the Participant hereby agrees to pay $[ ] to the Company, being an amount equal to the aggregate par value of the number of shares of Restricted Stock provided in the Grant Notice.

2. Vesting . Subject to the conditions contained herein and in the Plan, the shares of Restricted Stock shall vest and the restrictions on such shares of Restricted Stock shall lapse as provided in the Grant Notice. With respect to any share of Restricted Stock, the period of time that such share of Restricted Stock remains subject to vesting shall be its Restricted Period.

3. Issuance of Shares of Restricted Stock . The provisions of Section 9(d) of the Plan are incorporated herein by reference and made a part hereof.

4. Treatment of Shares of Restricted Stock Upon Termination . Unless otherwise provided by the Committee, in the event of: (a) a Participant’s Termination for any reason other than as set forth in Section 4(b) of this Restricted Stock Agreement prior to the time that such Participant’s Restricted Stock have vested and the restrictions on such shares of Restricted Stock have lapsed, (i) all vesting with respect to such Participant’s Restricted Stock shall cease and (ii) unvested shares of Restricted Stock shall be forfeited to the Company and the Participant shall transfer such shares to such Person (including but not limited to the Trustee) as the Company shall direct, by the Participant for no consideration as of the date of such Termination; and (b) Participant’s Termination as a result of such Participant’s death or Disability, the Participant’s Restricted Stock shall fully vest.

5. Company; Participant .

(a) The term “Company” as used in this Restricted Stock Agreement with reference to employment shall include the Company and its Subsidiaries.

(b) Whenever the word “Participant” is used in any provision of this Restricted Stock Agreement under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the shares of Restricted Stock may be transferred by will or by the laws of descent and distribution, the word “Participant” shall be deemed to include such person or persons.

6. Non-Transferability . The shares of Restricted Stock are not transferable by the Participant except to Permitted Transferees in accordance with Section 13(b) of the Plan. Except as otherwise provided herein, no assignment or transfer of the shares of Restricted Stock, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise, shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the shares of Restricted Stock shall terminate and become of no further effect.

7. Rights as Stockholder; Legend; Dividends . The provisions of Sections 9(b) and 9(e) of the Plan are incorporated herein by reference and made a part hereof; provided that any cash or in-kind dividends paid with respect to the shares of Restricted Stock which have not, prior to the record date of the dividend, become vested shall be withheld by the Company without interest and shall be paid to the Participant only when, and if, such shares of Restricted Stock shall become vested pursuant to the Grant

Notice and Section 2 of this Restricted Stock Agreement.

8. Tax Withholding . The provisions of Section 13(d) of the Plan are incorporated herein by reference and made a part hereof.

9. Notice . Every notice or other communication relating to this Restricted Stock Agreement between the Company and the Participant shall be in writing, and shall be mailed to or delivered to the party for whom it is intended at such address as may from time to time be designated by such party in a notice mailed or delivered to the other party as herein provided; provided that, unless and until some other address be so designated, all notices or communications by the Participant to the Company shall be mailed or delivered to the Company at its principal executive office, to the attention of the Company General Counsel, and all notices or communications by the Company to the Participant may be given to the Participant personally or may be mailed to the Participant at the Participant’s last known address, as reflected in the Company’s records. Notwithstanding the above, all notices and communications between the Participant and any third-party plan administrator shall be mailed, delivered, transmitted or sent in accordance with the procedures established by such third-party plan administrator and communicated to the Participant from time to time.

10. No Right to Continued Service . This Restricted Stock Agreement does not confer upon the Participant any right to continue as an employee or service provider to the Company.

11. Binding Effect . This Restricted Stock Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

12. Waiver and Amendments . Except as otherwise set forth in Section 12 of the Plan, any waiver, alteration, amendment or modification of any of the terms of this Restricted Stock Agreement shall be valid only if made in writing and signed by the parties hereto; provided, however , that any such waiver, alteration, amendment or modification is consented to on the Company’s behalf by the Committee. No waiver by either of the parties hereto of their rights hereunder shall be deemed to constitute a waiver with respect to any subsequent occurrences or transactions hereunder unless such waiver specifically states that it is to be construed as a continuing waiver.

13. Governing Law . This Restricted Stock Agreement shall be construed and interpreted in accordance with the laws of the State of Colorado, without regard to the principles of conflicts of law thereof. Notwithstanding anything contained in this Restricted Stock Agreement, the Grant Notice or the Plan to the contrary, if any suit or claim is instituted by the Participant or the Company relating to this Restricted Stock Agreement, the Grant Notice or the Plan, the Participant hereby submits to the exclusive jurisdiction of and venue in the courts of Colorado.

14. Plan . The terms and provisions of the Plan are incorporated herein by reference. In the event of a conflict or inconsistency between the terms and provisions of the Plan and the provisions of this Restricted Stock Agreement (including the Grant Notice), the Plan shall govern and control.

Exhibit 10.4

RESTRICTED STOCK UNIT GRANT NOTICE

UNDER THE

Gates Industrial Corporation plc

2018 OMNIBUS INCENTIVE PLAN

TIME-BASED VESTING AWARD

(Non-Employee Director)

Gates Industrial Corporation plc (the “Company”), pursuant to its 2018 Omnibus Incentive Plan, as it may be amended and restated from time to time (the “Plan”), hereby grants to the Participant set forth below, the number of Restricted Stock Units set forth below. The Restricted Stock Units are subject to all of the terms and conditions as set forth herein, in the Restricted Stock Unit Agreement (attached hereto), and in the Plan, all of which are incorporated herein in their entirety. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Plan.


Participant :	[ Insert Participant Name ]


Vesting Commencement Date :	[ Insert Grant Date ]


Number of Shares of Restricted Stock :	[ Insert No. of Shares of Restricted Stock Granted ]

Vesting Schedule :

Provided the Participant has not undergone a Termination at the time of the applicable vesting date (or event), 100% of the Restricted Stock Units will vest on the earlier of (i) the first anniversary of the Date of Grant or (ii) the next regularly scheduled annual meeting of the stockholders of the Company following the Date of Grant; provided, however, that in the event that the Participant undergoes a Termination as a result of such Participant’s death or Disability prior to the applicable vesting date (or event), such Participant shall fully vest in such Participant’s Restricted Stock Units.

In addition, in the event of a Change in Control prior to the applicable vesting date (or event), such Participant shall fully vest in such Participant’s Restricted Stock Units to the extent not then vested or previously forfeited or cancelled.

* * *

GATES INDUSTRIAL CORPORATION PLC

________________________________

By:

Title:

THE UNDERSIGNED PARTICIPANT ACKNOWLEDGES RECEIPT OF THIS RESTRICTED STOCK UNIT GRANT NOTICE, THE RESTRICTED STOCK UNIT AGREEMENT AND THE PLAN, AND, AS AN EXPRESS CONDITION TO THE GRANT OF RESTRICTED STOCK UNITS HEREUNDER, AGREES TO BE BOUND BY THE TERMS OF THIS RESTRICTED STOCK UNIT GRANT NOTICE, THE RESTRICTED STOCK UNIT AGREEMENT AND THE PLAN.

PARTICIPANT ¹

_______________________________

______________________________

TIME-BASED RESTRICTED STOCK UNIT AGREEMENT

UNDER THE

Gates Industrial Corporation plc

2018 OMNIBUS INCENTIVE PLAN

(Non-Employee Director)

Pursuant to the Restricted Stock Unit Grant Notice (the “ Grant Notice ”) delivered to the Participant (as defined in the Grant Notice), and subject to the terms of this Restricted Stock Unit Agreement (this “ Restricted Stock Unit Agreement ”) and the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan, as it may be amended and restated from time to time (the “ Plan ”), Gates Industrial Corporation plc (the “ Company ”) and the Participant agree as follows. Capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Plan.

1. Grant of Restricted Stock Units . Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Participant the number of Restricted Stock Units provided in the Grant Notice (with each Restricted Stock Unit representing an unfunded, unsecured right to receive one share of Common Stock). The Company reserves all rights with respect to the granting of additional Restricted Stock Units hereunder and makes no implied promise to grant additional Restricted Stock Units.

2. Vesting . Subject to the conditions contained herein and in the Plan, the Restricted Stock Units shall vest as provided in the Grant Notice.

3. Settlement of Restricted Stock Units . The Company will procure delivery to the Participant as soon as reasonably practicable (and, in any event, within two and one-half months) following the applicable vesting date, one share of Common Stock for each Restricted Stock Unit (as adjusted under the Plan, as applicable, and subject to Section 8 below) which becomes vested hereunder and such vested Restricted Stock Unit shall be cancelled upon such delivery. Notwithstanding anything in this Restricted Stock Unit Agreement to the contrary, the Company shall have no obligation to issue or transfer any shares of Common Stock as contemplated by this Restricted Stock Unit Agreement unless and until such issuance or transfer complies with all relevant provisions of law and the requirements of any stock exchange on which the Company’s shares of Common Stock are listed for trading. Such compliance shall include the requirement for the Participant to pay the par value of each share of Common Stock for each Restricted Stock Unit which has become vested hereunder.

4. Treatment of Restricted Stock Units Upon Termination . The provisions of Section 9(c)(ii) of the Plan are incorporated herein by reference and made a part hereof. Unless otherwise provided by the Committee, in the event of: (a) a Participant’s Termination for any reason other than as set forth in Section 4(b) of this Restricted Stock Unit Agreement prior to the time that such Participant’s Restricted Stock Units have vested, (i) all vesting with respect to such Participant’s Restricted Stock Units shall cease and (ii) unvested Restricted Stock Units shall be forfeited to the Company; and (b) Participant’s Termination as a result of such Participant’s death or Disability, the Participant’s Restricted Stock Units shall fully vest.

5. Company; Participant .

(a) The term “Company” as used in this Restricted Stock Unit Agreement with reference to service shall include the Company and its Subsidiaries.

(b) Whenever the word “Participant” is used in any provision of this Restricted Stock Unit Agreement under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or

persons to whom the Restricted Stock Units may be transferred by will or by the laws of descent and distribution, the word “Participant” shall be deemed to include such person or persons.

6. Non-Transferability . The Restricted Stock Units may not be assigned, alienated, pledged, attached, sold, or otherwise transferred or encumbered by the Participant, unless such transfer is by will, by the laws of descent and distribution or other applicable law, or specifically required pursuant to a domestic relations order, and any such purported assignment, alienation, pledge, attachment, sale, transfer, or encumbrance shall be void and unenforceable against the Company or any other member of the Company Group; provided , that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer, or encumbrance.

7. Rights as Stockholder; Dividend Equivalents . The Participant or a permitted transferee in accordance with Section 13(b) of the Plan shall have no rights as a stockholder with respect to any share of Common Stock underlying a Restricted Stock Unit (including no rights with respect to voting or to receive dividends or dividend equivalents) unless and until the Participant shall have become the holder of record or the beneficial owner of such Common Stock, and no adjustment shall be made for dividends or distributions or other rights in respect of such share of Common Stock for which the record date is prior to the date upon which the Participant shall become the holder of record or the beneficial owner thereof. The Restricted Stock Units shall be entitled to be credited with dividend equivalent payments upon the payment by the Company of dividends on shares of Common Stock. Such dividend equivalents will be provided in shares of Common Stock having a Fair Market Value on the date that the Restricted Stock Units are settled equal to the amount of such applicable dividends, and shall be payable at the same time as the Restricted Stock Units are settled in accordance with Section 4 below. In the event that any Restricted Stock Unit is forfeited by its terms, the Participant shall have no right to dividend equivalent payments in respect of such forfeited Restricted Stock Units.

8. Tax Withholding . The provisions of Section 13(d) of the Plan are incorporated herein by reference and made a part hereof. The Participant shall satisfy such Participant’s withholding liability, if any, referred to in Section 13(d) of the Plan by way of a settlement procedure effected by the settlement of the Award in a combination of: (i) shares of Common Stock; and (ii) cash, where the amount of cash is sufficient to pay all applicable required minimum income, employment, and/or other applicable taxes and employee and, if applicable, employer social security contributions that are statutorily required to be withheld with respect to an Award. Notwithstanding the foregoing, the Participant acknowledges and agrees that to the extent consistent with applicable law and the Participant’s status as an independent consultant for U.S. federal income tax purposes, the Company does not intend to withhold any amounts as federal income tax withholdings under any other state or federal laws, and Participant hereby agrees to make adequate provision for any sums required to satisfy all applicable federal, state, local and foreign tax withholding obligations of the Company which may arise in connection with the grant of Restricted Stock Units.

9. Notice . Every notice or other communication relating to this Restricted Stock Unit Agreement between the Company and the Participant shall be in writing, and shall be mailed to or delivered to the party for whom it is intended at such address as may from time to time be designated by such party in a notice mailed or delivered to the other party as herein provided; provided that, unless and until some other address be so designated, all notices or communications by the Participant to the Company shall be mailed or delivered to the Company at its principal executive office, to the attention of the Company’s General Counsel, and all notices or communications by the Company to the Participant may be given to the Participant personally or may be mailed to the Participant at the Participant’s last known address, as reflected in the Company’s records. Notwithstanding the above, all notices and communications between the Participant and any third-party plan administrator shall be mailed, delivered, transmitted or sent in accordance with the procedures established by such third-party plan administrator and communicated to the Participant from time to time.

10. No Right to Continued Service . This Restricted Stock Unit Agreement does not confer upon the Participant any right to continue as an employee or service provider to the Company.

11. Binding Effect . This Restricted Stock Unit Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

12. Waiver and Amendments . Except as otherwise set forth in Section 12 of the Plan, any waiver, alteration,

amendment or modification of any of the terms of this Restricted Stock Unit Agreement shall be valid only if made in writing and signed by the parties hereto; provided, however , that any such waiver, alteration, amendment or modification is consented to on the Company’s behalf by the Committee. No waiver by either of the parties hereto of their rights hereunder shall be deemed to constitute a waiver with respect to any subsequent occurrences or transactions hereunder unless such waiver specifically states that it is to be construed as a continuing waiver.

13. Governing Law . This Restricted Stock Unit Agreement shall be construed and interpreted in accordance with the laws of the State of Colorado, without regard to the principles of conflicts of law thereof. Notwithstanding anything contained in this Restricted Stock Unit Agreement, the Grant Notice or the Plan to the contrary, if any suit or claim is instituted by the Participant or the Company relating to this Restricted Stock Unit Agreement, the Grant Notice or the Plan, the Participant hereby submits to the exclusive jurisdiction of and venue in the courts of Colorado.

14. Plan . The terms and provisions of the Plan are incorporated herein by reference. In the event of a conflict or inconsistency between the terms and provisions of the Plan and the provisions of this Restricted Stock Unit Agreement (including the Grant Notice), the Plan shall govern and control.

15. Section 409A . It is intended that the Restricted Stock Units granted hereunder shall be exempt from Section 409A of the Code pursuant to the “short-term deferral” rule applicable to such section, as set forth in the regulations or other guidance published by the Internal Revenue Service thereunder.

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Ivo Jurek, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 of Gates Industrial Corporation plc (the “registrant”);


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	[Reserved]


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.




Date:	May 3, 2018

/s/ Ivo Jurek
Ivo Jurek
Chief Executive Officer
(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, David H. Naemura, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 of Gates Industrial Corporation plc (the “registrant”);


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	[Reserved]


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.




Date:	May 3, 2018

/s/ David H. Naemura
David H. Naemura
Chief Financial Officer
(Principal Financial Officer)

Exhibit 32.1

Certification pursuant to

18 U.S.C. Section 1350,

as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Gates Industrial Corporation plc (the “Company”) for the period ended March 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned certifies, in his capacity as an officer of the Company and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:


(i)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(ii)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.




/s/ Ivo Jurek
Ivo Jurek
Chief Executive Officer
(Principal Executive Officer)
Date:	May 3, 2018

/s/ David H. Naemura
David H. Naemura
Chief Financial Officer
(Principal Financial Officer)
Date:	May 3, 2018

A signed original of this certification required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.