Gates Industrial Corp plc (Form: 10-Q, Received: 11/02/2018 14:20:36)

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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 September 29, 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)



1144 Fifteenth Street, Denver, Colorado		80202
(Address of principal executive offices)		(Zip Code)

(303) 744-1911

( Registrant’s telephone number, including area code )

Not Applicable

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

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 every Interactive Data File required to be submitted 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.:



Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☐

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 November 1, 2018 , there were 289,808,150 ordinary shares of $0.01 par value outstanding.

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TABLE OF CONTENTS



Part I – Financial Information

Item 1.	Financial Statements (unaudited)	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	50
Item 4.	Controls and Procedures	50

Part II – Other Information

Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 6.	Exhibits	51
Signatures		52

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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”), and the following: conditions in the global and regional economy and the major end markets we serve; economic, political and other risks associated with international operations; availability of raw materials at favorable prices and in sufficient quantities; changes in our relationships with, or the financial condition, performance, purchasing power or inventory levels of, key channel partners; competition in all areas of our business; pricing pressures from our customers; continued operation of our manufacturing facilities; our ability to forecast demand or meet significant increases in demand; exchange rate fluctuations; market acceptance of new product introductions and product innovations; our cost-reduction actions; litigation, legal or regulatory proceedings brought against us; enforcement of our intellectual property rights; recalls, product liability claims or product warranties claims; anti-corruption laws and other laws governing our international operations; existing or new laws and regulations that may prohibit, restrict or burden the sale of aftermarket products; our decentralized information technology systems and any interruptions to our computer and IT systems; environmental, health and safety laws and regulations; lives of products used in our end markets as well as the development of replacement markets; our ability to successfully integrate future acquired businesses or assets; our reliance on senior management or key personnel; our ability to maintain and enhance our brand; work stoppages and other labor matters; our investments in joint ventures; liabilities with respect to businesses that we have divested in the past; terrorist acts, conflicts and wars; losses to our facilities, supply chains, distribution systems or information technology systems due to catastrophe or other events; additional cash contributions we may be required to make to our defined benefit pension plans; the loss or financial instability of any significant customer or customers; changes in legislative, regulatory and legal developments involving taxes and other matters; our substantial leverage; and the significant influence of our majority shareholder, The Blackstone Group L.P., over us, as such factors may be updated from time to time in its periodic filings with the SEC which are accessible on the SEC’s website at www.sec.gov. 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. Gates undertakes no obligation to update or supplement any forward-looking statements as a result of new information, future events 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 unaudited 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 affiliates of 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.

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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; and


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

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PART I — FINANCIAL INFORMATION

Item 1: Financial Statements (unaudited)

Gates Industrial Corporation plc

Unaudited Condensed Consolidated Statements of Operations



	Three months ended						Nine months ended
(dollars in millions, except per share amounts)	September 29, 2018			September 30, 2017			September 29, 2018			September 30, 2017
Net sales	$	828.4		$	760.6		$	2,555.5		$	2,259.9
Cost of sales	501.2			449.8			1,534.9			1,343.9
Gross profit	327.2			310.8			1,020.6			916.0
Selling, general and administrative expenses	202.7			201.4			621.1			585.5
Transaction-related expenses	0.2			7.2			6.2			11.3
Impairment of intangibles and other assets	0.2			—			0.6			—
Restructuring expense	1.2			2.4			3.2			8.3
Other operating expenses (income)	5.1			(0.1		)	12.5			(0.1		)
Operating income from continuing operations	117.8			99.9			377.0			311.0
Interest expense	40.2			55.0			139.8			179.0
Other expenses	3.4			10.9			17.5			46.7
Income from continuing operations before taxes	74.2			34.0			219.7			85.3
Income tax expense	7.2			15.9			30.4			32.9
Net income from continuing operations	67.0			18.1			189.3			52.4
Loss (gain) on disposal of discontinued operations, net of tax, respectively, of $0, $0, $0 and $0	0.3			(0.1		)	0.7			(0.1		)
Net income	66.7			18.2			188.6			52.5
Non-controlling interests	(6.8		)	(5.0		)	(18.9		)	(20.0		)
Net income attributable to shareholders	$	59.9		$	13.2		$	169.7		$	32.5

Earnings per share
Basic
Earnings per share from continuing operations	$	0.21		$	0.05		$	0.60		$	0.13
Earnings per share from discontinued operations	—			—			—			—
Net income per share	$	0.21		$	0.05		$	0.60		$	0.13

Diluted
Earnings per share from continuing operations	$	0.20		$	0.05		$	0.58		$	0.13
Earnings per share from discontinued operations	—			—			—			—
Net income per share	$	0.20		$	0.05		$	0.58		$	0.13

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

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Gates Industrial Corporation plc

Unaudited Condensed Consolidated Statements of Comprehensive Income



	Three months ended						Nine months ended
(dollars in millions)	September 29, 2018			September 30, 2017			September 29, 2018			September 30, 2017
Net income	$	66.7		$	18.2		$	188.6		$	52.5
Other comprehensive income (loss)
Foreign currency translation:
—Net translation (loss) gain on foreign operations, net of tax (expense) benefit, respectively, of ($1.3), $4.2, ($0.5) and $13.7	(2.2		)	59.9			(83.4		)	280.4
—Gain (loss) on net investment hedges, net of tax expense, respectively, of $0.2, $0, $0.2 and $0	3.8			(26.1		)	4.7			(90.9		)
Total foreign currency translation movements	1.6			33.8			(78.7		)	189.5
Cash flow hedges (Interest rate derivatives):
—Gain (loss) arising in the period, net of tax expense, respectively, of $0, $0, $0 and $0	3.6			(0.2		)	13.3			(6.4		)
—Reclassification to net income, net of tax benefit (expense), respectively, of $3.3, ($0.4), $2.0 and ($1.4)	4.3			2.4			6.5			7.0
Total cash flow hedges movements	7.9			2.2			19.8			0.6
Available-for-sale investments:
—Net unrealized (loss) gain, net of tax expense, respectively, of $0.1, $0.1, $0.1 and $0	(0.5		)	0.3			(0.5		)	0.1
Total available-for-sale investment movements	(0.5		)	0.3			(0.5		)	0.1
Post-retirement benefits:
—Actuarial loss, net of tax benefit, respectively, of $0, $0, $0.1 and $0	—			—			(0.1		)	—
—Reclassification of actuarial (gain) loss to net income, net of tax expense, respectively, of $0, $1.1, $0 and $1.1	(0.1		)	2.0			(0.4		)	2.1
Total post-retirement benefit movements	(0.1		)	2.0			(0.5		)	2.1
Other comprehensive income (loss)	8.9			38.3			(59.9		)	192.3
Comprehensive income for the period	$	75.6		$	56.5		$	128.7		$	244.8

Comprehensive income attributable to shareholders:
—Income arising from continuing operations	$	82.2		$	46.3		$	130.6		$	205.6
—(Loss) income arising from discontinued operations	(0.3		)	0.1			(0.7		)	0.1
	81.9			46.4			129.9			205.7
Comprehensive (loss) income attributable to non-controlling interests	(6.3		)	10.1			(1.2		)	39.1
	$	75.6		$	56.5		$	128.7		$	244.8

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

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Gates Industrial Corporation plc

Unaudited Condensed Consolidated Balance Sheets



(dollars in millions, except share numbers and per share amounts)	As of September 29, 2018			As of December 30, 2017
Assets
Current assets
Cash and cash equivalents	$	296.3		$	564.4
Trade accounts receivable, net	778.2			713.8
Inventories	526.8			457.1
Taxes receivable	7.3			14.1
Prepaid expenses and other assets	108.6			76.8
Total current assets	1,717.2			1,826.2
Non-current assets
Property, plant and equipment, net	761.7			686.2
Goodwill	2,093.8			2,085.5
Pension surplus	57.3			57.7
Intangible assets, net	2,022.0			2,126.8
Taxes receivable	26.0			32.7
Other non-current assets	40.7			38.6
Total assets	$	6,718.7		$	6,853.7
Liabilities and equity
Current liabilities
Debt, current portion	$	32.8		$	66.4
Trade accounts payable	402.1			392.0
Taxes payable	29.3			29.0
Accrued expenses and other current liabilities	190.2			210.4
Total current liabilities	654.4			697.8
Non-current liabilities
Debt, less current portion	2,962.7			3,889.3
Post-retirement benefit obligations	155.2			157.1
Taxes payable	79.0			100.6
Deferred income taxes	468.3			517.1
Other non-current liabilities	72.0			63.4
Total liabilities	4,391.6			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: 289,808,150 (December 30, 2017: authorized shares: 3,000,000,000; outstanding shares: 245,474,605)	2.9			2.5
—Additional paid-in capital	2,415.5			1,622.6
—Accumulated other comprehensive loss	(787.2		)	(747.4		)
—Retained earnings	306.6			136.9
Total shareholders’ equity	1,937.8			1,014.6
Non-controlling interests	389.3			413.8
Total equity	2,327.1			1,428.4
Total liabilities and equity	$	6,718.7		$	6,853.7

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

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Gates Industrial Corporation plc

Unaudited Condensed Consolidated Statements of Cash Flows



	Nine months ended
(dollars in millions)	September 29, 2018			September 30, 2017
Cash flows from operating activities
Net income	$	188.6		$	52.5
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization	163.3			158.2
Non-cash currency transaction (gain) loss on net debt and hedging instruments	(35.0		)	47.6
Premium paid on redemption of long-term debt	27.0			—
Other net non-cash financing costs	54.9			39.2
Share-based compensation expense	5.5			2.9
Decrease in post-employment benefit obligations, net	(2.5		)	(5.6		)
Deferred income taxes	(44.0		)	(37.0		)
Other operating activities	1.5			1.7
Changes in operating assets and liabilities, net of effects of acquisitions:
—Increase in accounts receivable	(82.6		)	(68.6		)
—Increase in inventories	(81.0		)	(55.8		)
—Increase in accounts payable	16.4			30.1
—(Increase) decrease in prepaid expenses and other assets	(24.6		)	2.1
—(Decrease) increase in taxes payable	(6.4		)	6.6
—Decrease in other liabilities	(38.8		)	(24.0		)
Net cash provided by operations	142.3			149.9
Cash flows from investing activities
Purchases of property, plant and equipment	(143.0		)	(57.8		)
Purchases of intangible assets	(11.9		)	(6.9		)
Net cash paid under corporate-owned life insurance policies	(7.4		)	(7.3		)
Proceeds from the sale of property, plant and equipment	1.6			1.9
Purchase of businesses, net of cash acquired	(50.9		)	(36.7		)
Other investing activities	(2.5		)	(0.3		)
Net cash used in investing activities	(214.1		)	(107.1		)
Cash flows from financing activities
Issue of shares, net of cost of issuance	799.6			0.6
Deferred offering costs	(8.6		)	—
Buy-back of shares	—			(1.6		)
Proceeds from long-term debt	—			644.7
Payments of long-term debt	(933.5		)	(670.1		)
Premium paid on redemption of long-term debt	(27.0		)	—
Debt issuance costs paid	—			(17.4		)
Dividends paid to non-controlling interests	(23.3		)	(17.9		)
Other financing activities	5.7			3.5
Net cash used in financing activities	(187.1		)	(58.2		)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(9.2		)	16.6
Net (decrease) increase in cash and cash equivalents and restricted cash	(268.1		)	1.2
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	$	297.9		$	530.0
Supplemental schedule of cash flow information
Interest paid	$	142.4		$	169.2
Income taxes paid, net	$	83.7		$	64.9
Accrued capital expenditures	$	2.5		$	1.9

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

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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	—		—			—			32.5			32.5			20.0			52.5
Other comprehensive income	—		—			173.2			—			173.2			19.1			192.3
Total comprehensive income	—		—			173.2			32.5			205.7			39.1			244.8
Other changes in equity:
—Issue of shares	—		0.6			—			—			0.6			—			0.6
—Buy-back of shares	—		(1.6		)	—			—			(1.6		)	—			(1.6		)
—Share-based compensation	—		2.9			—			—			2.9			—			2.9
—Dividends paid to non-controlling interests	—		—			—			—			—			(17.9		)	(17.9		)
As of September 30, 2017	$	2.5	$	1,620.9		$	(742.7	)	$	18.2		$	898.9		$	398.3		$	1,297.2



(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	—		—			—			169.7		169.7			18.9			188.6
Other comprehensive loss	—		—			(39.8		)	—		(39.8		)	(20.1		)	(59.9		)
Total comprehensive (loss) income	—		—			(39.8		)	169.7		129.9			(1.2		)	128.7
Other changes in equity:
—Issue of shares	0.4		841.2			—			—		841.6			—			841.6
—Share-based compensation	—		4.7			—			—		4.7			—			4.7
—Dividends paid to non-controlling interests	—		—			—			—		—			(23.3		)	(23.3		)
—Cost of shares issued	—		(53.0		)	—			—		(53.0		)	—			(53.0		)
As of September 29, 2018	$	2.9	$	2,415.5		$	(787.2	)	$	306.6	$	1,937.8		$	389.3		$	2,327.1

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

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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 affiliates of 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 ratio. 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 September 29, 2018 and December 30, 2017 and the related condensed consolidated statements of operations, comprehensive income, cash flows, and shareholders’ equity are presented for the 90 day period from July 1, 2018 to September 29, 2018 , with comparative information for the 90 day period from July 2, 2017 to September 30, 2017 and the 272 day period from December 31, 2017 to September 29, 2018 , with comparative information for the 272 day period from January 1, 2017 to September 30, 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 September 29, 2018 and the results of its operations and cash flows for the periods ended September 29, 2018 and September 30, 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.

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

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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 (unless otherwise noted) of the following new Accounting Standard Updates (each, an “ASU”):


•	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 “ 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: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) 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.

We 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, we comprehensively reviewed our relationships with our 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 and nine months ended September 29, 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 and 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.

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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.

We allocate 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, we consider 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 net sales 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 we expect 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 our contracts with customers;


(iii)	not to assess whether a contract has a significant financing component (as our 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 Gates 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.

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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 $7.3 million for the nine months ended September 30, 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 for the nine months ended September 29, 2018 . In addition, cash and cash equivalents for the purposes of the condensed consolidated statement of cash flows included restricted cash of $1.6 million as of both September 29, 2018 and December 30, 2017 , and $1.6 million as of both September 30, 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 statement of operations separately from the service cost component and outside of operating income from continuing operations.

Following adoption of this ASU, we continue 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 expenses line, outside of operating income from continuing operations. In accordance with the transition requirements of this ASU, these presentation changes to the statement of operations have been reflected 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. Please refer to note 14 for the components of the net periodic pension and other post-retirement costs that are now reported outside of operating income from continuing operations instead of within selling, general and administrative expenses.


•	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.

Following an assessment of its impact, we have elected to early adopt this ASU during the third quarter of 2018. On adoption, there was no cumulative effect adjustment on retained earnings.

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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 our 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 have an impact on Gates.

2. Recent accounting pronouncements not yet adopted

The following recent accounting pronouncements are relevant to Gates’ operations but have not yet been adopted.


•	ASU 2016-02 “ Leases ” (Topic 842)


•	ASU 2018-10 “ Leases ” (Topic 842): Codification Improvements to Topic 842, Leases


•	ASU 2018-11 “ Leases ” (Topic 842): Targeted Improvements

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. We are gathering and analyzing all relevant lease data and are continuing to evaluate the impact of the ASU.

In July 2018, the FASB issued ASU 2018-11, which allows entities an additional, optional transition method. Previously, Topic 842 was required to be adopted on a modified retrospective basis; however, entities now have the option of initially applying the new leases standard at the adoption date and recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, with comparative periods continuing to be presented in accordance with current GAAP (Topic 840, Leases). We currently anticipate adopting Topic 842 using this optional transition method.


•	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 financial 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.

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•	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 ASU, which may affect the recognition, measurement and presentation of taxes, is still being evaluated.


•	ASU 2018-13 “ Fair Value Measurement ” (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, the FASB issued an ASU to modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, including the consideration of costs and benefits. The amendments remove certain disclosures, clarify other disclosure requirements, and add new disclosure requirements that have been identified as relevant.

The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Most of the amendments should be applied retrospectively to all periods presented, but a few amendments should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. Early adoption is permitted and an entity is permitted to early adopt any removed or modified disclosures upon issuance of the Update and delay adoption of the additional disclosures until their effective date. The impact on our consolidated financial statements of adopting this ASU, which will affect our fair value disclosures, is still being evaluated.


•	ASU 2018-14 “ Compensation - Retirement Benefits - Defined Benefit Plans - General ” (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans

In August 2018, the FASB issued an ASU to modify the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. The amendments remove certain disclosures, clarify other disclosure requirements, and add new disclosure requirements that have been identified as relevant.

The amendments are effective for fiscal years ending after December 15, 2020, and should be applied on a retrospective basis to all periods presented. The impact on our consolidated financial statements of adopting this ASU, which will affect our disclosures, is still being evaluated.


•	ASU 2018-15 “ Intangibles - Goodwill and Other - Internal-Use Software ” (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

In August 2018, the FASB issued an ASU to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement). The guidance permits capitalization of costs associated with the implementation of cloud-based software arrangements and aligns the criteria for capitalization with those for purchased or internally-generated computer software intangible assets. Implementation costs meeting the criteria for capitalization would not be classified as intangible assets but would instead be classified as prepaid expenses that are then amortized over the period of the arrangement as an additional expense consistent with the ongoing costs under the cloud computing arrangement.

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The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted and entities may choose to apply the requirements either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The impact on our consolidated financial statements of adopting this ASU, which may affect the recognition, measurement and presentation of cloud computing software arrangements, is still being evaluated.

3. Acquisitions

Description and financial effect of acquisitions

On April 26, 2018, Gates completed the acquisition of Rapro for $50.9 million , net of cash acquired. Rapro is 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 operates out of two facilities in Izmir, Turkey, with its products serving heavy-duty, commercial and light-vehicle applications.

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.

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.

During the nine months ended September 29, 2018 and September 30, 2017 , Gates incurred expenses of $1.2 million and $2.9 million , respectively, related directly to these acquisitions, all of which are included in the transaction-related expenses line in the statement of operations.

The fair values of assets acquired and liabilities assumed are as follows:



(dollars in millions)	Rapro		Atlas Hydraulics		Techflow Flexibles
Assets acquired
Accounts receivable	$	2.9	$	10.3	$	1.7
Inventories	5.5		21.2		4.2
Prepaid expenses and other receivables	1.5		0.5		1.7
Taxes receivable	0.1		2.7		—
Property, plant and equipment	1.8		24.5		13.0
Intangible assets	0.1		23.0		3.8
Total assets	11.9		82.2		24.4

Liabilities assumed
Bank loans	1.2		—		—
Accounts payable	3.7		5.5		2.6
Accrued expenses	0.3		2.4		4.8
Other current liabilities	1.8		11.6		0.3
Taxes payable	1.0		0.1		1.9
Deferred income taxes	—		11.6		0.6
Total liabilities	8.0		31.2		10.2
Net assets acquired	$	3.9	$	51.0	$	14.2

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Goodwill has been recognized as follows:



(dollars in millions)	Rapro			Atlas Hydraulics			Techflow Flexibles
Consideration, net of cash acquired	$	50.9		$	74.0		$	36.7
Net assets acquired	(3.9		)	(51.0		)	(14.2		)
Goodwill and provisional goodwill	$	47.0		$	23.0		$	22.5

The provisional goodwill of $47.0 million arising from the acquisition of Rapro relates primarily to the expected benefit from the acceleration of our growth strategy within the Fluid Power product line and expansion of our product range and geographic coverage. The acquisition is expected to accelerate our growth in replacement channels, particularly in emerging markets. None of the goodwill recognized is expected to be deductible for income tax purposes.

The acquisition accounting for Rapro’s inventories, property, plant and equipment, intangible assets, certain liabilities and related tax balances has not been completed as of September 29, 2018 , and the values associated with the acquisition accounting are therefore still subject to change. Accordingly, goodwill is provisional pending the finalization of the valuation of these net assets.

The goodwill of $23.0 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.

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.

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.

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C. Disaggregated net sales

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



	Net Sales
	Three months ended				Nine months ended
(dollars in millions)	September 29, 2018		September 30, 2017		September 29, 2018		September 30, 2017
North America	$	404.6	$	345.9	$	1,213.3	$	1,049.0
EMEA	207.1		198.3		665.3		583.1
East Asia and India	95.9		98.3		296.9		287.8
Greater China	90.2		83.6		281.7		239.3
South America	30.6		34.5		98.3		100.7
Net Sales	$	828.4	$	760.6	$	2,555.5	$	2,259.9

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



	Net Sales
	Three months ended				Nine months ended
(dollars in millions)	September 29, 2018		September 30, 2017		September 29, 2018		September 30, 2017
Developed	$	558.4	$	493.1	$	1,671.1	$	1,466.2
Emerging	270.0		267.5		884.4		793.7
Net Sales	$	828.4	$	760.6	$	2,555.5	$	2,259.9

D. Measure of segment profit or loss

The CEO uses Adjusted EBITDA, as defined below, to measure the profitability of each segment. Adjusted EBITDA is, therefore, the measure of segment profit or loss presented in Gates’ segment disclosures.

“EBITDA” represents net income for the period before net interest and other expenses, income taxes, depreciation and amortization derived from financial information prepared in accordance with U.S. GAAP.

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


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


•	transaction-related expenses 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 expense ;


•	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.

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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				Nine months ended
(dollars in millions)	September 29, 2018		September 30, 2017		September 29, 2018		September 30, 2017
Power Transmission	$	512.5	$	499.9	$	1,608.1	$	1,496.3
Fluid Power	315.9		260.7		947.4		763.6
Continuing operations	$	828.4	$	760.6	$	2,555.5	$	2,259.9



	Adjusted EBITDA
	Three months ended				Nine months ended
(dollars in millions)	September 29, 2018		September 30, 2017		September 29, 2018		September 30, 2017
Power Transmission	$	119.0	$	114.5	$	377.6	$	342.4
Fluid Power	62.2		49.6		192.4		153.7
Continuing operations	$	181.2	$	164.1	$	570.0	$	496.1

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 net income from continuing operations to Adjusted EBITDA:



	Three months ended					Nine months ended
(dollars in millions)	September 29, 2018		September 30, 2017			September 29, 2018		September 30, 2017
Net income from continuing operations	$	67.0	$	18.1		$	189.3	$	52.4
Income tax expense	7.2		15.9			30.4		32.9
Income from continuing operations before taxes	74.2		34.0			219.7		85.3
Interest expense	40.2		55.0			139.8		179.0
Other expenses	3.4		10.9			17.5		46.7
Operating income from continuing operations	117.8		99.9			377.0		311.0
Depreciation and amortization	53.7		52.0			163.3		158.2
Transaction-related expenses ⁽¹⁾	0.2		7.2			6.2		11.3
Impairment of intangibles and other assets	0.2		—			0.6		—
Restructuring expense	1.2		2.4			3.2		8.3
Share-based compensation	2.3		1.2			5.5		2.9
Sponsor fees (included in other operating expenses)	1.9		1.5			5.9		4.5
Impact of fair value adjustment on inventory (included in cost of sales)	—		—			0.3		—
Non-recurring inventory adjustments (included in costs of sales)	—		—			0.8		—
Other operating expenses (income)	3.2		(0.1		)	6.6		(0.1		)
Other non-recurring adjustments (included in SG&A)	0.7		—			0.6		—
Adjusted EBITDA	$	181.2	$	164.1		$	570.0	$	496.1


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

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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 certain operations to lower cost locations. A majority of the accrual for restructuring expense is expected to be utilized during 2018 and 2019 .

Restructuring expense of $1.2 million was recognized during the three months ended September 29, 2018 , relating primarily to the reorganization of our European corporate center and a strategic restructuring of part of our Asian business. Restructuring expense of $2.4 million was recognized during the prior year period, including $1.9 million in relation to severance costs, largely in the U.S. and Europe.

Restructuring expense of $3.2 million was recognized during the nine months ended September 29, 2018 , predominantly in the second quarter of 2018, relating to the items described above. Restructuring expense of $8.3 million was recognized during the nine months ended September 30, 2017 , including $6.1 million in relation to severance costs, largely in the U.S., Europe and China.

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



	Three months ended				Nine months ended
(dollars in millions)	September 29, 2018		September 30, 2017		September 29, 2018		September 30, 2017
Power Transmission	$	0.9	$	1.5	$	2.1	$	5.6
Fluid Power	0.3		0.9		1.1		2.7
Continuing operations	$	1.2	$	2.4	$	3.2	$	8.3

The following summarizes the restructuring activity for the nine month periods ended September 29, 2018 and September 30, 2017 , respectively:



(dollars in millions)	As of September 29, 2018			As of September 30, 2017
Balance as of the beginning of the period	$	8.6		$	5.0
Utilized during the period	(8.3		)	(7.1		)
Net charge for the period	3.5			6.5
Released during the period	(0.3		)	(0.1		)
Foreign currency translation	0.1			0.1
Balance as of the end of the period	$	3.6		$	4.4

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



(dollars in millions)	As of September 29, 2018		As of September 30, 2017
Accrued expenses and other current liabilities	$	3.4	$	3.9
Other non-current liabilities	0.2		0.5
	$	3.6	$	4.4

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6. Income taxes

For interim income tax reporting we estimate our annual effective tax rate and apply it 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 three months ended September 29, 2018 , we had an income tax expense of $7.2 million on pre-tax income of $74.2 million , which resulted in an effective tax rate of 9.7% , compared with an income tax expense of $15.9 million on pre-tax income of $34.0 million , which resulted in an effective tax rate of 46.8% for the three months ended September 30, 2017 . For the nine months ended September 29, 2018 , we had an income tax expense of $30.4 million on pre-tax income of $219.7 million , which resulted in an effective tax rate of 13.8% compared with an income tax expense of $32.9 million on pre-tax income of $85.3 million , which resulted in an effective tax rate of 38.6% for the nine months ended September 30, 2017 .

The decrease in the effective tax rate for the three and nine months ended September 29, 2018 compared with the prior year periods was due primarily to the beneficial impact of the change in our geographical mix of earnings, which in 2017 included a non-operating loss that was not subject to tax. In 2018 our effective tax rate included the benefit of global restructuring which helped offset the adverse impacts of the 2017 Tax Cuts and Jobs Act (the "Tax Act”). Primary factors of the Tax Act that increased our effective tax rate include the decrease in the U.S. tax rate, the base erosion anti-abuse tax (“BEAT”) and global intangible low-taxed income (“GILTI”). These increases were partially offset by the incentive for foreign-derived intangible income. The three-month period ending September 29, 2018 was reduced further by $5.7 million of discrete items, which included an adjustment to the measurement period provisional estimate associated with the Tax Act.

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 recorded a provisional benefit of $118.2 million in accordance with SAB 118 for the income tax effects of the Tax Act. The provisional estimate included $153.7 million deferred tax benefit for revaluing our deferred tax liabilities from the U.S. Corporate tax rate of 35% to 21% . For the three months ended September 29, 2018 we recorded a measurement period adjustment of $0.8 million to income tax expense and deferred tax for the revaluation of our deferred tax liabilities. The provisional estimate also included $33.6 million of tax expense for the estimated cost of the mandatory repatriation of non-U.S. earnings, including changes in the deferred tax liability related to the amount of earnings not indefinitely reinvested. For the three months ended September 29, 2018 we recorded a measurement period adjustment of $3.0 million to income tax benefit for the estimated cost of the mandatory deemed repatriation of non-U.S. earnings. 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 GILTI and 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 September 29, 2018 , we have included the estimated impacts of both GILTI and BEAT 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.

We have recorded valuation allowances against certain of our deferred tax assets and we intend to continue maintaining such valuation allowances until there is sufficient evidence to support the reduction of all or some portion of these allowances. However, we believe there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow us to conclude that a portion of these valuation allowances will no longer be required. A reduction in valuation allowances would result in an increase in our net deferred tax assets and a corresponding non-cash decrease in income tax expense in the period in which the reduction is recorded. The exact timing and amount of any such reduction is subject to change based on our continued evaluation of the Tax Act implications and associated tax planning, and may be material.

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 dilutive 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.

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The computation of net income per share is presented below:



	Three months ended				Nine months ended
(dollars in millions, except share numbers and per share amounts)	September 29, 2018		September 30, 2017		September 29, 2018		September 30, 2017
Net income attributable to shareholders	$	59.9	$	13.2	$	169.7	$	32.5

Weighted average number of shares outstanding	289,783,061		245,483,659		284,750,794		245,535,788
Dilutive effect of share-based awards (number of shares)	8,670,885		9,646,966		8,705,430		7,785,383
Diluted weighted average number of shares outstanding	298,453,946		255,130,625		293,456,224		253,321,171

Basic net income per share	$	0.21	$	0.05	$	0.60	$	0.13
Diluted net income per share	$	0.20	$	0.05	$	0.58	$	0.13

For the three months ended September 29, 2018 and September 30, 2017 , shares totaling 605,164 and 180,540 , respectively, were excluded from the diluted income per share calculation because they were anti-dilutive. For the nine months ended September 29, 2018 and September 30, 2017 , shares totaling 610,039 and 180,540 shares, respectively, were excluded from the diluted income per share calculation because they were anti-dilutive.

8. Inventories



(dollars in millions)	As of September 29, 2018		As of December 30, 2017
Raw materials and supplies	$	156.1	$	128.0
Work in progress	38.5		32.8
Finished goods	332.2		296.3
Total inventories	$	526.8	$	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
Acquisitions	—			48.2			48.2
Foreign currency translation	(36.5		)	(3.4		)	(39.9		)
As of September 29, 2018	$	1,393.7		$	700.1		$	2,093.8

Included in the acquisitions line above is $47.0 million of provisional goodwill arising from the acquisition of Rapro. An additional $1.2 million of goodwill was recognized during the second quarter of 2018 on finalization of the purchase accounting for the Atlas acquisition.

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10. Intangible assets



	As of September 29, 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	$	2,025.9	$	(509.7	)	$	1,516.2	$	2,051.1	$	(424.4	)	$	1,626.7
—Technology	90.7		(86.8		)	3.9		90.8		(86.2		)	4.6
—Capitalized software	59.6		(27.1		)	32.5		48.3		(22.2		)	26.1
	2,176.2		(623.6		)	1,552.6		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	$	2,689.6	$	(667.6	)	$	2,022.0	$	2,703.6	$	(576.8	)	$	2,126.8

During the three months ended September 29, 2018 , the amortization expense recognized in respect of intangible assets was $32.3 million , compared with $31.8 million for the three months ended September 30, 2017 . In addition, movements in foreign currency exchange rates resulted in a decrease in the net carrying value of total intangible assets of $0.2 million for the three months ended September 29, 2018 , compared with an increase of $16.2 million for the three months ended September 30, 2017 .

During the nine months ended September 29, 2018 , the amortization expense recognized in respect of intangible assets was $98.0 million , compared with $98.3 million for the nine months ended September 30, 2017 . In addition, movements in foreign currency exchange rates resulted in a decrease in the net carrying value of total intangible assets of $18.9 million for the nine months ended September 29, 2018 , compared with an increase of $76.4 million for the nine months ended September 30, 2017 .

11. Derivative financial instruments

We are exposed to certain risks relating to our ongoing business operations. From time to time, we use derivative financial instruments, principally foreign currency swaps, forward foreign currency contracts, interest rate caps (options) and interest rate swaps, 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.

We recognize derivative instruments as either assets or liabilities in the condensed consolidated balance sheet. We designate certain of our currency swaps as net investment hedges and designate our interest rate caps and interest rate swaps as cash flow hedges. 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.

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 gain (loss) before tax recognized in OCI in relation to the instruments designated as net investment hedging instruments:



	Three months ended					Nine months ended
(dollars in millions)	September 29, 2018		September 30, 2017			September 29, 2018			September 30, 2017
Net fair value gain (loss) recognized in OCI in relation to:
—Euro-denominated debt	$	0.3	$	(17.9	)	$	(11.5	)	$	(60.5	)
—Designated cross currency swaps	3.5		(8.2		)	16.2			(30.4		)
Total net fair value gain (loss)	$	3.8	$	(26.1	)	$	4.7		$	(90.9	)

During the three months ended September 29, 2018 and the nine months ended September 29, 2018 , a net gain of $0.7 million was recognized in interest expense in relation to our cross currency swaps that have been designated as net investment hedges.

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The following table sets out the movement before tax recognized in OCI in relation to the interest rate derivatives:



	Three months ended					Nine months ended
(dollars in millions)	September 29, 2018		September 30, 2017			September 29, 2018		September 30, 2017
Movement recognized in OCI in relation to:
—Fair value gain (loss) on interest rate derivatives	$	3.6	$	(0.2	)	$	13.3	$	(6.4	)
—Deferred premium reclassified from OCI to net income	1.0		2.8			4.5		8.4
Total movement	$	4.6	$	2.6		$	17.8	$	2.0

During the three and nine months ended September 29, 2018 , a net expense of $1.0 million and $4.5 million , respectively, was recognized in interest expense in relation to our cash flow hedges.

We do not designate our 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 three months ended September 29, 2018 , a net gain of $0.9 million was recognized in selling, general and administrative expenses on the fair valuation of these currency contracts, compared with a net loss of $5.4 million in the prior year period. During the nine months ended September 29, 2018 , a net gain of $1.7 million was recognized in selling, general and administrative expenses on the fair valuation of these currency contracts, compared with a net loss of $8.4 million in the prior year period.

The fair values of derivative financial instruments were as follows:



	As of September 29, 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	$	5.0	$	—	$	—		$	(32.3	)	$	(27.3	)	$	3.2	$	—	$	—		$	(42.1	)	$	(38.9	)
—Interest rate caps	3.3		7.2		—			—			10.5			—		0.6		(3.8		)	(2.4		)	(5.6		)
—Interest rate swaps	—		—		—			(1.6		)	(1.6		)	—		—		—			—			—

Derivatives not designated as hedging instruments:
—Currency forward contracts	1.3		—		(0.3		)	—			1.0			0.5		—		(1.6		)	—			(1.1		)
	$	9.6	$	7.2	$	(0.3	)	$	(33.9	)	$	(17.4	)	$	3.7	$	0.6	$	(5.4	)	$	(44.5	)	$	(45.6	)

A. Currency derivatives

As of September 29, 2018 , the notional amount of outstanding currency forward contracts that are used to manage operational foreign exchange exposures was $109.4 million , compared with $99.2 million as of December 30, 2017 , none of which have been designated as hedging instruments. In addition, we hold cross currency swaps that have been designated as net investment hedges. As of September 29, 2018 and December 30, 2017 , the notional principal amount of these contracts was $270.0 million .

B. Interest rate caps and interest rate swaps

We use interest rate caps and interest rate swaps as part of our interest rate risk management strategy to add stability to interest expense and to manage our exposure to interest rate movements. Interest rate 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. On June 7, 2018, we entered into two new interest rate caps with a notional amount of €425.0 million which run from July 1, 2019 through June 30, 2023 . As of September 29, 2018 , the notional amount of the interest rate cap contracts outstanding was $2.7 billion , compared with $2.2 billion as of December 30, 2017 .

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The periods covered by our interest rate caps are as follows:



(in millions)	Notional value
Covering current periods:
Through June 30, 2019	$	1,000.0
Through June 30, 2020	$	200.0
Covering future periods:
June 28, 2019 to June 30, 2020	$	1,000.0
July 1, 2019 to June 30, 2023	€	425.0

Also on June 7, 2018, we entered into three pay-fixed, receive-floating interest rate swaps with an aggregate notional amount of $870.0 million which run from June 30, 2020 through June 30, 2023 .

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 our debt are set out below:



	As of September 29, 2018				As of December 30, 2017
(dollars in millions)	Carrying amount		Fair value		Carrying amount		Fair value
Current	$	32.8	$	32.6	$	66.4	$	66.2
Non-current	2,962.7		2,997.2		3,889.3		3,970.7
	$	2,995.5	$	3,029.8	$	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 by “Qualified Institutional Buyers” and certain other eligible investors and their fair value is derived from quoted market prices.

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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 September 29, 2018
Available-for-sale securities	$	1.1	$	—		$	1.1
Derivative assets	$	—	$	16.8		$	16.8
Derivative liabilities	$	—	$	(34.2	)	$	(34.2	)

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 derivative 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 derivatives using the market standard methodology of netting the discounted future cash payments and the discounted expected receipts. The inputs used in the calculation are based on observable market-based inputs, including interest rate curves, implied volatilities and credit spreads.

We incorporate credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, 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 nine months ended September 29, 2018 or the year ended December 30, 2017 .

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13. Debt

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



(dollars in millions)	As of September 29, 2018			As of December 30, 2017
Secured debt:
—Dollar Term Loan	$	1,716.4		$	1,729.4
—Euro Term Loan	753.7			785.6
Unsecured debt:
—Dollar Senior Notes	568.0			1,190.0
—Euro Senior Notes	—			282.5
—Other loans	0.7			0.4
Total principal of debt	3,038.8			3,987.9
Deferred issuance costs	(51.1		)	(73.2		)
Accrued interest	7.8			41.0
Total carrying value of debt	2,995.5			3,955.7
Debt, current portion	32.8			66.4
Debt, less current portion	$	2,962.7		$	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

On January 31, 2018, Gates redeemed in full its outstanding €235.0 million Euro Senior Notes, plus interest accrued up to and including the redemption date 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 redeemed 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 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.

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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 September 29, 2018 , borrowings under this facility bore interest at a rate of 4.99% per annum. The Dollar Term Loan interest rate is re-set on the last business day of each month. As of September 29, 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 Euro Term Loan interest rate re-set date is on December 31, 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 nine months ended September 29, 2018 , we made amortization payments against the Dollar Term Loan and the Euro Term Loan of $13.0 million and $5.8 million , respectively. During the nine months ended September 30, 2017 , we made amortization payments against the Dollar Term Loan and the Euro Term Loan of $15.0 million and $4.3 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 periods presented, foreign exchange gains (losses) were recognized in respect of the Euro Term Loans as summarized in the table below. As a portion of the facility was designated as a net investment hedge of certain of Gates' Euro investments, a corresponding portion of the foreign exchange gains (losses) were recognized in OCI.



	Three months ended					Nine months ended
(dollars in millions)	September 29, 2018		September 30, 2017			September 29, 2018			September 30, 2017
Gain (loss) recognized in statement of operations	$	3.5	$	(14.0	)	$	32.6		$	(50.3	)
Gain (loss) recognized in OCI	0.3		(9.5		)	(6.5		)	(29.7		)
Total gains (losses)	$	3.8	$	(23.5	)	$	26.1		$	(80.0	)

During the three and nine months ended September 29, 2018 , the transactional foreign exchange gains recognized in the other expenses line in the statement of operations have been substantially offset by foreign exchange losses on Euro-denominated intercompany loans as part of our overall hedging strategy.

Unsecured Senior Notes

As of September 29, 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, on January 31, 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 .

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Up to the date of their redemption, foreign exchange losses were recognized in respect of the Euro Senior Notes as summarized in the table below. A portion of these losses were recognized in OCI for the period during which the facility was designated as a net investment hedge of certain of Gates' Euro investments.



	Three months ended					Nine months ended
(dollars in millions)	September 29, 2018		September 30, 2017			September 29, 2018			September 30, 2017
Loss recognized in statement of operations	$	—	$	—		$	(4.2	)	$	—
Loss recognized in OCI	—		(8.4		)	(5.0		)	(30.8		)
Total losses	$	—	$	(8.4	)	$	(9.2	)	$	(30.8	)

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 September 29, 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 ( $325.0 million as of September 29, 2018 , compared with $293.7 million as of December 30, 2017 , based on the 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 September 29, 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 September 29, 2018 amounted to $56.7 million , compared with $58.0 million as of December 30, 2017 .

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14. Post-retirement benefits

Gates provides 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 September 29, 2018									Three months ended September 30, 2017
(dollars in millions)	Pensions			Other post-retirement benefits			Total			Pensions			Other post-retirement benefits		Total
Reported in operating income:
—Employer service cost	$	1.3		$	—		$	1.3		$	1.4		$	—	$	1.4
Reported outside of operating income:
—Interest cost	5.8			0.6			6.4			8.0			0.9		8.9
—Expected return on plan assets	(5.6		)	—			(5.6		)	(7.1		)	—		(7.1		)
—Amortization of net actuarial gain	—			(0.1		)	(0.1		)	(0.2		)	—		(0.2		)
—Settlements	0.1			—			0.1			(4.2		)	—		(4.2		)
Net periodic benefit cost	$	1.6		$	0.5		$	2.1		$	(2.1	)	$	0.9	$	(1.2	)

Contributions	$	1.7		$	1.2		$	2.9		$	1.9		$	1.4	$	3.3



	Nine months ended September 29, 2018									Nine months ended September 30, 2017
(dollars in millions)	Pensions			Other post-retirement benefits			Total			Pensions			Other post-retirement benefits			Total
Reported in operating income:
—Employer service cost	$	4.0		$	—		$	4.0		$	4.2		$	—		$	4.2
Reported outside of operating income:
—Interest cost	17.7			1.7			19.4			23.8			2.3			26.1
—Expected return on plan assets	(17.0		)	—			(17.0		)	(21.2		)	—			(21.2		)
—Amortization of net actuarial loss (gain)	0.1			(0.5		)	(0.4		)	—			(0.1		)	(0.1		)
—Settlements	0.4			—			0.4			(4.2		)	—			(4.2		)
Net periodic benefit cost	$	5.2		$	1.2		$	6.4		$	2.6		$	2.2		$	4.8

Contributions	$	5.7		$	3.2		$	8.9		$	6.3		$	3.8		$	10.1

The components of the above net periodic benefit cost for pensions and other post-retirement benefits that are reported outside of operating income are all included in the other expenses line in the condensed consolidated statement of operations.

For 2018 as a whole, we expect to contribute approximately $5.5 million to our defined benefit pension plans and approximately $6.1 million to our other post-retirement benefit plans.

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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 nine month periods ended September 29, 2018 and September 30, 2017 , respectively, were as follows:



(number of shares)	As of September 29, 2018	As of September 30, 2017
Balance as of the beginning of the fiscal year	245,474,605	245,627,952
Issuance of shares	44,275,000	80,107
Exercise of share options	58,545	—
Buy back of shares	—	(233,454	)
Balance as of the end of the period	289,808,150	245,474,605

The Company has one class of authorized and issued shares, with a par value of $0.01 and each share has equal voting rights.

16. Analysis of accumulated other comprehensive (loss) income

Changes in accumulated other comprehensive (loss) income by component, net of tax, were 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	—			—			170.4			—			170.4			19.1			189.5
Cash flow hedges movements	—			—			—			0.6			0.6			—			0.6
Available-for-sale investment movements	0.1			—			—			—			0.1			—			0.1
Post-retirement benefit movements	—			2.1			—			—			2.1			—			2.1
Other comprehensive income	0.1			2.1			170.4			0.6			173.2			19.1			192.3
As of September 30, 2017	$	(0.1	)	$	(4.4	)	$	(713.7	)	$	(24.5	)	$	(742.7	)	$	(36.3	)	$	(779.0	)



(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	—			—			(58.7		)	—			(58.7		)	(20.0		)	(78.7		)
Cash flow hedges movements	—			—			—			19.8			19.8			—			19.8
Available-for-sale investment movements	(0.4		)	—			—			—			(0.4		)	(0.1		)	(0.5		)
Post-retirement benefit movements	—			(0.5		)	—			—			(0.5		)	—			(0.5		)
Other comprehensive (loss) income	(0.4		)	(0.5		)	(58.7		)	19.8			(39.8		)	(20.1		)	(59.9		)
As of September 29, 2018	$	(0.7	)	$	12.7		$	(801.5	)	$	2.3		$	(787.2	)	$	(45.6	)	$	(832.8	)

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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., each 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, 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 three months ended September 29, 2018 , Gates incurred $1.9 million , compared with $1.5 million during the prior year period, and during the nine months ended September 29, 2018 , Gates incurred $5.9 million , compared with $4.5 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 September 29, 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 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 of the New Monitoring Fee Agreement, 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., an affiliate of Blackstone, 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 and nine months ended September 30, 2017 were $5.6 million and $23.4 million , respectively.

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B. Equity method investees

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



	Three months ended						Nine months ended
(dollars in millions)	September 29, 2018			September 30, 2017			September 29, 2018			September 30, 2017
Sales	$	0.3		$	0.6		$	1.4		$	1.4
Purchases	$	(4.8	)	$	(2.1	)	$	(11.3	)	$	(7.5	)

Amounts outstanding in respect of these transactions were payables of $0.2 million as of September 29, 2018 , compared with $0.2 million as of December 30, 2017 . During the three months ended September 29, 2018 , we received dividends of $0 from our equity method investees, compared with $0.1 million in the prior year period. During the nine months ended September 29, 2018 , we received dividends of $0.4 million from our equity method investees, compared with $0.4 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						Nine months ended
(dollars in millions)	September 29, 2018			September 30, 2017			September 29, 2018			September 30, 2017
Sales	$	13.7		$	14.1		$	45.4		$	41.7
Purchases	$	(5.5	)	$	(4.7	)	$	(16.0	)	$	(15.6	)

Amounts outstanding in respect of these transactions were as follows:



(dollars in millions)	As of September 29, 2018			As of December 30, 2017
Receivables	$	1.5		$	1.2
Payables	$	(0.2	)	$	(0.2	)

D. Majority-owned subsidiaries

We are engaged in ongoing discussions with the non-controlling interest holder in certain of our consolidated, majority-owned subsidiaries, regarding the scope of business of such subsidiaries. If we successfully reach an agreement on a change in scope, we expect to reduce the magnitude of net income currently allocated to non-controlling interests and the change could be material.

18. Commitments and contingencies

A. Performance bonds, letters of credit and bank guarantees

As of September 29, 2018 , letters of credit were outstanding against the asset-backed revolving facility amounting to $56.7 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.

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C. Warranties

The following summarizes the movements in the warranty liability for the nine month periods ended September 29, 2018 and September 30, 2017 , respectively:



(dollars in millions)	As of September 29, 2018			As of September 30, 2017
Balance as of the beginning of the fiscal year	$	14.1		$	14.3
Charge for the period	9.2			10.5
Payments made	(7.3		)	(12.2		)
Acquisitions	—			0.2
Released during the period	(0.6		)	—
Foreign currency translation	(0.2		)	0.6
Balance as of the end of the period	$	15.2		$	13.4

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 (“first-fit”) manufacturers as specified components, with the majority of our revenue 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 net sales have 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. 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.

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During the nine months ended September 29, 2018 , sales into replacement channels accounted for approximately 62% 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 nine months ended September 29, 2018 , sales into first-fit channels accounted for approximately 38% 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 8% of our total net sales for the nine months ended September 29, 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 net sales have had any meaningful correlation to global automotive production but are positively correlated to industrial production.

Results for the three and nine months ended September 29, 2018 compared with the results for the three and nine months ended September 30, 2017

Summary Gates Performance



	Three months ended						Nine months ended
(dollars in millions)	September 29, 2018			September 30, 2017			September 29, 2018			September 30, 2017
Net sales	$	828.4		$	760.6		$	2,555.5		$	2,259.9
Cost of sales	501.2			449.8			1,534.9			1,343.9
Gross profit	327.2			310.8			1,020.6			916.0
Selling, general and administrative expenses	202.7			201.4			621.1			585.5
Transaction-related expenses	0.2			7.2			6.2			11.3
Impairment of intangibles and other assets	0.2			—			0.6			—
Restructuring expense	1.2			2.4			3.2			8.3
Other operating expenses (income)	5.1			(0.1		)	12.5			(0.1		)
Operating income from continuing operations	117.8			99.9			377.0			311.0
Interest expense	40.2			55.0			139.8			179.0
Other expenses	3.4			10.9			17.5			46.7
Income from continuing operations before taxes	74.2			34.0			219.7			85.3
Income tax expense	7.2			15.9			30.4			32.9
Net income from continuing operations	$	67.0		$	18.1		$	189.3		$	52.4

Adjusted EBITDA ⁽¹⁾	$	181.2		$	164.1		$	570.0		$	496.1
Adjusted EBITDA margin (%)	21.9		%	21.6		%	22.3		%	22.0		%


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

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Net sales

Net sales during the three months ended September 29, 2018 were $828.4 million , up by 8.9% , or $67.8 million , compared with net sales during the prior year period of $760.6 million . Our net sales in the three months ended September 29, 2018 were adversely impacted by movements in average currency exchange rates of $16.6 million compared with the prior year period, due principally to the strengthening of the U.S. dollar against a number of currencies, in particular the Brazilian Real ($4.5 million), the Mexican Peso ($2.9 million) and the Indian Rupee ($2.0 million). The weakening of the Turkish Lira, Russian Ruble and the Euro contributed a further $5.2 million of the impact. In addition, the Fluid Power acquisitions of Atlas Hydraulics in the second half of 2017 and of Rapro in April 2018, contributed $29.4 million to our third quarter 2018 net sales. Excluding these impacts, core sales increased by $55.0 million , or 7.2% , during the three months ended September 29, 2018 compared with the prior year period. Of this increase , $33.6 million was driven by higher volumes, with the remainder driven by favorable pricing, a function of our margin protection initiatives in the current inflationary environment.

Core sales in our Power Transmission and Fluid Power businesses grew by 4.7% and 12.1% , respectively, in the three months ended September 29, 2018 . The majority of this improvement was driven by double-digit growth in the industrial end markets, which benefited from strong growth across most regions in the three months ended September 29, 2018 compared with the prior year period. North America continued to be the primary contributor to this industrial growth, particularly with our first-fit customers. We continue to prioritize these customers, particularly in the current capacity-constrained environment for Fluid Power. Sales to industrial first-fit customers grew by 14.9% (or $19.8 million) on a core basis in the three months ended September 29, 2018 compared with the prior year period. Sales through our industrial replacement channels were also strong globally, increasing by 10.8% (or $24.0 million) on a core basis compared with the prior year period. Core growth in both our construction and agricultural end markets was 13.8% for the three months ended September 29, 2018 . Sales into the construction end market grew in all of our commercial regions, and we saw particular strength in emerging markets and in Europe. Growth in agriculture for the three months ended September 29, 2018 was again driven primarily by North America, focused on our first-fit customers. Core growth in sales to our automotive customers was predominantly in the replacement business which grew by 6.8% on a core basis, more than offsetting the impact of a 4.9% decline in sales to automotive first-fit customers. In dollar terms, the majority of the replacement sales growth came from North America, supported by continued double-digit growth in China. Overall, core sales into emerging and developed markets grew by 8.9% and 4.5%, respectively, in the three months ended September 29, 2018 .

Net sales during the nine months ended September 29, 2018 were $2,555.5 million , up by 13.1% , or $295.6 million , compared with net sales during the prior year period of $2,259.9 million . Our net sales for the nine months ended September 29, 2018 were positively impacted by movements in average currency exchange rates of $42.0 million compared with the prior year period, due principally to the strengthening of the Euro ($35.1 million) and the Chinese Renminbi ($12.5 million) against the U.S. dollar, offset partially by the weakening of the Brazilian Real ($7.4 million). In addition, the acquisitions of Techflow Flex ibles and Atlas Hydraulics in the second half of 2017, and the acquisition of Rapro in April 2018, contributed $101.5 million to our net sales for the nine months ended September 29, 2018 . Excluding these impacts, core sales increased by $152.1 million , or 6.7% , during the nine months ended September 29, 2018 compared with the prior year period. This increase was due primarily to higher volumes of $90.2 million with the remaining benefit coming from favorable, inflation-mitigating pricing.

Core sales in our Power Transmission and Fluid Power businesses grew by 5.1% and 9.8% , respectively, for the nine months ended September 29, 2018 . Similar to the quarter ended September 29, 2018 , this growth was driven primarily by industrial end markets, which performed well across all regions. During the nine months ended September 29, 2018 , sales to industrial first-fit and industrial replacement customers grew on a core basis by 14.2% and 7.3%, respectively. North America was the primary contributor to this industrial growth, with 14.4% core growth in sales to our industrial first-fit customers. Our construction and agricultural end markets increased by 17.2% and 9.9%, respectively, growing on a core basis across most of our commercial regions, particularly in emerging markets. Sales to automotive replacement customers grew on a core basis by 6.7% globally, driven by solid North American and European demand and strong contributions from our well-established businesses in emerging markets, particularly China and South America.

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Cost of sales

Cost of sales for the three months ended September 29, 2018 was $501.2 million , an increase of 11.4% , or $51.4 million , compared with $449.8 million for the prior year period. The increase was driven primarily by the acquisition of businesses, which contributed $20.9 million to the increase from the prior year period, in addition to the impacts from higher volumes of $19.1 million. Inflation of $8.3 million and approximately $2 million of start-up costs for our new manufacturing facilities that are coming on-line, offset partially by favorable movements in average currency exchange rates of $5.5 million.

Cost of sales for the nine months ended September 29, 2018 was $1,534.9 million , an increase of 14.2% , or $191.0 million , compared with $1,343.9 million for the prior year period. The increase was driven primarily by the acquisition of businesses, which contributed $76.2 million to the increase from the prior year, and the impacts from higher volumes of $51.9 million. Other contributing factors included unfavorable movements in average currency exchange rates of $35.8 million, a combination of wage and material inflation of $17.5 million, and, to a lesser extent, higher operational costs of $11.5 million. These higher operational costs were due primarily to higher freight costs for expediting products from China to North America to meet Fluid Power demand due to capacity constraints but also included some start-up costs for our new manufacturing facilities that are coming on-line.

Gross profit

Gross profit for the three months ended September 29, 2018 was $327.2 million , up 5.3% from $310.8 million for the prior year period. The increase was driven primarily by the volume growth in net sales as discussed above. The benefit from the recent business acquisitions and favorable pricing were mostly offset by inflationary pressure and unfavorable impacts of movements in average currency exchange rates.

Our gross profit margin dropped by 140 basis points to 39.5% for the three months ended September 29, 2018 , down from 40.9% for the prior year period, driven primarily by dilution from our recent acquisitions. This impact was offset partially by the benefit from higher volumes on a partially fixed cost base and favorable pricing mitigating rising material costs in the current inflationary environment.

Gross profit for the nine months ended September 29, 2018 was $1,020.6 million , up 11.4% from $916.0 million for the prior year period, driven broadly by the same factors described above, except that there was a net positive impact from movements in average currency exchange rates of $6.2 million.

Our gross profit margin dropped by 60 basis points to 39.9% for the nine months ended September 29, 2018 , down from 40.5% for the prior year period. The recent acquisitions had a 110 basis point dilutive impact on the gross margin for the nine months ended September 29, 2018 , which was offset partially by a positive impact from movements in average currency exchange rates. In addition, inflationary pressures on both wages and materials were broadly offset by the benefit from higher volumes on a partially fixed cost base and inflation-mitigating pricing actions.

Selling, general and administrative expenses

Selling, general and administrative (“SG&A”) expenses for the three months ended September 29, 2018 were $202.7 million compared with $201.4 million for the prior year period. Increases related to the recent business acquisitions, and expenses associated with operating in a public company environment were largely offset by labor and benefits cost savings of $5.3 million.

SG&A expenses for the nine months ended September 29, 2018 were $621.1 million compared with $585.5 million for the prior year period. This increase of $35.6 million was driven primarily by a $10.5 million increase related to the recent business acquisitions, with the remainder of the increase attributable to a combination of individually minor items, including expenses associated with operating in a public company environment, product line and customer service investments, volume-related increases in variable costs, increases in outbound freight costs, higher duties and taxes in India, and unfavorable impacts from movements in average currency exchange rates.

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Transaction-related expenses

Transaction-related expenses for the three months ended September 29, 2018 were $0.2 million , related primarily to acquisition related activities, compared with $7.2 million for the prior year period. The transaction-related expenses incurred in the prior year period included $4.3 million of payments made on resolution of certain contingencies that affected the purchase price paid by Blackstone on acquiring Gates in July 2014. The remainder of the transaction-related expenses in the prior year period were driven primarily by the acquisitions of Techflow Flexibles and Atlas Hydraulics.

Transaction-related expenses for the nine months ended September 29, 2018 were $6.2 million compared with $11.3 million for the prior year period. Expenses for the nine months ended September 29, 2018 included $4.3 million related to our initial public offering, with the remainder of the transaction-related expenses for the period related primarily to the recent business acquisitions. The transaction-related expenses incurred in the prior year period included $4.3 million related to the accounting for the acquisition of Gates by Blackstone in July 2014 as described above and $2.0 million of professional fees incurred as part of the debt refinancing initiated during March 2017. The remainder of the transaction-related expenses were incurred primarily in relation to the acquisitions of Techflow Flexibles and Atlas Hydraulics.

Restructuring expense

A restructuring expense of $1.2 million was recognized during the three months ended September 29, 2018 , relating primarily to the reorganization of our European corporate center and a strategic restructuring of part of our Asian business. A restructuring expense of $2.4 million was recognized during the prior year period, including $1.9 million in relation to severance costs, largely in the U.S. and Europe.

A restructuring expense of $3.2 million was recognized during the nine months ended September 29, 2018 , predominantly in the second quarter of 2018, relating to the reorganization of our European corporate center and a strategic restructuring of part of our Asian business. A restructuring expense of $8.3 million was recognized during the prior year period, including $6.1 million in relation to severance costs, largely in the U.S., Europe and China.

Interest expense

Interest expense for the three months ended September 29, 2018 was $40.2 million compared with $55.0 million for the prior year period. Interest expense for the nine months ended September 29, 2018 was $139.8 million compared with $179.0 million for the prior year period. Our interest expense was as follows:



	Three months ended				Nine months ended
(dollars in millions)	September 29, 2018		September 30, 2017		September 29, 2018		September 30, 2017
Debt:
Dollar Term Loan	$	23.0	$	22.9	$	67.5	$	74.0
Euro Term Loan	5.5		6.9		17.3		15.4
Dollar Senior Notes	8.1		17.6		28.4		51.3
Euro Senior Notes	—		3.9		1.3		11.6
Other loans	—		—		—		0.1
	36.6		51.3		114.5		152.4
Amortization of deferred issuance costs	2.5		2.9		23.1		24.5
Other interest expense	1.1		0.8		2.2		2.1
	$	40.2	$	55.0	$	139.8	$	179.0

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

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Interest expense for the three months and nine months ended September 29, 2018 decreased when compared with the equivalent prior year periods due primarily to the interest saving from the debt repayment in the first quarter of 2018, which we expect to benefit our future interest expense by approximately $54 million per year compared with 2017. Interest expense for the current year benefited further from margin reductions negotiated in 2017. Partially offsetting these benefits in the nine months ended September 29, 2018 , was the acceleration of $15.4 million of deferred issuance cost amortization as a consequence of the debt payments made during the first quarter of 2018. A similar impact of $14.2 million was recognized in the prior year period in relation to the debt payments made in April 2017.

Other expenses

Our other expenses were as follows:



	Three months ended						Nine months ended
(dollars in millions)	September 29, 2018			September 30, 2017			September 29, 2018			September 30, 2017
Interest income on bank deposits	$	(1.0	)	$	(1.2	)	$	(2.7	)	$	(3.3	)
Foreign currency (gain) loss on net debt and hedging instruments	3.9			12.5			(8.4		)	47.6
Premiums paid on debt redemptions	—			—			27.0			—
Net adjustments related to post-retirement benefits	0.8			(2.6		)	2.4			0.6
Other	(0.3		)	2.2			(0.8		)	1.8
	$	3.4		$	10.9		$	17.5		$	46.7

Other expenses for the three months ended September 29, 2018 was $3.4 million , compared with $10.9 million in the prior year period. This change was driven primarily by net foreign currency losses of $3.9 million on net debt and hedging instruments for the three months ended September 29, 2018 , compared with net losses of $12.5 million in the prior year period. Underlying this change was the fact that, for the three months ended September 29, 2018 , transactional foreign exchange movements on the unhedged portion of our Euro-denominated debt were being substantially offset by similar movements on Euro-denominated intercompany loans as part of our overall hedging strategy.

Net adjustments related to post-retirement benefits were an expense of $0.8 million for the three months ended September 29, 2018 , compared with a net gain of $2.6 million in the prior year period due to a settlement gain of $3.9 million recognized in the prior year period in relation to an annuity purchase for most of the retirees in our largest U.S. defined benefit pension plan during September 2017.

Other expense for the nine months ended September 29, 2018 was $17.5 million , which decreased from $46.7 million in the prior year period. This decrease was driven primarily by net foreign currency gains of $8.4 million on net debt and hedging instruments for the nine months ended September 29, 2018 , compared with net losses of $47.6 million in the prior year period. As noted above, underlying this change was the fact that, for the three months ended September 29, 2018 , transactional foreign exchange movements on the unhedged portion of our Euro-denominated debt were being substantially offset by similar movements on Euro-denominated intercompany loans as part of our overall hedging strategy. Also included in the gain for the nine months ended September 29, 2018 was a $5.8 million gain on a derivative used to lock in the exchange rate used to repay the Euro Senior Notes. Partially offsetting these decreases in other expenses was 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.

Net adjustments related to post-retirement benefits were higher by $1.8 million during the nine months ended September 29, 2018 as compared with the prior year period. This was due to a $3.9 million settlement gain recognized in September 2017 in relation to an annuity purchase, as described above, offset partially by the impact of lower net interest on the reduced net obligation during the nine months ended September 29, 2018 as compared with the prior year period.

Income tax expense

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The decrease in the effective tax rate for the three and nine months ended September 29, 2018 compared with the prior year periods was due primarily to the beneficial impact of the change in our geographical mix of earnings, which in 2017 included a non-operating loss that was not subject to tax. In 2018 our effective tax rate included the benefit of global restructuring which helped offset the adverse impacts of the 2017 Tax Cuts and Jobs Act (the “Tax Act”). Primary factors of the Tax Act that increased our effective tax rate include the decrease in the U.S. tax rate, the base erosion anti-abuse tax (“BEAT”) and global intangible low-taxed income (“GILTI”). These increases were partially offset by the incentive for foreign-derived intangible income. The three-month period ending September 29, 2018 was reduced further by $5.7 million of discrete items, which included an adjustment to the measurement period provisional estimate associated with the Tax Act.

Adjusted EBITDA

Adjusted EBITDA for the three months ended September 29, 2018 was $181.2 million , an increase of 10.4% or $17.1 million , compared with the prior year period Adjusted EBITDA of $164.1 million . The Adjusted EBITDA margin was 21.9% for the three months ended September 29, 2018 , a 30 basis point increase from the prior year period margin of 21.6% . The increase in Adjusted EBITDA was driven primarily by higher sales of $67.8 million , which resulted in additional gross profit of $16.4 million as described above.

Adjusted EBITDA for the nine months ended September 29, 2018 was $570.0 million , an increase of 14.9% or $73.9 million , compared with Adjusted EBITDA of $496.1 million for the prior year period. Adjusted EBITDA margin was 22.3% for the nine months ended September 29, 2018 , a 30 basis point increase from the prior year period margin of 22.0% . The increase in Adjusted EBITDA was driven primarily by higher sales of $295.6 million , which resulted in additional gross profit of $104.6 million as described above. Partially offsetting this increase were higher SG&A expenses 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.”

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Analysis by Operating Segment

Power Transmission ( 61.9% and 62.9% , respectively, of Gates’ net sales for the three and nine months ended September 29, 2018 )



	Three months ended
(dollars in millions)	September 29, 2018			September 30, 2017			Period over Period Change
Net sales	$	512.5		$	499.9		2.5	%
Adjusted EBITDA	$	119.0		$	114.5		3.9	%
Adjusted EBITDA margin (%)	23.2		%	22.9		%



	Nine months ended
(dollars in millions)	September 29, 2018			September 30, 2017			Period over Period Change
Net sales	$	1,608.1		$	1,496.3		7.5	%
Adjusted EBITDA	$	377.6		$	342.4		10.3	%
Adjusted EBITDA margin (%)	23.5		%	22.9		%

Net sales in Power Transmission for the three months ended September 29, 2018 were $512.5 million , an increase of 2.5% , or $12.6 million , when compared with prior year period net sales of $499.9 million . Excluding the adverse impact of movements in average currency exchange rates of $10.9 million , core sales increased by 4.7% , or $23.5 million , compared with the prior year period. The majority of this increase was due to higher sales volumes of $16.3 million, with the remainder due to pricing actions taken in response to inflation.

Net sales in Power Transmission for the nine months ended September 29, 2018 were $1,608.1 million , an increase of 7.5% , or $111.8 million , when compared with the prior year period net sales of $1,496.3 million . Excluding the positive impact of movements in average currency exchange rates of $34.9 million , core sales increased by 5.1% , or $76.9 million , compared with the prior year period. The majority of this increase was due to higher sales volumes of $59.1 million and remainder due to pricing actions taken in response to inflation.

Power Transmission's core growth was driven by sales to automotive replacement customers, which grew by 7.3% and 9.4% during the three and nine months ended September 29, 2018 compared with the prior year periods, due primarily to strong demand in North America and Europe. Sales to industrial customers grew by mid- to high-single digits during both the three and nine months ended September 29, 2018 compared with the prior year periods, offsetting some softness in sales to automotive first-fit customers, particularly in Europe. Industrial sales to the transportation end market were particularly strong, with core growth of 10.0% and 9.3% for the three and nine months ended September 29, 2018 , respectively, compared with the prior year periods. On a regional basis, in addition to the strength in North America, we saw strong growth in emerging markets, particularly in China, which had core growth of 9.9% and 12.3% for the three and nine months ended September 29, 2018 , respectively, compared with the prior year periods.

Our Power Transmission Adjusted EBITDA for the three months ended September 29, 2018 was $119.0 million , an increase of 3.9% or $4.5 million , compared with prior year period Adjusted EBITDA of $114.5 million . The increase in Adjusted EBITDA was driven primarily by a volume-related increase of $2.9 million in gross profit, combined with a favorable $1.5 million impact on SG&A from movements in average currency exchange rates. Adjusted EBITDA margin for the three months ended September 29, 2018 was 23.2% , a 30 basis point improvement over the prior year period Adjusted EBITDA margin of 22.9% , driven primarily by pricing actions and volume-related procurement and operating efficiencies, offset partially by inflation and net unfavorable movements in average currency exchange rates.

Our Power Transmission Adjusted EBITDA for the nine months ended September 29, 2018 was $377.6 million , an increase of 10.3% or $35.2 million , compared with the prior year period Adjusted EBITDA of $342.4 million . Movements in average currency exchange rates drove $7.7 million of this increase. Excluding this impact, the increase in Adjusted EBITDA was driven primarily by higher sales of $111.8 million , which was the primary driver of a $50.3 million increase in gross profit. Adjusted EBITDA margin for the nine months ended September 29, 2018 was 23.5% , a 60 basis point improvement over the prior year period Adjusted EBITDA margin of 22.9% , driven by similar impacts as described above for the three month period.

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Fluid Power ( 38.1% and 37.1% , respectively, of Gates’ net sales for the three and nine months ended September 29, 2018 )



	Three months ended
(dollars in millions)	September 29, 2018			September 30, 2017			Period over Period Change
Net sales	$	315.9		$	260.7		21.2	%
Adjusted EBITDA	$	62.2		$	49.6		25.4	%
Adjusted EBITDA margin (%)	19.7		%	19.0		%



	Nine months ended
(dollars in millions)	September 29, 2018			September 30, 2017			Period over Period Change
Net sales	$	947.4		$	763.6		24.1	%
Adjusted EBITDA	$	192.4		$	153.7		25.2	%
Adjusted EBITDA margin (%)	20.3		%	20.1		%

Net sales in Fluid Power for the three months ended September 29, 2018 were $315.9 million , an increase of 21.2% , or $55.2 million , compared with net sales during the prior year period of $260.7 million . Excluding the adverse impact of movements in average currency exchange rates of $5.7 million and the benefit of $29.4 million from the recent business acquisitions, core sales increased by 12.1% , or $31.5 million , compared with the prior year period. This increase was due in approximately equal parts to higher volumes and pricing actions taken in response to inflation.

Net sales in Fluid Power for the nine months ended September 29, 2018 were $947.4 million , an increase of 24.1% , or $183.8 million , compared with net sales during the prior year period of $763.6 million . Excluding the positive impact of movements in average currency exchange rates of $7.1 million and the benefit of $101.5 million from the recent business acquisitions, core sales increased by 9.8% , or $75.2 million , compared with the prior year period. This increase was due in approximately equal parts to higher volumes and pricing actions taken in response to inflation.

Core sales growth in both the three and nine months ended September 29, 2018 was driven almost exclusively by sales to industrial customers, particularly in the construction and general industrial end markets. 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 for both the three and nine months ended September 29, 2018 , with strong growth continuing in the emerging markets, particularly in Asia. During the three months ended September 29, 2018 , East Asia and India grew by 16.4% compared with the prior year period, predominantly in construction, with a similar performance for the nine month period.

Adjusted EBITDA for the three months ended September 29, 2018 was $62.2 million , an increase of 25.4% , or $12.6 million , compared with the prior year period Adjusted EBITDA of $49.6 million . Recent business acquisitions contributed $6.6 million of this increase. The remainder of the increase was driven by the benefit to gross profit from higher volumes and pricing actions, offset partially by a combination of raw material inflation and unfavorable movements in average exchange rates. The Adjusted EBITDA margin consequently increased by 70 basis points.

Adjusted EBITDA for the nine months ended September 29, 2018 was $192.4 million , an increase of 25.2% , or $38.7 million , compared with the prior year period Adjusted EBITDA of $153.7 million . Recent business acquisitions contributed $17.4 million of this increase. Consistent with the three month period, the remainder of the increase was driven by the benefit from higher volumes and pricing actions, offset partially by higher SG&A expenses, higher costs associated with capacity constraints and net unfavorable movements in average exchange rates. The Adjusted EBITDA margin consequently increased by 20 basis points.

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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 by incurring new secured or unsecured debt, including borrowings under our credit facilities. The amounts involved in any such purchase transactions, individually or in the aggregate, may be material. Any such purchases may relate to a substantial amount of a particular tranche of debt, with a corresponding reduction, where relevant, in the trading liquidity of that debt. In addition, any such purchases made at prices below the “adjusted issue price” (as defined for U.S. federal income tax purposes) may result in taxable cancellation of indebtedness income to us, which 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 level of working capital as of September 29, 2018 is sufficient for Gates’ present requirements.

Cash Flow

Nine months ended September 29, 2018 compared with the nine months ended September 30, 2017

Cash provided by operations was $142.3 million during the nine months ended September 29, 2018 compared with cash provided by operations of $149.9 million during the prior year period. Operating cash inflow before movements in operating assets and liabilities was $359.3 million during the nine months ended September 29, 2018 compared with $259.5 million during the prior year period, an increase of $99.8 million which was due largely to the improved operational performance of Gates which flowed through to operating income. Movements in operating assets and liabilities during the nine months ended September 29, 2018 gave rise to a decrease of $217.0 million in cash compared with a decrease of $109.6 million in the prior year period. This decrease , or further use of cash, was driven primarily by the build of working capital due to increased demand.

Net cash used in investing activities during the nine months ended September 29, 2018 was $214.1 million , compared with $107.1 million in the prior year period. Capital expenditures increased by $90.2 million from $64.7 million in the nine months ended September 30, 2017 to $154.9 million in the nine months ended September 29, 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. During the nine months ended September 29, 2018 , we also purchased the Rapro business for $50.9 million, net of cash acquired, whereas in the prior year period we used $36.7 million to acquire Techflow Flexibles.

Net cash used in financing activities was $187.1 million during the nine months ended September 29, 2018 , compared with $58.2 million net cash used in financing activities in the prior year period. This net outflow in the nine months ended September 29, 2018 related primarily to the net cash received from our initial public offering of $799.1 million and the use of those funds (in addition to a portion of cash on hand) to redeem debt of $913.7 million and to pay premiums thereon of $27.0 million . We paid a further $18.8 million in quarterly amortization payments under the term loans. The net cash outflow from financing activities in the prior year period was driven by payments of long-term debt of $670.1 million and debt issuance costs paid of $17.4 million , offset by the receipt of proceeds of $644.7 million . These cash flows related almost entirely to the debt refinancing transactions completed in April 2017. In addition, dividend payments to non-controlling shareholders of our joint venture operations were $23.3 million during the nine months ended September 29, 2018 , compared with $17.9 million in the prior year period.

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Indebtedness

During the periods presented, our long-term debt in issue consisted principally of two term loans and two unsecured notes. Our long-term debt as of September 29, 2018 and December 30, 2017 was as follows:



	Carrying amount				Principal amount
(dollars in millions)	As of September 29, 2018		As of December 30, 2017		As of September 29, 2018		As of December 30, 2017
Debt:
—Secured
Term Loans (U.S. dollar and Euro denominated)	$	2,428.2	$	2,467.8	$	2,470.1	$	2,515.0
—Unsecured
Senior Notes (U.S. dollar and Euro denominated)	566.6		1,487.5		568.0		1,472.5
Other debt	0.7		0.4		0.7		0.4
	$	2,995.5	$	3,955.7	$	3,038.8	$	3,987.9

Details of our long-term debt are presented in note 13 to our 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.

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 $500.0 million of the Dollar Senior Notes remain in issue at that time. These term loan facilities bear interest at a floating rate. As of September 29, 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 4.99% per annum. The Dollar Term Loan interest rate is re-set on the last business day of each month. As of September 29, 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% .

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	Three months ended					Nine months ended
(dollars in millions)	September 29, 2018		September 30, 2017			September 29, 2018			September 30, 2017
Gain (loss) recognized in statement of operations	$	3.5	$	(14.0	)	$	32.6		$	(50.3	)
Gain (loss) recognized in OCI	0.3		(9.5		)	(6.5		)	(29.7		)
Total gains (losses)	$	3.8	$	(23.5	)	$	26.1		$	(80.0	)

During the three and nine months ended September 29, 2018 , the transactional foreign exchange gains recognized in the other expenses line in the statement of operations were substantially offset by foreign exchange losses on Euro-denominated intercompany loans as part of our overall hedging strategy.

Unsecured Senior Notes

The Euro Senior Notes were redeemed in full in January 2018 and as of September 29, 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.



	Three months ended					Nine months ended
(dollars in millions)	September 29, 2018		September 30, 2017			September 29, 2018			September 30, 2017
Loss recognized in statement of operations	$	—	$	—		$	(4.2	)	$	—
Loss recognized in OCI	—		(8.4		)	(5.0		)	(30.8		)
Total losses	$	—	$	(8.4	)	$	(9.2	)	$	(30.8	)

Revolving Credit Facility

As of both September 29, 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

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As of September 29, 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 $56.7 million and $58.0 million as of September 29, 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 nine months ended September 29, 2018 , before intercompany eliminations, our non-guarantor subsidiaries represented approximately 69% of our net sales and 66% of our EBITDA as defined in the financial covenants attaching to the senior secured credit facilities. As of September 29, 2018 , before intercompany eliminations, our non-guarantor subsidiaries represented approximately 138% of our total assets and approximately 120% of our total liabilities. After adjusting for intercompany loans payable and receivable by Finco Omaha Limited, a non-guarantor intermediate holding company, and certain changes in intercompany relationships related to our IPO structure, 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 nine months ended September 29, 2018 , our net debt decreased by $692.1 million from $3,391.3 million as of December 30, 2017 to $2,699.2 million as of September 29, 2018 . The primary driver of this decrease was the net cash proceeds of $799.1 million received from our initial public offering and cash provided by operating activities during the nine months ended September 29, 2018 of $142.3 million . Partially offsetting this decrease in net debt was capital expenditures of $154.9 million , the acquisition of Rapro for $50.9 million, the payment of the debt redemption premiums of $27.0 million and the payment of dividends of $23.3 million to non-controlling shareholders of our joint venture operations.

Movements in foreign currency had a favorable net impact of $7.7 million on net debt during the nine months ended September 29, 2018 , the majority of the movement relating to the impact on our Euro-denominated debt of the weakening of the Euro against the U.S. dollar.

Borrowing Headroom

As of September 29, 2018 , our asset-backed revolving credit facility had a borrowing base of $325.0 million , being the maximum amount we can draw down based on the current value of the secured assets. The facility was undrawn for cash but there were letters of credit outstanding against the facility amounting to $56.7 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 .

In total, our committed borrowing headroom was $453.3 million , in addition to cash balances of $296.3 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).

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Management uses Adjusted EBITDA as its key profitability measure. This is a non-GAAP measure that represents EBITDA before certain items that are considered to hinder comparison of the performance of our businesses on a period-over-period basis or with other businesses. We use Adjusted EBITDA as our measure of segment profitability to assess the performance of our businesses and it is used for total Gates as well because we believe it is important to consider our profitability on a basis that is consistent with that of our operating segments, as well as that of 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 computing Adjusted EBITDA primarily included:


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


•	transaction-related expenses 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 expense ;


•	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 entities acquired by Gates. We also exclude costs associated with major corporate transactions because we do not believe that they relate to our performance. Other items are excluded from Adjusted EBITDA because they are individually or collectively significant items that are not considered to be representative of the performance of our businesses. During the periods presented we excluded restructuring expense that reflects specific, strategic actions taken by management to shutdown, downsize, or otherwise fundamentally reorganize areas of Gates' business; 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 significant impairments of intangibles and of other assets, representing the excess of their carrying amounts over the amounts that are expected to be recovered from them in the future.

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.

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



	Three months ended					Nine months ended
(dollars in millions)	September 29, 2018		September 30, 2017			September 29, 2018		September 30, 2017
Net income from continuing operations	$	67.0	$	18.1		$	189.3	$	52.4
Income tax expense	7.2		15.9			30.4		32.9
Net interest and other expenses	43.6		65.9			157.3		225.7
Depreciation and amortization	53.7		52.0			163.3		158.2
EBITDA	171.5		151.9			540.3		469.2
Transaction-related expenses	0.2		7.2			6.2		11.3
Impairment of intangibles and other assets	0.2		—			0.6		—
Restructuring expense	1.2		2.4			3.2		8.3
Share-based compensation	2.3		1.2			5.5		2.9
Sponsor fees (included in other operating expenses)	1.9		1.5			5.9		4.5
Impact of fair value adjustment on inventory (included in cost of sales)	—		—			0.3		—
Non-recurring inventory adjustments (included in costs of sales)	—		—			0.8		—
Other operating expenses (income)	3.2		(0.1		)	6.6		(0.1		)
Other non-recurring adjustments (included in SG&A)	0.7		—			0.6		—
Adjusted EBITDA	$	181.2	$	164.1		$	570.0	$	496.1

Adjusted EBITDA Margin

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



	Three months ended						Nine months ended
(dollars in millions)	September 29, 2018			September 30, 2017			September 29, 2018			September 30, 2017
Net sales	$	828.4		$	760.6		$	2,555.5		$	2,259.9
Adjusted EBITDA	$	181.2		$	164.1		$	570.0		$	496.1
Adjusted EBITDA margin (%)	21.9		%	21.6		%	22.3		%	22.0		%

Core growth reconciliations

Core sales growth is a non-GAAP measure that represents net sales for the period excluding the impacts of movements in average currency exchange 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 September 29, 2018	$	512.5		$	315.9		$	828.4
Impact on net sales of movements in currency rates	10.9			5.7			16.6
Impact on net sales from recent acquisitions	—			(29.4		)	(29.4		)
Core revenue for the three months ended September 29, 2018	523.4			292.2			815.6

Net sales for the three months ended September 30, 2017	499.9			260.7			760.6
Increase in net sales on a core basis (core revenue)	$	23.5		$	31.5		$	55.0

Core revenue growth (%)	4.7		%	12.1		%	7.2		%

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(dollars in millions)	Power Transmission			Fluid Power			Total
Net sales for the nine months ended September 29, 2018	$	1,608.1		$	947.4		$	2,555.5
Impact on net sales of movements in currency rates	(34.9		)	(7.1		)	(42.0		)
Impact on net sales from recent acquisitions	—			(101.5		)	(101.5		)
Core revenue for the nine months ended September 29, 2018	1,573.2			838.8			2,412.0

Net sales for the nine months ended September 30, 2017	1,496.3			763.6			2,259.9
Increase in net sales on a core basis (core revenue)	$	76.9		$	75.2		$	152.1

Core revenue growth (%)	5.1		%	9.8		%	6.7		%

Net Debt

Management uses net debt, rather than the narrower measure of cash and cash equivalents and restricted cash which forms the basis for the condensed consolidated statement of cash flows, 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; and


•	the carrying amount of cash and cash equivalents.

Net debt was as follows:



(dollars in millions)	As of September 29, 2018		As of December 30, 2017
Debt	$	2,995.5	$	3,955.7
Cash and cash equivalents	296.3		564.4
Net debt	$	2,699.2	$	3,391.3

Adjusted EBITDA adjustments for ratio calculation purposes

The financial maintenance ratio in our revolving credit agreement and other ratios related to incurrence-based covenants (measured only upon the taking of certain actions, including the incurrence of additional indebtedness) under our revolving credit facility, our term loan facility and the indenture governing our outstanding notes are calculated in part based on financial measures similar to Adjusted EBITDA as presented elsewhere in this 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, resulted in a net benefit to Adjusted EBITDA for ratio calculation purposes o f $9.6 million.

Gates Industrial Corporation plc is not an obligor under our revolving credit facility, our term loan facility or the indenture governing our outstanding notes. 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 a receivable of $11.8 million as of September 29, 2018 due to Gates Global LLC and its subsidiaries from indirect parent entities of Gates Global LLC and additional cash and cash equivalents held by the Company of $1.2 million and $8.3 million as of September 29, 2018 and December 30, 2017 , respectively.

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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, interest rate caps (options), and interest rate swaps, 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 September 29, 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.

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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 I, Item 1 of this Quarterly Report on Form 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 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 Industrial Corporation plc 2018 Omnibus Incentive Plan.*†
10.2	Form of Time-Based Restricted Stock Agreement under the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan.*†
10.3	Form of Time-Based Restricted Stock Unit Agreement under the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan (Non-Employee Director).*†
10.4	Form of Time-Based Restricted Stock Unit Agreement under the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan (Employee).*†
10.5	Form of Stock Appreciation Right Agreement under the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan.*†
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**
101	The following financial information from Gates Industrial Corporation's Quarterly Report on Form 10-Q for the three and nine months ended September 29, 2018, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Statements of Operations for the three and nine months ended September 29, 2018 and September 30, 2017, (ii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 29, 2018 and September 30, 2017, (iii) Condensed Consolidated Balance Sheets as of September 29, 2018 and December 30, 2017, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 29, 2018 and September 30, 2017, (v) Condensed Consolidated Statements of Shareholders' Equity, and (vi) Notes to the Condensed Consolidated Financial Statements.*

* Filed herewith.

** Furnished herewith.

† Management contract or compensatory plan or arrangement.

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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:	/s/ David H. Naemura
	Name:	David H. Naemura
	Title:	Chief Financial Officer

Date: November 2, 2018

Exhibit 10.1

GATES INDUSTRIAL CORPORATION PLC

2018 OMNIBUS INCENTIVE PLAN

1. Purpose . The purpose of the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan is to provide a means through which the Company and the other members of the Company Group may attract and retain key personnel and to provide a means whereby directors, officers, employees, consultants, and advisors of the Company and the other members of the Company Group can acquire and maintain an equity interest in the Company, or be paid incentive compensation, including incentive compensation measured by reference to the value of Ordinary Shares, thereby strengthening their commitment to the welfare of the Company Group and aligning their interests with those of the Company’s shareholders.

2. Definitions . The following definitions shall be applicable throughout the Plan.

(a) “ Absolute Share Limit ” has the meaning given to such term in Section 5(b) of the Plan.

(b) “ Adjustment Event ” has the meaning given to such term in Section 11(a) of the Plan.

(c) “ Affiliate ” means any Person that directly or indirectly controls, is controlled by, or is under common control with the Company. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting or other securities, by contract, or otherwise.

(d) “ Award ” means, individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Other Equity-Based Award, and Other Cash-Based Award granted under the Plan.

(e) “ Award Agreement ” means the document or documents by which each Award (other than an Other Cash-Based Award) is evidenced, which may be in written or electronic form.

(f) “ Board ” means the Board of Directors of the Company.

(g) “ Cause ” means, as to any Participant, unless the applicable Award Agreement states otherwise, (i) “Cause,” as defined in any employment or consulting agreement between the Participant and the Service Recipient or as defined in the Company’s Executive Severance Plan to the extent the Participant participates in such plan, in each case, in effect at the time of such Termination; or (ii) in the absence of any such employment or consulting agreement (or the absence of any definition of “Cause” contained therein), the Participant’s (A) willful neglect in the performance of the Participant’s duties for the Service Recipient or willful or repeated failure or refusal to perform such duties; (B) engagement in conduct in connection with the Participant’s employment or service with the Service Recipient, which results in, or could reasonably be expected to result in, material harm to the business or reputation of the Service Recipient or any other member of the Company Group; (C) conviction of, or plea of guilty or no contest to, (I) any felony or (II) any other crime that results in, or could reasonably be expected to result in, material harm to the business or reputation of the Service Recipient or any other member of the Company Group; (D) material violation of the written policies of the Service Recipient, including, but not limited to, those relating to sexual harassment or the disclosure or misuse of confidential information, or those set forth in the manuals or statements of policy of the Service Recipient; (E) fraud or misappropriation, embezzlement, or misuse of funds or property belonging to the Service Recipient or any other member of the Company Group; or (F) act of personal dishonesty that involves personal profit in connection with the Participant’s employment or service to the Service Recipient; provided, in any case, a Participant’s resignation after an event that would be grounds for a Termination for Cause will be treated as a Termination for Cause hereunder.

(h) “ Change in Control ” means:

(i) the acquisition (whether by purchase, merger, consolidation, combination, or other similar transaction) by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% (on a fully diluted basis) of either (A) the then-outstanding Ordinary Shares, taking into account as outstanding for this purpose such Ordinary Shares issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such Ordinary Shares; or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however, that for purposes of the Plan, the following acquisitions shall not constitute a Change in Control: (I) any acquisition by the Company or any Affiliate; (II) any acquisition by any employee benefit plan sponsored or maintained by the Company or any Affiliate; or (III) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of Persons including the Participant (or any entity controlled by the Participant or any group of Persons including the Participant);

(ii) during any period of 12 months, individuals who, at the beginning of such period, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board; provided, that any person becoming a director subsequent to the Effective Date, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-12 of Regulation 14A promulgated under the Exchange Act, with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director; or

(iii) the sale, transfer, or other disposition of all or substantially all of the assets of the Company Group (taken as a whole) to any Person that is not an Affiliate of the Company.

(i) “ Code ” means the Internal Revenue Code of 1986, as amended, and any successor thereto. Reference in the Plan to any section of the Code shall be deemed to include any regulations or other interpretative guidance under such section, and any amendments or successor provisions to such section, regulations, or guidance.

(j) “ Committee ” means the Compensation Committee of the Board or any properly delegated subcommittee thereof or, if no such Compensation Committee or subcommittee thereof exists, the Board.

(k) “ Company ” means Gates Industrial Corporation plc, a public limited company organized under the laws of England and Wales, and any successor thereto.

(l) “ Company Group ” means, collectively, the Company and its Subsidiaries.

(m) “ Date of Grant ” means the date on which the granting of an Award is authorized, or such other date as may be specified in such authorization.

(n) “ Designated Foreign Subsidiaries ” means all members of the Company Group that are organized under the laws of any jurisdiction other than the United States of America that may be designated by the Board or the Committee from time to time.

(o) “ Detrimental Activity ” means any of the following: (i) unauthorized disclosure of any confidential or proprietary information of any member of the Company Group; (ii) any activity that would be grounds to terminate the Participant’s employment or service with the Service Recipient for Cause; (iii) a breach by the Participant of any restrictive covenant by which such Participant is bound, including, without limitation, any covenant not to compete or not to solicit, in any agreement with any member of the Company Group; or (iv) fraud or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its sole discretion.

(p) “ Disability ” means, as to any Participant, unless the applicable Award Agreement states otherwise, (i) “Disability,” as defined in any employment or consulting agreement between the Participant and the Service Recipient in effect at the time of such Termination; or (ii) in the absence of any such employment or consulting agreement (or the absence of any definition of “Disability” contained therein), a condition entitling the Participant to receive benefits under a long-term disability plan of the Service Recipient or other member of the Company Group in which such Participant is eligible to participate, or, in the absence of such a plan, the complete and permanent inability of the Participant by reason of illness or accident to perform the duties of the position at which the Participant was employed or served when such disability commenced. Any determination of whether Disability exists in the absence of a long-term disability plan shall be made by the Company (or its designee) in its sole and absolute discretion.

(q) “ Effective Date ” means the date on which the Company enters into an agreement to consummate an initial public offering of the Ordinary Shares pursuant to a registration filed with the Securities Exchange Commission pursuant to the Securities Act.

(r) “ Eligible Person ” means any (i) individual employed by any member of the Company Group; provided, however, that no such employee covered by a collective bargaining agreement shall be an Eligible Person unless and to the extent that such eligibility is set forth in such collective bargaining agreement or in an agreement or instrument relating thereto; (ii) director or officer of any member of the Company Group; or (iii) consultant or advisor to any member of the Company Group who may be offered securities registrable pursuant to a registration statement on Form S-8 under the Securities Act, who, in the case of each of clauses (i) through (iii) above, has entered into an Award Agreement or who has received written notification from the Committee or its designee that they have been selected to participate in the Plan.

(s) “ Employee Benefit Trust ” means any employee benefit trust established for the benefit of most or all of the employees or former employees of the Company Group or certain of their relatives.

(t) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Exchange Act shall be deemed to include any rules, regulations, or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations, or guidance.

(u) “ Exercise Price ” has the meaning given to such term in Section 7(b) of the Plan.

(v) “ Fair Market Value ” means, on a given date, (i) if the Ordinary Shares are listed on a national securities exchange, the closing sales price of the Ordinary Shares reported on the primary exchange on which the Ordinary Shares are listed and traded on such date, or, if there are no such sales on that date, then on the last preceding date on which such sales were reported; (ii) if the Ordinary Shares are not listed on any national securities exchange but is quoted in an inter-dealer quotation system on a last-sale basis, the average between the closing bid price and ask price reported on such date, or, if there is no such sale on that date, then on the last preceding date on which a sale was reported; or (iii) if the Ordinary Shares are not listed on a national securities exchange or quoted in an inter-dealer quotation system on a last-sale basis, the amount determined by the Committee in good faith to be the fair market value of the Ordinary Shares; provided, however, as to any Awards granted on or with a Date of Grant of the date of the pricing of the Company’s initial public offering, “Fair Market Value” shall be equal to the per share price at which the Ordinary Shares are offered to the public in connection with such initial public offering.

(w) “ GAAP ” has the meaning given to such term in Section 7(d) of the Plan.

(x) “ Immediate Family Members ” has the meaning given to such term in Section 13(b) of the Plan.

(y) “ Incentive Stock Option ” means an Option which is designated by the Committee as an incentive stock option as described in Section 422 of the Code and otherwise meets the requirements set forth in the Plan.

(z) “ Indemnifiable Person ” has the meaning given to such term in Section 4(e) of the Plan.

(aa) “ Nonqualified Stock Option ” means an Option which is not designated by the Committee as an Incentive Stock Option.

(bb) “ Non-Employee Director ” means a member of the Board who is not an employee of any member of the Company Group.

(cc) “ Option ” means an Award granted under Section 7 of the Plan.

(dd) “ Option Period ” has the meaning given to such term in Section 7(c) of the Plan.

(ee) “ Ordinary Share ” means an ordinary share of the Company, par value $0.01 per share (and any stock or other securities into which such Ordinary Share may be converted or into which it may be exchanged).

(ff) “ Other Cash-Based Award ” means an Award that is not a Stock Appreciation Right granted under Section 10 of the Plan that is denominated and/or payable in cash.

(gg) “ Other Equity-Based Award ” means an Award that is not an Option, Stock Appreciation Right, Restricted Stock, or Restricted Stock Unit that is granted under Section 10 of the Plan and is (i) payable by delivery of Ordinary Shares and/or (ii) measured by reference to the value of Ordinary Shares.

(hh) “ Participant ” means an Eligible Person who has been selected by the Committee to participate in the Plan and to receive an Award pursuant to the Plan.

(ii) “ Performance Conditions ” means specific levels of performance of the Company (and/or one or more members of the Company Group, divisions or operational and/or business units, product lines, brands, business segments, administrative departments, or any combination of the foregoing), which may be determined in accordance with GAAP or on a non-GAAP basis on the following measures: (i) net earnings, net income (before or after taxes), or consolidated net income; (ii) basic or diluted earnings per share (before or after taxes); (iii) net revenue or net revenue growth; (iv) gross revenue or gross revenue growth, gross profit or gross profit growth; (v) net operating profit (before or after taxes); (vi) return measures (including, but not limited to, return on investment, assets, capital, employed capital, invested capital, equity, or sales); (vii) cash flow measures (including, but not limited to, operating cash flow, free cash flow, or cash flow return on capital), which may be but are not required to be measured on a per share basis; (viii) actual or adjusted earnings before or after interest, taxes, depreciation, and/or amortization (including EBIT and EBITDA); (ix) gross or net operating margins; (x) productivity ratios; (xi) share price (including, but not limited to, growth measures and total shareholder return); (xii) expense targets or cost reduction goals, general and administrative expense savings; (xiii) operating efficiency; (xiv) objective measures of customer/client satisfaction; (xv) working capital targets; (xvi) measures of economic value added or other ‘value creation’ metrics; (xvii) enterprise value; (xviii) sales; (xix) shareholder return; (xx) customer/client retention; (xxi) competitive market metrics; (xxii) employee retention; (xxiii) objective measures of personal targets, goals, or completion of projects (including, but not limited to, succession and hiring projects, completion of specific acquisitions, dispositions, reorganizations, or other corporate transactions or capital-raising transactions, expansions of specific business operations, and meeting divisional or project budgets); (xxiv) comparisons of continuing operations to other operations; (xxv) market share; (xxvi) cost of capital, debt leverage, year-end cash position or book value; (xxvii) strategic objectives; or (xxviii) any combination of the foregoing. Any one or more of the aforementioned performance criteria may be stated as a percentage of another performance criteria, or used on an absolute or relative basis to measure the performance of one or more members of the Company Group as a whole or any divisions or operational and/or business units, product lines, brands, business segments, or administrative departments of the Company and/or one or more members of the Company Group or any combination thereof, as the Committee may deem appropriate, or any of the above performance criteria may be compared to the performance of a selected group of comparison companies, or a published or special index that the Committee, in its sole discretion, deems appropriate, or as compared to various stock market indices.

(jj) “ Permitted Transferee ” has the meaning given to such term in Section 13(b) of the Plan.

(kk) “ Person ” means any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).

(ll) “ Plan ” means this Gates Industrial Corporation plc 2018 Omnibus Incentive Plan, as it may be amended and/or restated from time to time.

(mm) “ Qualifying Director ” means a person who is, with respect to actions intended to obtain an exemption from Section 16(b) of the Exchange Act pursuant to Rule 16b-3 under the Exchange Act, a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act.

(nn) “ Restricted Period ” means the period of time determined by the Committee during which an Award is subject to restrictions, including vesting conditions.

(oo) “ Restricted Stock ” means Ordinary Shares, subject to certain specified restrictions (which may include, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan.

(pp) “ Restricted Stock Unit ” means an unfunded and unsecured promise to deliver Ordinary Shares, cash, other securities, or other property, subject to certain restrictions (which may include, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan.

(qq) “ SAR Period ” has the meaning given to such term in Section 8(c) of the Plan.

(rr) “ Securities Act ” means the Securities Act of 1933, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Securities Act shall be deemed to include any rules, regulations, or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations, or guidance.

(ss) “ Service Recipient ” means, with respect to a Participant holding a given Award, the member of the Company Group by which the original recipient of such Award is, or following a Termination was most recently, principally employed or to which such original recipient provides, or following a Termination was most recently providing, services, as applicable.

(tt) “ Stock Appreciation Right ” or “ SAR ” means an Award granted under Section 8 of the Plan.

(uu) “ Strike Price ” has the meaning given to such term in Section 8(b) of the Plan.

(vv) “ Subsidiary ” means, with respect to any specified Person:

(i) any corporation, association, or other business entity of which more than 50% of the total voting power of shares of such entity’s voting securities (without regard to the occurrence of any contingency and after giving effect to any voting agreement or shareholders’ agreement that effectively transfers voting power) is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

(ii) any partnership (or any comparable foreign entity) (A) the sole general partner (or functional equivalent thereof) or the managing general partner of which is such Person or Subsidiary of such Person or (B) the only general partners (or functional equivalents thereof) of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).

(ww) “ Substitute Award ” has the meaning given to such term in Section 5(e) of the Plan.

(xx) “ Sub-Plans ” means any sub-plan to the Plan that has been adopted by the Board or the Committee for the purpose of permitting the offering of Awards to employees of certain Designated Foreign Subsidiaries or otherwise outside the jurisdiction of the United States of America, with each such sub-plan designed to comply with local laws applicable to offerings in such foreign jurisdictions. Although any Sub-Plan may be designated a separate and independent plan from the Plan in order to comply with applicable local laws, the Absolute Share Limit and the other limits specified in Section 5(b) shall apply in the aggregate to the Plan and any Sub-Plan adopted hereunder.

(yy) “ Termination ” means the termination of a Participant’s employment or service, as applicable, with the Service Recipient for any reason (including death).

(zz) “ Trustee ” means the trustee or trustees of any Employee Benefit Trust from time to time.

3. Effective Date; Duration . The Plan shall be effective as of the Effective Date. The expiration date of the Plan, on and after which date no Awards may be granted hereunder, shall be the 10 ^th anniversary of the Effective Date; provided, however, that such expiration shall not affect Awards then outstanding, and the terms and conditions of the Plan shall continue to apply to such Awards.

4. Administration .

(a) General . The Committee shall administer the Plan. To the extent required to comply with the provisions of Rule 16b-3 promulgated under the Exchange Act (if the Board is not acting as the Committee under the Plan), it is intended that each member of the Committee shall, at the time such member takes any action with respect to an Award under the Plan that is intended to qualify for the exemptions provided by Rule 16b-3 promulgated under the Exchange Act, be a Qualifying Director. However, the fact that a Committee member shall fail to qualify as a Qualifying Director shall not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.

(b) Committee Authority . Subject to the provisions of the Plan and applicable law, the Committee shall have the sole and plenary authority, in addition to other express powers and authorizations conferred on the Committee by the Plan, to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of Ordinary Shares to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled in, or exercised for, cash, Ordinary Shares, other securities, other Awards, or other property, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances the delivery of cash, Ordinary Shares, other securities, other Awards, or other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the Participant or of the Committee; (vii) interpret, administer, reconcile any inconsistency in, correct any defect in, and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan; (viii) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem appropriate for the proper administration of the Plan; (ix) adopt Sub-Plans; and (x) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan.

(c) Delegation . Except to the extent prohibited by applicable law or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time. Without limiting the generality of the foregoing, the Committee may delegate to one or more officers of any member of the Company Group the authority to act on behalf of the Committee with respect to any matter, right, obligation, or election which is the responsibility of, or which is allocated to, the Committee herein, and which may be so delegated as a matter of law, except for grants of Awards to Non-Employee Directors. Notwithstanding the foregoing in this Section 4(c), it is intended that any action under the Plan intended to qualify for an exemption provided by Rule 16b-3 promulgated under the Exchange Act related to persons who are subject to Section 16 of the Exchange Act will be taken only by the Board or by a committee or subcommittee of two or more Qualifying Directors. However, the fact that any member of such committee or subcommittee shall fail to qualify as a Qualifying Director shall not invalidate any action that is otherwise valid under the Plan.

(d) Finality of Decisions . Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan, any Award or any Award Agreement shall be within the sole discretion of the Committee, may be made at any time, and shall be final, conclusive, and binding upon all Persons, including, without limitation, any member of the Company Group, any Participant, any holder or beneficiary of any Award, and any shareholder of the Company.

(e) Indemnification . No member of the Board, the Committee or any employee or agent of any member of the Company Group (each such Person, an “ Indemnifiable Person ”) shall be liable for any action taken or omitted to be taken or any determination made with respect to the Plan or any Award hereunder (unless constituting fraud or a willful criminal act or omission). Each Indemnifiable Person shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense (including attorneys’ fees) that may be imposed upon or incurred by such Indemnifiable Person in connection with or resulting from any action, suit, or proceeding to which such Indemnifiable Person may be a party or in which such Indemnifiable Person may be involved by reason of any action taken or omitted to be taken or determination made with respect to the Plan or any Award hereunder and against and from any and all amounts paid by such Indemnifiable Person with the Company’s approval, in settlement thereof, or paid by such Indemnifiable Person in satisfaction of any judgment in any such action, suit, or proceeding against such Indemnifiable Person, and the Company shall advance to such Indemnifiable Person any such expenses promptly upon written request (which request shall include an undertaking by the Indemnifiable Person to repay the amount of such advance if it shall ultimately be determined, as provided below, that the Indemnifiable Person is not entitled to be indemnified); provided, that the Company shall have the right, at its own expense, to assume and defend any such action, suit, or proceeding and once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Company’s choice. The foregoing right of indemnification shall not be available to an Indemnifiable Person to the extent that a final judgment or other final adjudication (in either case not subject to further appeal) binding upon such Indemnifiable Person determines that the acts, omissions, or determinations of such Indemnifiable Person giving rise to the indemnification claim resulted from such Indemnifiable Person’s fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the organizational documents of any member of the Company Group. The foregoing right of indemnification shall not be exclusive of or otherwise supersede any other rights of indemnification to which such Indemnifiable Persons may be entitled under the organizational documents of any member of the Company Group, as a matter of law, under an individual indemnification agreement or contract, or otherwise, or any other power that the Company may have to indemnify such Indemnifiable Persons or hold such Indemnifiable Persons harmless.

(f) Board Authority . Notwithstanding anything to the contrary contained in the Plan, the Board may, in its sole discretion, at any time and from time to time, grant Awards and administer the Plan with respect to such Awards. Any such actions by the Board shall be subject to the applicable rules of the securities exchange or inter-dealer quotation system on which the Ordinary Shares are listed or quoted. In any such case, the Board shall have all the authority granted to the Committee under the Plan.

5. Grant of Awards; Shares Subject to the Plan; Limitations .

(a) Grants . The Committee may, from time to time, grant Awards to one or more Eligible Persons. All Awards granted under the Plan shall vest and become exercisable in such manner and on such date or dates or upon such event or events as determined by the Committee, including, without limitation, attainment of Performance Conditions.

(b) Share Reserve and Limits . Awards granted under the Plan shall be subject to the following limitations: (i) subject to Section 11 of the Plan, no more than 12,500,000 Ordinary Shares (the “ Absolute Share Limit ”) shall be available for Awards under the Plan; provided, however, that the Absolute Share Limit shall be increased on the first day of each fiscal year beginning with the 2019 fiscal year in an amount equal to the least of (x) 6,500,000 Ordinary Shares, (y) 2.5% of the total number of Ordinary Shares outstanding on the last day of the immediately preceding fiscal year, and (z) a lower number of Ordinary Shares as determined by the Board; (ii) subject to Section 11 of the Plan, no more than the number of Ordinary Shares equal to the 12,500,000 may be issued in the aggregate pursuant to the exercise of Incentive Stock Options granted under the Plan; and (iii) during a single fiscal year, each Non-Employee Director shall be granted a number of Ordinary Shares subject to Awards, taken together with any cash fees paid to such Non-Employee Director during the fiscal year, equal to a total value of $1,000,000 (calculating the value of any such Awards based on the grant date fair value of such Awards for financial reporting purposes) or such lower amount as determined by the Board.

(c) Share Counting . Other than with respect to Substitute Awards, to the extent that an Award expires or is canceled, forfeited, or terminated without issuance to the Participant of the full number of Ordinary Shares to which the Award related, the unissued shares will again be available for grant under the Plan. Ordinary Shares shall be deemed to have been issued in settlement of Awards if the Fair Market Value equivalent of such shares is paid in cash in connection with such settlement; provided, however, that no shares shall be deemed to have been issued in settlement of a SAR or Restricted Stock Unit that provides for settlement only in cash and settles only in cash or in respect of any Other Cash-Based Awards. In no event shall (i) shares tendered or withheld on exercise of Options or other Award for the payment of the exercise or purchase price or withholding taxes, (ii) shares not issued upon the settlement of a SAR that by the terms of the Award Agreement would settle in Ordinary Shares (or could settle in Ordinary Shares), or (iii) shares purchased on the open market with cash proceeds from the exercise of Options, again become available for other Awards under the Plan.

(d) Source of Shares . Ordinary Shares issued by the Company in settlement of Awards may be authorized and unissued shares, shares held in the treasury of the Company, shares purchased on the open market or by private purchase, or a combination of the foregoing.

(e) Substitute Awards . Awards may, in the sole discretion of the Committee, be granted under the Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity directly or indirectly acquired by the Company or with which the Company combines (“ Substitute Awards ”). Substitute Awards shall not be counted against the Absolute Share Limit; provided, that Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding Options intended to qualify as “incentive stock options” within the meaning of Section 422 of the Code shall be counted against the aggregate number of Ordinary Shares available for Awards of Incentive Stock Options under the Plan. Subject to applicable stock exchange requirements, available shares under a shareholder-approved plan of an entity directly or indirectly acquired by the Company or with which the Company combines (as appropriately adjusted to reflect the acquisition or combination transaction) may be used for Awards under the Plan and shall not reduce the number of Ordinary Shares available for issuance under the Plan.

(f) Holding of Shares. Notwithstanding any other provision of the Plan, all Ordinary Shares acquired pursuant to the Plan will be held in the facilities of the Depositary Trust Company (the “ DTC ”). This means that the Ordinary Shares will be held by Cede & Co as nominee for the DTC and that when Ordinary Shares are allocated to a Participant under the Plan, their DTC participant account will be credited with a book entry interest in the relevant Ordinary Shares. It is a condition to any Ordinary Shares being acquired under the Plan that they should be held through the facilities of the DTC in this way. No Participant in the Plan will be entitled to withdraw their Ordinary Shares from the facilities of the DTC without the prior agreement of the Committee and for the avoidance of doubt, any stamp duty or stamp duty reserve tax arising as a result of or in connection with such withdrawal shall be for the account of the relevant Participant and the Company and the Committee take no responsibility for any effect on the value of any Ordinary Shares or ability to trade in it as a result of any withdrawal from the facilities of the DTC.

6. Eligibility . Participation in the Plan shall be limited to Eligible Persons.

7. Options .

(a) General . Each Option granted under the Plan shall be evidenced by an Award Agreement, which agreement need not be the same for each Participant. Each Option so granted shall be subject to the conditions set forth in this Section 7, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. All Options granted under the Plan shall be Nonqualified Stock Options unless the applicable Award Agreement expressly states that the Option is intended to be an Incentive Stock Option. Incentive Stock Options shall be granted only to Eligible Persons who are employees of a member of the Company Group, and no Incentive Stock Option shall be granted to any Eligible Person who is ineligible to receive an Incentive Stock Option under the Code. No Option shall be treated as an Incentive Stock Option unless the Plan has been approved by the shareholders of the Company in a manner intended to comply with the shareholder approval requirements of Section 422(b)(1) of the Code; provided, that any Option intended to be an Incentive Stock Option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such Option shall be treated as a Nonqualified Stock Option unless and until such approval is obtained. In the case of an Incentive Stock Option, the terms and conditions of such grant shall be subject to, and comply with, such rules as may be prescribed by Section 422 of the Code. If for any reason an Option intended to be an Incentive Stock Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option or portion thereof shall be regarded as a Nonqualified Stock Option appropriately granted under the Plan.

(b) Exercise Price . Except as otherwise provided by the Committee in the case of Substitute Awards, the exercise price (“ Exercise Price ”) per Ordinary Share for each Option shall not be less than 100% of the Fair Market Value of such share (determined as of the Date of Grant); provided, however, that in the case of an Incentive Stock Option granted to an employee who, at the time of the grant of such Option, owns stock representing more than 10% of the voting power of all classes of stock of any member of the Company Group, the Exercise Price per share shall be no less than 110% of the Fair Market Value per share on the Date of Grant. Notwithstanding the foregoing, if the Fair Market Value of a Share is less than its par value the Exercise Price in respect of an Option to subscribe for Ordinary Shares shall not be less than such par value.

(i) Options shall vest and become exercisable in such manner and on such date or dates or upon such event or events as determined by the Committee including, without limitation, those set forth in Section 5(a) of the Plan; provided, however, that notwithstanding any such vesting dates or events, the Committee may in its sole discretion accelerate the vesting of any Options at any time and for any reason. Options shall expire upon a date determined by the Committee, not to exceed 10 years from the Date of Grant (the “Option Period”); provided, that if the Option Period (other than in the case of an Incentive Stock Option) would expire at a time when trading in the Ordinary Shares is prohibited by the Company’s insider trading policy (or Company-imposed “blackout period”), then the Option Period shall be automatically extended until the 30th day following the expiration of such prohibition. Notwithstanding the foregoing, in no event shall the Option Period exceed five years from the Date of Grant in the case of an Incentive Stock Option granted to a Participant who on the Date of Grant owns stock representing more than 10% of the voting power of all classes of stock of any member of the Company Group.

(ii) Unless otherwise provided by the Committee, whether in an Award Agreement or otherwise, 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 terminate and expire, and each outstanding vested Option shall remain exercisable for one year thereafter (but in no event beyond the expiration of the Option Period); and (C) 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).

(d) Method of Exercise and Form of Payment . No Ordinary Shares shall be issued pursuant to any exercise of an Option until payment in full of the Exercise Price therefor is received by the Company and the Participant has paid to the Company an amount equal to any Federal, state, local, and non-U.S. income, employment, and any other applicable taxes required to be withheld. Options which have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company (or telephonic instructions to the extent provided by the Committee) in accordance with the terms of the Option accompanied by payment of the Exercise Price. The Exercise Price shall be payable: (i) in cash, or (ii) by such other method as the Committee may permit in its sole discretion, including, without limitation: (A) if there is a public market for the Ordinary Shares at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company is delivered (including telephonically to the extent permitted by the Committee) a copy of irrevocable instructions to a stockbroker to sell the Ordinary Shares otherwise issuable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price; or (B) a “net exercise” procedure effected by the settlement of the Award in a combination of: (i) Ordinary Shares; and (ii) cash, where the amount of cash is sufficient to pay the Exercise Price and all applicable required withholding and any other applicable taxes required to be withheld. Any fractional Ordinary Shares shall be settled in cash.

(e) Notification upon Disqualifying Disposition of an Incentive Stock Option . Each Participant awarded an Incentive Stock Option under the Plan shall notify the Company in writing immediately after the date the Participant makes a disqualifying disposition of any Ordinary Shares acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including, without limitation, any sale) of such Ordinary Shares before the later of (i) the date that is two years after the Date of Grant of the Incentive Stock Option or (ii) the date that is one year after the date of exercise of the Incentive Stock Option. The Company may, if determined by the Committee and in accordance with procedures established by the Committee, retain possession, as agent for the applicable Participant, of any Ordinary Shares acquired pursuant to the exercise of an Incentive Stock Option until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such Ordinary Shares.

(f) Compliance With Laws, etc . Notwithstanding the foregoing, in no event shall a Participant be permitted to exercise an Option in a manner which the Committee determines would violate the Sarbanes-Oxley Act of 2002, as it may be amended from time to time, or any other applicable law or the applicable rules and regulations of the Securities and Exchange Commission or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded (including, without limitation, the Financial Conduct Authority of the United Kingdom).

8. Stock Appreciation Rights .

(a) General . Each SAR granted under the Plan shall be evidenced by an Award Agreement. Each SAR so granted shall be subject to the conditions set forth in this Section 8, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. Any Option granted under the Plan may include tandem SARs. The Committee also may award SARs to Eligible Persons independent of any Option.

(b) Strike Price . Except as otherwise provided by the Committee in the case of Substitute Awards, the strike price (“ Strike Price ”) per Ordinary Share for each SAR shall not be less than 100% of the Fair Market Value of such share (determined as of the Date of Grant). Notwithstanding the foregoing, a SAR granted in tandem with (or in substitution for) an Option previously granted shall have a Strike Price equal to the Exercise Price of the corresponding Option.

(i) A SAR granted in connection with an Option shall become exercisable and shall expire according to the same vesting schedule and expiration provisions as the corresponding Option. A SAR granted independent of an Option shall vest and become exercisable in such manner and on such date or dates or upon such event or events as determined by the Committee including, without limitation, those set forth in Section 5(a) of the Plan; provided, however, that notwithstanding any such vesting dates or events, the Committee may, in its sole discretion, accelerate the vesting of any SAR at any time and for any reason. SARs shall expire upon a date determined by the Committee, not to exceed 10 years from the Date of Grant (the “SAR Period”); provided, that if the SAR Period would expire at a time when trading in the Ordinary Shares is prohibited by the Company’s insider trading policy (or Company-imposed “blackout period”), then the SAR Period shall be automatically extended until the 30th day following the expiration of such prohibition.

(ii) Unless otherwise provided by the Committee, whether in an Award Agreement or otherwise, in the event of: (A) a Participant’s Termination by the Service Recipient for Cause, all outstanding SARs granted to such Participant shall immediately terminate and expire; (B) a Participant’s Termination due to death or Disability, each outstanding unvested SAR granted to such Participant shall immediately terminate and expire, and each outstanding vested SAR shall remain exercisable for one year thereafter (but in no event beyond the expiration of the SAR Period); and (C) a Participant’s Termination for any other reason, each outstanding unvested SAR granted to such Participant shall immediately terminate and expire, and each outstanding vested SAR shall remain exercisable for 90 days thereafter (but in no event beyond the expiration of the SAR Period).

(d) Method of Exercise . SARs which have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company in accordance with the terms of the Award, specifying the number of SARs to be exercised and the date on which such SARs were awarded.

(e) Payment . Upon the exercise of a SAR, the Company shall pay to the Participant an amount equal to the number of shares subject to the SAR that is being exercised multiplied by the excess of the Fair Market Value of one Ordinary Share on the exercise date over the Strike Price, less an amount equal to any Federal, state, local, and non-U.S. income, employment, and any other applicable taxes and employee and, if applicable, employer social security contributions required to be withheld. The Company shall pay, or procure the payment of, such amount in cash, in Ordinary Shares valued at Fair Market Value, or any combination thereof, as determined by the Committee. Any fractional Ordinary Shares shall be settled in cash. Where payment is made in Ordinary Shares, such payment may be satisfied by the transfer of Ordinary Shares by the Trustee to the Participant.

9. Restricted Stock and Restricted Stock Units .

(a) General . Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award Agreement. Each Restricted Stock and Restricted Stock Unit so granted shall be subject to the conditions set forth in this Section 9, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement.

(b) Stock Certificates and Book-Entry; Escrow or Similar Arrangement . Upon the grant of Restricted Stock, the Committee shall cause a stock certificate registered in the name of the Participant to be issued or shall cause Ordinary Shares to be registered in the name of the Participant and held in book-entry form subject to the Company’s directions and, if the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than issued to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (i) an escrow agreement satisfactory to the Committee, if applicable, and (ii) the appropriate stock power (endorsed in blank) with respect to the Restricted Stock covered by such agreement. If a Participant shall fail to execute and deliver (in a manner permitted under Section 13(a) of the Plan or as otherwise determined by the Committee) an agreement evidencing an Award of Restricted Stock and, if applicable, an escrow agreement and blank stock power within the amount of time specified by the Committee, the Award shall be null and void. Subject to the restrictions set forth in this Section 9, Section 13(c) of the Plan, and the applicable Award Agreement, a Participant generally shall have the rights and privileges of a shareholder as to shares of Restricted Stock, including, without limitation, the right to vote such Restricted Stock; provided, that if the lapsing of restrictions with respect to any grant of Restricted Stock is contingent on satisfaction of Performance Conditions (other than, or in addition to, the passage of time), any dividends payable on such shares of Restricted Stock shall be held by the Company and delivered (without interest) to the Participant within 15 days following the date on which the restrictions on such Restricted Stock lapse (and the right to any such accumulated dividends shall be forfeited upon the forfeiture of the Restricted Stock to which such dividends relate). To the extent shares of Restricted Stock are forfeited, any stock certificates issued to the Participant evidencing such shares shall be returned to the Company. The Participant shall transfer such shares to such Person (including but not limited to the Trustee) as the Company shall direct, and all rights of the Participant to such shares and as a shareholder with respect thereto shall terminate without further obligation on the part of the Company. A Participant shall have no rights or privileges as a shareholder as to Restricted Stock Units.

(i) Restricted Stock and Restricted Stock Units shall vest, and any applicable Restricted Period shall lapse, in such manner and on such date or dates or upon such event or events as determined by the Committee, including, without limitation, those set forth in Section 5(a) of the Plan; provided, however, that, notwithstanding any such dates or events, the Committee may, in its sole discretion, accelerate the vesting of any Restricted Stock or Restricted Stock Unit or the lapsing of any applicable Restricted Period at any time and for any reason.

(ii) Unless otherwise provided by the Committee, whether in an Award Agreement or otherwise, in the event of a Participant’s Termination for any reason prior to the time that such Participant’s Restricted Stock or Restricted Stock Units, as applicable, have vested, (A) all vesting with respect to such Participant’s Restricted Stock or Restricted Stock Units, as applicable, shall cease and (B) unvested shares of Restricted Stock and unvested Restricted Stock Units, as applicable, 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.

(d) Issuance of Restricted Stock and Settlement of Restricted Stock Units .

(i) Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall issue to the Participant, or the Participant’s beneficiary, without charge, the stock certificate (or, if applicable, a notice evidencing a book-entry notation) evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (rounded down to the nearest full share). Dividends, if any, that may have been withheld by the Committee and attributable to any particular share of Restricted Stock shall be distributed to the Participant in cash or, in the sole discretion of the Committee, in Ordinary Shares having a Fair Market Value (on the date of distribution) equal to the amount of such dividends, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends.

(ii) Unless otherwise provided by the Committee in an Award Agreement or otherwise, upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, the Company shall issue or procure the transfer, to the Participant or the Participant’s beneficiary, without charge, one Ordinary Share (or other securities or other property, as applicable) for each such outstanding Restricted Stock Unit; provided, however, that the Committee may, in its sole discretion, elect to (A) pay cash or part cash and part Ordinary Shares in lieu of issuing only Ordinary Shares in respect of such Restricted Stock Units; or (B) defer the issuance of Ordinary Shares (or cash or part cash and part Ordinary Shares, as the case may be) beyond the expiration of the Restricted Period if such extension would not cause adverse tax consequences under Section 409A of the Code. If a cash payment is made in lieu of issuing Ordinary Shares in respect of such Restricted Stock Units, the amount of such payment shall be equal to the Fair Market Value per Ordinary Share as of the date on which the Restricted Period lapsed with respect to such Restricted Stock Units.

(e) Legends on Restricted Stock . Each certificate, if any, or book entry representing Restricted Stock awarded under the Plan, if any, shall bear a legend or book entry notation substantially in the form of the following, in addition to any other information the Company deems appropriate, until the lapse of all restrictions with respect to such Ordinary Shares:

TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS RESTRICTED PURSUANT TO THE TERMS OF THE GATES INDUSTRIAL CORPORATION PLC 2018 OMNIBUS INCENTIVE PLAN AND A RESTRICTED STOCK AWARD AGREEMENT BETWEEN GATES INDUSTRIAL CORPORATION PLC AND THE PARTICIPANT. A COPY OF SUCH PLAN AND AWARD AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF GATES INDUSTRIAL CORPORATION PLC.

10. Other Equity-Based Awards and Other Cash-Based Awards. The Committee may grant Other Equity-Based Awards and Other Cash-Based Awards under the Plan to Eligible Persons, alone or in tandem with other Awards, in such amounts and dependent on such conditions as the Committee shall from time to time in its sole discretion determine, including, without limitation, those set forth in Section 5(a) of the Plan. Each Other Equity-Based Award granted under the Plan shall be evidenced by an Award Agreement and each Other Cash-Based Award granted under the Plan shall be evidenced in such form as the Committee may determine from time to time. Each Other Equity-Based Award or Other Cash-Based Award, as applicable, so granted shall be subject to such conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement or other form evidencing such Award, including, without limitation, those set forth in Section 13(a) of the Plan.

11. Changes in Capital Structure and Similar Events. Notwithstanding any other provision in the Plan to the contrary, the following provisions shall apply to all Awards granted hereunder (other than Other Cash-Based Awards):

(a) General . In the event of (i) any dividend (other than regular cash dividends) or other distribution (whether in the form of cash, Ordinary Shares, other securities, or other property), recapitalization, share split, reverse share split, reorganization, merger, consolidation, split-up, split-off, spin-off, combination, repurchase, or exchange of Ordinary Shares or other securities of the Company, issuance of warrants or other rights to acquire Ordinary Shares or other securities of the Company, or other similar corporate transaction or event that affects the Ordinary Shares (including a Change in Control), or (ii) unusual or nonrecurring events affecting the Company, including changes in applicable rules, rulings, regulations, or other requirements, that the Committee determines, in its sole discretion, could result in substantial dilution or enlargement of the rights intended to be granted to, or available for, Participants (any event in (i) or (ii), an “ Adjustment Event ”), the Committee shall, in respect of any such Adjustment Event, make such proportionate substitution or adjustment, if any, as it deems equitable, to any or all of (A) the Absolute Share Limit, or any other limit applicable under the Plan with respect to the number of Awards which may be granted hereunder, (B) the number of Ordinary Shares or other securities of the Company (or number and kind of other securities or other property) which may be issued in respect of Awards or with respect to which Awards may be granted under the Plan or any Sub-Plan, and (C) the terms of any outstanding Award, including, without limitation, (I) the number of Ordinary Shares or other securities of the Company (or number and kind of other securities or other property) subject to outstanding Awards or to which outstanding Awards relate, (II) the Exercise Price or Strike Price with respect to any Award, or (III) any applicable performance measures; provided, that in the case of any “equity restructuring” (within the meaning of the Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor pronouncement thereto)), the Committee shall make an equitable or proportionate adjustment to outstanding Awards to reflect such equity restructuring; and provided, further, that, except as otherwise provided by the Committee, whether in an Award Agreement or otherwise, in the event of a Participant’s Termination within the two-year period following a Change in Control by the Service Recipient without Cause (excluding, for the avoidance of doubt, a Termination due to death or Disability or any voluntary Termination by the Participant), all Awards held by the Participant shall become fully vested upon such Termination. Any adjustment under this Section 11 shall be conclusive and binding for all purposes.

(b) Adjustment Events . Without limiting the foregoing, except as may otherwise be provided in an Award Agreement, in connection with any Adjustment Event, the Committee may, in its sole discretion, provide for any one or more of the following:

(i) substitution or assumption of Awards (or awards of an acquiring company), acceleration of the exercisability of, lapse of restrictions on, or termination of Awards, or a period of time (which shall not be required to be more than 10 days) for Participants to exercise outstanding Awards prior to the occurrence of such event (and any such Award not so exercised shall terminate upon the occurrence of such event); and

(ii) subject to any limitations or reductions as may be necessary to comply with Section 409A of the Code, cancellation of any one or more outstanding Awards and payment to the holders of such Awards that are vested as of such cancellation (including, without limitation, any Awards that would vest as a result of the occurrence of such event but for such cancellation or for which vesting is accelerated by the Committee in connection with such event) the value of such Awards, if any, as determined by the Committee (which value, if applicable, may be based upon the price per Ordinary Share received or to be received by other shareholders of the Company in such event), including, without limitation, in the case of an outstanding Option or SAR, a cash payment in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Committee) of the Ordinary Shares subject to such Option or SAR over the aggregate Exercise Price or Strike Price of such Option or SAR (it being understood that, in such event, any Option or SAR having a per share Exercise Price or Strike Price equal to, or in excess of, the Fair Market Value of an Ordinary Share subject thereto may be canceled and terminated without any payment or consideration therefor), or, in the case of Restricted Stock, Restricted Stock Units, or Other Equity-Based Awards that are not vested as of such cancellation, a cash payment or equity subject to deferred vesting and delivery consistent with the vesting restrictions applicable to such Restricted Stock, Restricted Stock Units, or Other Equity-Based Awards prior to cancellation, or the underlying shares in respect thereof.

Payments to holders pursuant to clause (ii) above shall be made in cash or, in the sole discretion of the Committee, in the form of such other consideration necessary for a Participant to receive property, cash, or securities (or combination thereof) as such Participant would have been entitled to receive upon the occurrence of the transaction if the Participant had been, immediately prior to such transaction, the holder of the number of Ordinary Shares covered by the Award at such time (less any applicable Exercise Price or Strike Price).

(c) Other Requirements . Prior to any payment or adjustment contemplated under this Section 11, the Committee may require a Participant to (i) represent and warrant as to the unencumbered title to the Participant’s Awards, (ii) bear such Participant’s pro rata share of any post-closing indemnity obligations, and be subject to the same post-closing purchase price adjustments, escrow terms, offset rights, holdback terms, and similar conditions as the other holders of Ordinary Shares, subject to any limitations or reductions as may be necessary to comply with Section 409A of the Code, and (iii) deliver customary transfer documentation as reasonably determined by the Committee.

(d) Fractional Shares . Any adjustment provided under this Section 11 may provide for the elimination of any fractional share that might otherwise become subject to an Award.

(e) Binding Effect . Any adjustment, substitution, determination of value or other action taken by the Committee under this Section 11 shall be conclusive and binding for all purposes.

12. Amendments and Termination .

(a) Amendment and Termination of the Plan . The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; provided, that no such amendment, alteration, suspension, discontinuance, or termination shall be made without shareholder approval if: (i) such approval is necessary to comply with any regulatory requirement applicable to the Plan (including, without limitation, as necessary to comply with any rules or regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company may be listed or quoted) or for changes in GAAP to new accounting standards; (ii) it would materially increase the number of securities which may be issued under the Plan (except for increases pursuant to Section 5 or 11 of the Plan) or (iii) it would materially modify the requirements for participation in the Plan; provided, further, that any such amendment, alteration, suspension, discontinuance, or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder, or beneficiary. Notwithstanding the foregoing, no amendment shall be made to Section 13(c) of the Plan without shareholder approval.

(b) Amendment of Award Agreements . The Committee may, to the extent consistent with the terms of the Plan and any applicable Award Agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel, or terminate, any Award theretofore granted or the associated Award Agreement, prospectively or retroactively (including after a Participant’s Termination); provided, that, other than pursuant to Section 11, any such waiver, amendment, alteration, suspension, discontinuance, cancellation, or termination that would materially and adversely affect the rights of any Participant with respect to any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant.

(c) No Repricing . Notwithstanding anything in the Plan to the contrary, without shareholder approval, except as otherwise permitted under Section 11 of the Plan, (i) no amendment or modification may reduce the Exercise Price of any Option or the Strike Price of any SAR; (ii) the Committee may not cancel any outstanding Option or SAR and replace it with a new Option or SAR (with a lower Exercise Price or Strike Price, as the case may be) or other Award or cash payment that is greater than the intrinsic value (if any) of the cancelled Option or SAR; and (iii) the Committee may not take any other action which is considered a “repricing” for purposes of the shareholder approval rules of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted.

13. General .

(a) Award Agreements . Each Award (other than an Other Cash-Based Award) under the Plan shall be evidenced by an Award Agreement, which shall be delivered to the Participant to whom such Award was granted and shall specify the terms and conditions of the Award and any rules applicable thereto, including, without limitation, the effect on such Award of the death, Disability, or Termination of a Participant, or of such other events as may be determined by the Committee. For purposes of the Plan, an Award Agreement may be in any such form (written or electronic) as determined by the Committee (including, without limitation, a Board or Committee resolution, an employment agreement, a notice, a certificate, or a letter) evidencing the Award. The Committee need not require an Award Agreement to be signed by the Participant or a duly authorized representative of the Company.

(b) Nontransferability .

(i) Each Award shall be exercisable only by such Participant to whom such Award was granted during the Participant’s lifetime, or, if permissible under applicable law, by the Participant’s legal guardian or representative. No Award may be assigned, alienated, pledged, attached, sold, or otherwise transferred or encumbered by a Participant (unless such transfer is specifically required pursuant to a domestic relations order or by applicable law) other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer, or encumbrance shall be void and unenforceable against any member of the Company Group; provided, that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer, or encumbrance.

(ii) Notwithstanding the foregoing, the Committee may, in its sole discretion, permit Awards (other than Incentive Stock Options) to be transferred by a Participant, without consideration, subject to such rules as the Committee may adopt consistent with any applicable Award Agreement to preserve the purposes of the Plan, to: (A) any person who is a “family member” of the Participant, as such term is used in the instructions to Form S-8 under the Securities Act or any successor form of registration statement promulgated by the Securities and Exchange Commission (collectively, the “Immediate Family Members”); (B) a trust solely for the benefit of the Participant and the Participant’s Immediate Family Members; (C) a partnership or limited liability company whose only partners or shareholders are the Participant and the Participant’s Immediate Family Members; or (D) a beneficiary to whom donations are eligible to be treated as “charitable contributions” for federal income tax purposes (each transferee described in clauses (A), (B), (C), and (D) above is hereinafter referred to as a “Permitted Transferee”); provided, that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of the Plan.

(iii) The terms of any Award transferred in accordance with clause (ii) above shall apply to the Permitted Transferee and any reference in the Plan, or in any applicable Award Agreement, to a Participant shall be deemed to refer to the Permitted Transferee, except that: (A) Permitted Transferees shall not be entitled to transfer any Award, other than by will or the laws of descent and distribution; (B) Permitted Transferees shall not be entitled to exercise any transferred Option unless there shall be in effect a registration statement on an appropriate form covering the Ordinary Shares to be acquired pursuant to the exercise of such Option if the Committee determines, consistent with any applicable Award Agreement, that such a registration statement is necessary or appropriate; (C) neither the Committee nor the Company shall be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the Participant under the Plan or otherwise; and (D) the consequences of a Participant’s Termination under the terms of the Plan and the applicable Award Agreement shall continue to be applied with respect to the Participant, including, without limitation, that an Option shall be exercisable by the Permitted Transferee only to the extent, and for the periods, specified in the Plan and the applicable Award Agreement.

(c) Dividends and Dividend Equivalents . The Committee may, in its sole discretion, provide a Participant as part of an Award with dividends, dividend equivalents, or similar payments in respect of Awards, payable in cash, Ordinary Shares, other securities, other Awards, or other property, on a current or deferred basis, on such terms and conditions as may be determined by the Committee in its sole discretion, including, without limitation, payment directly to the Participant, the transfer of Ordinary Shares from, including but not limited to, the Trustee to the Participant, withholding of such amounts by the Company subject to vesting of the Award, or reinvestment in additional Ordinary Shares, Restricted Stock, or other Awards; provided, that no dividends, dividend equivalents, or other similar payments shall be payable in respect of outstanding (i) Options or SARs or (ii) other unearned Awards subject to Performance Conditions (other than, or in addition to, the passage of time) (although dividends, dividend equivalents, or other similar payments may be accumulated in respect of unearned Awards and paid within 15 days after such Awards are earned and become payable or distributable). Dividends, if any, that may have been withheld by the Committee and attributable to any particular share of Restricted Stock shall be distributed to the Participant in cash or, in the sole discretion of the Committee, in Ordinary Shares having a Fair Market Value (on the date of distribution) equal to the amount of such dividends, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends. Where payment is made in Ordinary Shares, such payment may be satisfied by the transfer of Ordinary Shares by the Trustee to the Participant.

(d) Tax Withholding .

(i) A Participant shall be required to pay to the Company or one or more of its Subsidiaries, as applicable, an amount in cash (by check or wire transfer) equal to the aggregate amount of any income, employment, and/or other applicable taxes and employee and, if applicable, employer social security contributions that are statutorily required to be withheld in respect of an Award. Alternatively, the Company or any of its Subsidiaries may elect, in its sole discretion, to satisfy this requirement by withholding such amount from any cash compensation or other cash amounts owing to a Participant.

(ii) Without limiting the foregoing, the Committee may (but is not obligated to), in its sole discretion, permit or require a Participant to satisfy all or any portion of the 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 by ) way of a settlement procedure effected by the settlement of the Award in a combination of: (i) Ordinary Shares; and (ii) cash, where the amount of cash is sufficient to pay all applicable required withholding and any other applicable taxes required to be withheld.

(iii) The Committee, subject to its having considered the applicable accounting impact of any such determination, has full discretion to allow Participants to satisfy, in whole or in part, any additional income, employment, and/or other applicable taxes and employee and, if applicable, employer social security contributions payable by them with respect to an Award by electing to receive part of the Award in cash, where the amount of cash is equal to the income, employment, and/or other applicable taxes and employee and, if applicable, employer social security contributions that have arisen, with the remainder of the Award being settled in Ordinary Shares.

(e) Data Protection . By participating in the Plan or accepting any rights granted under it, each Participant consents to the collection and processing of personal data relating to the Participant so that the Company and its Affiliates can fulfill their obligations and exercise their rights under the Plan and generally administer and manage the Plan. This data will include, but may not be limited to, data about participation in the Plan and shares offered or received, purchased, or sold under the Plan from time to time and other appropriate financial and other data (such as the date on which the Awards were granted) about the Participant and the Participant’s participation in the Plan.

(f) No Claim to Awards; No Rights to Continued Employment; Waiver . No employee of any member of the Company Group, or other Person, shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award. There is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards. The terms and conditions of Awards and the Committee’s determinations and interpretations with respect thereto need not be the same with respect to each Participant and may be made selectively among Participants, whether or not such Participants are similarly situated. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ or service of the Service Recipient or any other member of the Company Group, nor shall it be construed as giving any Participant any rights to continued service on the Board. The Service Recipient or any other member of the Company Group may at any time dismiss a Participant from employment or discontinue any consulting relationship, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or any Award Agreement. By accepting an Award under the Plan, a Participant shall thereby be deemed to have waived any claim to continued exercise or vesting of an Award or to damages or severance entitlement related to non-continuation of the Award beyond the period provided under the Plan or any Award Agreement, except to the extent of any provision to the contrary in any written employment contract or other agreement between the Service Recipient and/or any member of the Company Group and the Participant, whether any such agreement is executed before, on, or after the Date of Grant.

(g) International Participants . With respect to Participants who reside or work outside of the United States of America, the Committee may, in its sole discretion, amend the terms of the Plan and create or amend Sub-Plans or amend outstanding Awards with respect to such Participants in order to conform such terms with the requirements of local law or to obtain more favorable tax or other treatment for a Participant or any member of the Company Group.

(h) Designation and Change of Beneficiary . Each Participant may file with the Committee a written designation of one or more Persons as the beneficiary or beneficiaries, as applicable, who shall be entitled to receive the amounts payable with respect to an Award, if any, due under the Plan upon the Participant’s death. A Participant may, from time to time, revoke or change the Participant’s beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participant’s death, and in no event shall it be effective as of a date prior to such receipt. If no beneficiary designation is filed by a Participant, the beneficiary shall be deemed to be the Participant’s spouse or, if the Participant is unmarried at the time of death, the Participant’s estate.

(i) Termination . Except as otherwise provided in an Award Agreement, unless determined otherwise by the Committee at any point following such event: (i) neither a temporary absence from employment or service due to illness, vacation, or leave of absence (including, without limitation, a call to active duty for military service through a Reserve or National Guard unit) nor a transfer from employment or service with one Service Recipient to employment or service with another Service Recipient (or vice-versa) shall be considered a Termination; and (ii) if a Participant undergoes a Termination, but such Participant continues to provide services to the Company Group in a non-employee capacity, such change in status shall not be considered a Termination for purposes of the Plan. Further, unless otherwise determined by the Committee, in the event that any Service Recipient ceases to be a member of the Company Group (by reason of sale, divestiture, spin-off, or other similar transaction), unless a Participant’s employment or service is transferred to another entity that would constitute a Service Recipient immediately following such transaction, such Participant shall be deemed to have suffered a Termination hereunder as of the date of the consummation of such transaction.

(j) No Rights as a Shareholder . Except as otherwise specifically provided in the Plan or any Award Agreement, no Person shall be entitled to the privileges of ownership in respect of Ordinary Shares which are subject to Awards hereunder until such shares have been issued or delivered to such Person.

(k) Government and Other Regulations .

(i) The obligation of the Company to settle Awards in Ordinary Shares or other consideration shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell, and shall be prohibited from offering to sell or selling, any Ordinary Shares pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel (if the Company has requested such an opinion), satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale under the Securities Act any of the Ordinary Shares to be offered or sold under the Plan. The Committee shall have the authority to provide that all Ordinary Shares or other securities of any member of the Company Group issued under the Plan shall be subject to such stop‑transfer orders and other restrictions as the Committee may deem advisable under the Plan, the applicable Award Agreement, the Federal securities laws, or the rules, regulations, and other requirements of the Securities and Exchange Commission and any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted, and any other applicable Federal, state, local, or non-U.S. laws, rules, regulations, and other requirements, and, without limiting the generality of Section 9 of the Plan, the Committee may cause a legend or legends to be put on certificates representing Ordinary Shares or other securities of any member of the Company Group issued under the Plan to make appropriate reference to such restrictions or may cause such Ordinary Share or other securities of any member of the Company Group issued under the Plan in book-entry form to be held subject to the Company’s instructions or subject to appropriate stop-transfer orders. Notwithstanding any provision in the Plan to the contrary, the Committee reserves the right to, at any time, add any additional terms or provisions to any Award granted under the Plan that the Committee, in its sole discretion, deems necessary or advisable in order that such Award complies with the legal requirements of any governmental entity to whose jurisdiction the Award is subject.

(ii) The Committee may cancel an Award or any portion thereof if it determines, in its sole discretion, that legal or contractual restrictions and/or blockage and/or other market considerations would make the Company’s acquisition of Ordinary Shares from the public markets, the Company’s issuance of Ordinary Shares to the Participant, the Participant’s acquisition of Ordinary Shares from the Company, and/or the Participant’s sale of Ordinary Shares to the public markets, illegal, impracticable, or inadvisable. If the Committee determines to cancel all or any portion of an Award in accordance with the foregoing, the Company shall, subject to any limitations or reductions as may be necessary to comply with Section 409A of the Code, (A) pay to the Participant an amount equal to the excess of (I) the aggregate Fair Market Value of the Ordinary Shares subject to such Award or portion thereof canceled (determined as of the applicable exercise date, or the date that the shares would have been vested or issued, as applicable), over (II) the aggregate Exercise Price or Strike Price (in the case of an Option or SAR, respectively) or any amount payable as a condition of issuance of Ordinary Shares (in the case of any other Award). Such amount shall be delivered to the Participant as soon as practicable following the cancellation of such Award or portion thereof, or (B) in the case of Restricted Stock, Restricted Stock Units, or Other Equity-Based Awards, provide the Participant with a cash payment or equity subject to deferred vesting and delivery consistent with the vesting restrictions applicable to such Restricted Stock, Restricted Stock Units, or Other Equity-Based Awards, or the underlying shares in respect thereof.

(l) No Section 83(b) Elections Without Consent of Company . No election under Section 83(b) of the Code or under a similar provision of law may be made unless expressly permitted by the terms of the applicable Award Agreement or by action of the Company in writing prior to the making of such election. If a Participant, in connection with the acquisition of Ordinary Shares under the Plan or otherwise, is expressly permitted to make such election and the Participant makes the election, the Participant shall notify the Company of such election within 10 days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to Section 83(b) of the Code or other applicable provision.

(m) Payments to Persons Other Than Participants . If the Committee shall find that any Person to whom any amount is payable under the Plan is unable to care for the Participant’s affairs because of illness or accident, or is a minor, or has died, then any payment due to such Person or the Participant’s estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to the Participant’s spouse, child, relative, an institution maintaining or having custody of such Person, or any other Person deemed by the Committee to be a proper recipient on behalf of such Person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor.

(n) Nonexclusivity of the Plan . Neither the adoption of the Plan by the Board nor the submission of the Plan to the shareholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of equity-based awards otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.

(o) No Trust or Fund Created . Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between any member of the Company Group, on the one hand, and a Participant or other Person, on the other hand. No provision of the Plan or any Award shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company be obligated to maintain separate bank accounts, books, records, or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other service providers under general law.

(p) Reliance on Reports . Each member of the Committee and each member of the Board shall be fully justified in acting or failing to act, as the case may be, and shall not be liable for having so acted or failed to act in good faith, in reliance upon any report made by the independent public accountant of any member of the Company Group and/or any other information furnished in connection with the Plan by any agent of the Company or the Committee or the Board, including any compensation consultant, other than himself or herself.

(q) Relationship to Other Benefits . No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance, or other benefit plan of the Company except as otherwise specifically provided in such other plan or as required by applicable law.

(r) Governing Law . The Plan shall be governed by and construed in accordance with the internal laws of the State of Colorado applicable to contracts made and performed wholly within the State of Colorado, without giving effect to the conflict of laws’ provisions thereof. EACH PARTICIPANT WHO ACCEPTS AN AWARD IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION, OR OTHER PROCEEDING INSTITUTED BY OR AGAINST SUCH PARTICIPANT IN RESPECT OF THE PARTICIPANT’S RIGHTS OR OBLIGATIONS HEREUNDER.

(s) Severability . If any provision of the Plan or any Award or Award Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be construed or deemed stricken as to such jurisdiction, Person, or Award and the remainder of the Plan and any such Award shall remain in full force and effect.

(t) Obligations Binding on Successors . The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation, or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.

(u) Section 409A of the Code .

(i) Notwithstanding any provision of the Plan to the contrary, it is intended that the provisions of the Plan comply with Section 409A of the Code, and all provisions of the Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code. Each Participant is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or in respect of such Participant in connection with the Plan (including any taxes and penalties under Section 409A of the Code), and neither the Service Recipient nor any other member of the Company Group shall have any obligation to indemnify or otherwise hold such Participant (or any beneficiary) harmless from any or all of such taxes or penalties. With respect to any Award that is considered “deferred compensation” subject to Section 409A of the Code, references in the Plan to “termination of employment” (and substantially similar phrases) shall mean “separation from service” within the meaning of Section 409A of the Code. For purposes of Section 409A of the Code, each of the payments that may be made in respect of any Award granted under the Plan is designated as a separate payment.

(ii) Notwithstanding anything in the Plan to the contrary, if a Participant is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, no payments in respect of any Awards that are “deferred compensation” subject to Section 409A of the Code and which would otherwise be payable upon the Participant’s “separation from service” (as defined in Section 409A of the Code) shall be made to such Participant prior to the date that is six months after the date of such Participant’s “separation from service” or, if earlier, the date of the Participant’s death. Following any applicable six-month delay, all such delayed payments will be paid in a single lump sum on the earliest date permitted under Section 409A of the Code that is also a business day.

(iii) Unless otherwise provided by the Committee in an Award Agreement or otherwise, in the event that the timing of payments in respect of any Award (that would otherwise be considered “deferred compensation” subject to Section 409A of the Code) would be accelerated upon the occurrence of (A) a Change in Control, no such acceleration shall be permitted unless the event giving rise to the Change in Control satisfies the definition of a change in the ownership or effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation pursuant to Section 409A of the Code or (B) a Disability, no such acceleration shall be permitted unless the Disability also satisfies the definition of “Disability” pursuant to Section 409A of the Code.

(v) Clawback/Repayment . All Awards shall be subject to reduction, cancellation, forfeiture, or recoupment to the extent necessary to comply with (A) any clawback, forfeiture, or other similar policy adopted by the Board or the Committee and as in effect from time to time, and (B) applicable law. Further, to the extent that the Participant receives any amount in excess of the amount that the Participant should otherwise have received under the terms of the Award for any reason (including, without limitation, by reason of a financial restatement, mistake in calculations, or other administrative error), the Participant shall be required to repay any such excess amount to the Company.

(w) Detrimental Activity . Notwithstanding anything to the contrary contained herein, if a Participant has engaged in any Detrimental Activity, as determined by the Committee, the Committee may, in its sole discretion, provide for one or more of the following:

(i) cancellation of any or all of such Participant’s outstanding Awards; or

(ii) forfeiture by the Participant of any gain realized on the vesting or exercise of Awards, and repayment of any such gain promptly to the Company.

(x) Right of Offset . The Company will have the right to offset against its obligation to deliver Ordinary Shares (or other property or cash) under the Plan or any Award Agreement any outstanding amounts (including, without limitation, travel and entertainment or advance account balances, loans, repayment obligations under any Awards, or amounts repayable to the Company pursuant to tax equalization, housing, automobile, or other employee programs) that the Participant then owes to any member of the Company Group and any amounts the Committee otherwise deems appropriate pursuant to any tax equalization policy or agreement. Notwithstanding the foregoing, if an Award is “deferred compensation” subject to Section 409A of the Code, the Committee will have no right to offset against its obligation to deliver Ordinary Shares (or other property or cash) under the Plan or any Award Agreement if such offset could subject the Participant to the additional tax imposed under Section 409A of the Code in respect of an outstanding Award.

(y) Expenses; Titles and Headings . The expenses of administering the Plan shall be borne by the Company Group. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

United Kingdom Employee Sub-Plan (the “ UK Sub-Plan ”) to the Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan (the “ Plan ”) established in accordance with Section 13(g) of the Plan

The purpose of the UK Sub-Plan is to provide for alterations and amendments to the Plan in respect of its operation in the United Kingdom so as to facilitate the grant of Awards thereunder to Eligible Persons in the United Kingdom.

Words and expressions defined in the Plan shall have the same meaning when used in the UK Sub-Plan, unless otherwise stated herein. The provisions of the Plan shall apply to the provisions of the UK Sub-Plan except where expressly varied herein. References to Sections in the UK Sub-Plan are references to Sections of the Plan. In the event of any discrepancy between the provisions of the Plan and the provisions of the UK Sub-Plan, the provisions of the UK Sub-Plan shall take precedence.

Awards may be granted in accordance with such provisions as would be applicable if the provisions of the Plan were here set out in full, subject to the following modifications:


1.	Section 1 – Purpose

Section 1 shall be amended by the removal of the words shown underlined below and the addition of the words in italics:

Purpose . The purpose of the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan is to provide a means through which the Company and the other members of the Company Group may attract and retain key personnel and to provide a means whereby bona fide employees (including directors , and officers ) , and employees, consultants and advisors of the Company and the other members of the Company Group can acquire and maintain an equity interest in the Company, or be paid incentive compensation, including incentive compensation measured by reference to the value of Ordinary Shares, thereby strengthening their commitment to the welfare of the Company Group and aligning their interests with those of the Company’s shareholders.


2.	Section 2 – Definitions

Section 2(g) shall be amended by the removal of the words shown underlined below:

“ Cause ” means, as to any Participant, unless the applicable Award Agreement states otherwise, (i) “Cause,” as defined in any employment or consulting agreement between the Participant and the Service Recipient or as defined in the Company’s Executive Severance Plan to the extent the Participant participates in such plan, in each case, in effect at the time of such Termination; or (ii) in the absence of any such employment or consulting agreement (or the absence of any definition of “Cause” contained therein), the Participant’s (A) willful neglect in the performance of the Participant’s duties for the Service Recipient or willful or repeated failure or refusal to perform such duties; (B) engagement in conduct in connection with the Participant’s employment or service with the Service Recipient, which results in, or could reasonably be expected to result in, material harm to the business or reputation of the Service Recipient or any other member of the Company Group; (C) conviction of, or plea of guilty or no contest to, (I) any felony or (II) any other crime that results in, or could reasonably be expected to result in, material harm to the business or reputation of the Service Recipient or any other member of the Company Group; (D) material violation of the written policies of the Service Recipient, including, but not limited to, those relating to sexual harassment or the disclosure or misuse of confidential information, or those set forth in the manuals or statements of policy of the Service Recipient; (E) fraud or misappropriation, embezzlement, or misuse of funds or property belonging to the Service Recipient or any other member of the Company Group; or (F) act of personal dishonesty that involves personal profit in connection with the Participant’s employment or service to the Service Recipient; provided , in any case, a Participant’s resignation after an event that would be grounds for a Termination for Cause will be treated as a Termination for Cause hereunder.

Section 2(p) shall be amended by the removal of the words shown underlined below:

“ Disability ” means, as to any Participant, unless the applicable Award Agreement states otherwise, (i) “Disability,” as defined in any employment or consulting agreement between the Participant and the Service Recipient in effect at the time of such Termination; or (ii) in the absence of any such employment or consulting agreement (or the absence of any definition of “Disability” contained therein), a condition entitling the Participant to receive benefits under a long-term disability plan of the Service Recipient or other member of the Company Group in which such Participant is eligible to participate, or, in the absence of such a plan, the complete and permanent inability of the Participant by reason of illness or accident to perform the duties of the position at which the Participant was employed or served when such disability commenced. Any determination of whether Disability exists in the absence of a long-term disability plan shall be made by the Company (or its designee) in its sole and absolute discretion.

Section 2(r) shall be amended by the removal of the words shown underlined and the addition of the words shown in italics below:

“ Eligible Person ” means any (i) individual who is a bona fide employee employed by any member of the Company Group; provided, however , that no such employee covered by a collective bargaining agreement shall be an Eligible Person unless and to the extent that such eligibility is set forth in such collective bargaining agreement or in an agreement or instrument relating thereto; (ii) director or officer of any member of the Company Group who is a bona fide employee ; or (iii) consultant or advisor to any member of the Company Group who may be offered securities registrable pursuant to a registration statement on Form S-8 under the Securities Act, who, in the case of each of clauses (i) through (iii) and (ii) above, has entered into an Award Agreement or who has received written notification from the Committee or its designee that they have been selected to participate in the Plan.

Section 2(vv) shall be amended by the addition of the words shown in italics below:

“ Subsidiary ” means, with respect to any specified Person:

provided always that such corporation, association, other business entity or partnership would fall within the definition of a subsidiary under Section 1159 of the Companies Act 2006.


3.	Section 13 – General

Section 13(b)(ii) shall be amended by the removal of the words shown underlined and the addition of the words shown in italics below:

Notwithstanding the foregoing, the Committee may, in its sole discretion, permit Awards (other than Incentive Stock Options) to be transferred by a Participant, without consideration, subject to such rules as the Committee may adopt consistent with any applicable Award Agreement to preserve the purposes of the Plan, to: (A) any person who is a “family member” of the Participant being the spouses, civil partners, surviving spouses, surviving civil partners, or minor children or step-children of the Participant (collectively, the “Immediate Family Members”); (B) a trust solely for the benefit of the Participant and the Participant’s Immediate Family Members; (C) a partnership or limited liability company whose only partners or shareholders are the Participant and the Participant’s Immediate Family Members; or (D) a beneficiary to whom donations are eligible to be treated as “charitable contributions” for federal income tax purposes (each transferee described in clauses (A), (B), (C), and (D) above is hereinafter referred to as a “ Permitted Transferee ”); provided , that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of the Plan.

The words shown in italics below shall be inserted as a new Section 13(d)(iv):

In the event that at any relevant time a Participant is resident for tax purposes in the United Kingdom and any of the Ordinary Shares to be acquired by, delivered, issued or awarded to such Participant pursuant to an Award fall within the meaning of 'restricted securities' for the purposes of Chapter 2 of Part 7 of the United Kingdom Income Tax (Earnings & Pensions) Act 2003 (“ ITEPA ”), it shall be a condition of such acquisition, delivery, issue or award that the Participant shall, unless the Committee directs otherwise, and no later than 14 days after the acquisition, delivery, issue or award of such Ordinary Shares (or such longer period as Her Majesty's Revenue & Customs in the United Kingdom (“ HMRC ”) may direct), enter into a joint election with the Company (or the Participant's employer company, if different) under section 431(1) of ITEPA (in the form prescribed or agreed by HMRC in order to: (a) disapply all restrictions attaching to such Ordinary Share; and (b) elect to pay income tax (if any) computed by reference to the ‘unrestricted market value’ of the Ordinary Share (as defined in ITEPA).

The words shown in italics below shall be inserted as a new Section 13(f):

FATCA. Each Award shall include a requirement that the Participant irrevocably (i) agrees to give all such assistance and representations and supply or procure to be supplied (including by way of updates) all such information and execute and deliver (or procure the execution and delivery of) all such documents that the Company or any member of the Company Group requests in writing for the purpose of enabling any of the Company or any member of the Company Group to comply with the Foreign Account Tax Compliance Act (“ FATCA ”), any exchange of information agreement (“ IGA ”) or any similar, equivalent or related applicable laws, rules or regulations in any jurisdiction and (ii) authorizes any of the Company or any member of the Company Group to disclose such information to any governmental authorities (including, but not limited to, HMRC in the United Kingdom and the Internal Revenue Service in the USA) if it is required to be disclosed pursuant to FATCA, any IGA or any similar, equivalent or related applicable laws, rules or regulations.

Section 13(f) shall be renumbered as Section 13(g).

The words shown in italics below shall be inserted as a new section 13(h):

Without limiting the generality of Section 13(g), any Participant who leaves the employment or service of a Service Recipient or who otherwise ceases to be a Participant shall not be entitled to any compensation for any loss of any right or benefit or prospective right or benefit under the Plan which he might otherwise have enjoyed whether such compensation is claimed by way of damages for wrongful dismissal or other breach of contract or by way of compensation for loss of office or otherwise howsoever. This exclusion applies equally (and without limitation) to any loss arising from the way in which discretion is (or is not) exercised under the Plan.

Section 13(g) shall be renumbered as Section 13(i).

Section 13(h) shall be renumbered as Section 13(j).

Section 13(i) shall be renumbered as Section 13(k).

Section 13(j) shall be renumbered as Section 13(l).

Section 13(k) shall be renumbered as Section 13(m).

Section 13(l) shall be renumbered as Section 13(n).

Section 13(m) shall be renumbered as Section 13(o).

Section 13(n) shall be renumbered as Section 13(p).

Section 13(o) shall be renumbered as Section 13(q).

Section 13(p) shall be renumbered as Section 13(r).

Section 13(q) shall be renumbered as Section 13(s).

Section 13(r) shall be renumbered as Section 13(t).

Section 13(s) shall be renumbered as Section 13(u).

Section 13(t) shall be renumbered as Section 13(v).

Section 13(u) shall be renumbered as Section 13(w).

Section 13(v) shall be renumbered as Section 13(x).

Section 13(w) shall be renumbered as Section 13(y).

Section 13(x) shall be renumbered as Section 13(z).

Section 13(y) shall be renumbered as Section 13(aa).

The words shown in italics below shall be inserted as a new Section 13(bb):

Rights of Third Parties. It is not intended that any of the terms of this Plan should be enforceable by any third party pursuant to the UK Contract (Rights of Third Parties) Act 1999.

Exhibit 10.2

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 ]


Date of Grant	[ 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 grant date;


•	25% of the shares of Restricted Stock will vest on the second anniversary of the grant date;


•	25% of the shares of Restricted Stock will vest on the third anniversary of the grant date; and


•	the remaining unvested shares of Restricted Stock will vest on the fourth anniversary of the grant 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:

[ Signature Page to Time-Based Restricted Stock Award ]

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

________________________________

[ Signature Page to Time-Based Restricted Stock Award ]

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. Participant consents to having such amount withheld from the Participant’s next paycheck, and acknowledges that this amount will not be returned if the Restricted Stock is forfeited.

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) immediately following such Termination, all 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 10.3

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 ]


Date of Grant :	[ Insert Date of Grant ]

Number of


Restricted Stock Units :	[ Insert No. of Restricted Stock Units 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 grant date or (ii) the next regularly scheduled annual meeting of the stockholders of the Company following the grant date; 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.

* * *

[ Signature Page to Restricted Stock Unit Award (Non-Employee Director) ]

GATES INDUSTRIAL CORPORATION PLC

________________________________

By:

Title:

[ Signature Page to Restricted Stock Unit Award (Non-Employee Director) ]

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

________________________________

[ Signature Page to Restricted Stock Unit Award (Non-Employee Director) ]

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 Ordinary Share). 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 Ordinary Share 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 Ordinary Shares 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 are listed for trading. Such compliance shall include the requirement for the Participant to pay the par value of each Ordinary Share 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) immediately following such Termination, all 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 Ordinary Share 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 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. The Restricted Stock Units shall be entitled to be credited with dividend equivalent payments upon the payment by the Company of dividends on Ordinary Shares. Such dividend equivalents will be provided in Ordinary Shares 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.

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 10.4

RESTRICTED STOCK UNIT GRANT NOTICE
UNDER THE
GATES INDUSTRIAL CORPORATION PLC
2018 OMNIBUS INCENTIVE PLAN
TIME-BASED VESTING AWARD

(Employee)

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 ]


Date of Grant :	[ Insert Date of Grant ]

Number of


Restricted Stock Units :	[ Insert No. of Restricted Stock Units Granted ]


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


•	25% of the Restricted Stock Units will vest on the first anniversary of the grant date;


•	25% of the Restricted Stock Units will vest on the second anniversary of the grant date;


•	25% of the Restricted Stock Units will vest on the third anniversary of the grant date; and


•	the remaining unvested Restricted Stock Units will vest on the fourth anniversary of the grant date;

provided , however , that the Restricted Stock Units 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:

[ Signature Page to Restricted Stock Unit Award (Employee) ]

PARTICIPANT

________________________________

[ Signature Page to Restricted Stock Unit Award -Employee) ]

TIME-BASED RESTRICTED STOCK UNIT AGREEMENT
UNDER THE
GATES INDUSTRIAL CORPORATION PLC
2018 OMNIBUS INCENTIVE PLAN

(Employee)

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, either one Ordinary Share or the cash value of one Ordinary Share 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 Ordinary Shares 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 are listed for trading. Such compliance shall include the requirement for the Participant to pay the par value of each Ordinary Share for each Restricted Stock Unit which has become vested hereunder.

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.

8. Tax Withholding and Payment of Par Value . 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) Ordinary Shares; and (ii) cash, where the amount of cash is sufficient to pay (A) the par value of each Ordinary Share delivered pursuant to the award, and (B) 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.

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.

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. 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.

Exhibit 10.5

STOCK APPRECIATION RIGHT 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 Stock Appreciation Rights in respect of the number of Ordinary Shares set forth below, at a Strike Price per share set forth below. The Stock Appreciation Rights are subject to all of the terms and conditions as set forth herein, in the Stock Appreciation Right 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 ]


Number of Stock Appreciation Rights :	[ Insert Number of Stock Appreciation Rights ]


Strike Price :	[ Insert Strike Price ]


SAR Period Expiration Date :	[ Insert Expiration Date ]


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 Stock Appreciation Rights will vest and become exercisable on the first anniversary of the grant date;


•	25% of the Stock Appreciation Rights will vest and become exercisable on the second anniversary of the grant date;


•	25% of the Stock Appreciation Rights will vest and become exercisable on the third anniversary of the grant date; and


•	the remaining unvested Stock Appreciation Rights will vest and become exercisable on the fourth anniversary of the grant date;

provided , however , that the Stock Appreciation Rights 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:

[ Signature Page Stock Appreciation Right Award ]

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

PARTICIPANT

______________________________

[ Signature Page Stock Appreciation Right Award ]

STOCK APPRECIATION RIGHT AGREEMENT
UNDER THE
GATES INDUSTRIAL CORPORATION PLC
2018 OMNIBUS INCENTIVE PLAN

Pursuant to the Stock Appreciation Right Grant Notice (the “ Grant Notice ”) delivered to the Participant (as defined in the Grant Notice), and subject to the terms of this Stock Appreciation Right Agreement (this “ Stock Appreciation Right 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 Stock Appreciation Rights . Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Participant the number of Stock Appreciation Rights provided in the Grant Notice (in respect of the number of Ordinary Shares as provided in the Grant Notice), at a Strike Price per share as provided in the Grant Notice. The Company reserves all rights with respect to the granting of additional Stock Appreciation Rights hereunder and makes no implied promise to grant additional Stock Appreciation Rights.

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

3. Exercise of Stock Appreciation Rights 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 Stock Appreciation Rights granted to such Participant shall immediately terminate and expire; (b) a Participant’s Termination due to death or Disability, each outstanding unvested Stock Appreciation Right granted to such Participant shall immediately fully vest and become exercisable, and each outstanding vested Stock Appreciation Right shall remain exercisable for one year thereafter (but in no event beyond the expiration of the SAR Period); (c) a Participant’s voluntary Termination of employment, each outstanding unvested Stock Appreciation Right granted to such Participant shall immediately terminate and expire, and each outstanding vested Stock Appreciation Right shall remain exercisable for 60 days thereafter (but in no event beyond the expiration of the SAR Period); and (d) a Participant’s Termination for any other reason, each outstanding unvested Stock Appreciation Right granted to such Participant shall immediately terminate and expire, and each outstanding vested Stock Appreciation Right shall remain exercisable for 90 days thereafter (but in no event beyond the expiration of the SAR Period).

4. Method of Exercising Stock Appreciation Rights . The Stock Appreciation Rights may be exercised by the delivery of notice of the number of Stock Appreciation Rights that are being 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 Stock Appreciation Rights under the Plan, in the case of either (a) or (b), as communicated to the Participant by the Company from time to time.

5. Settlement of Stock Appreciation Rights . Following the exercise of a Stock Appreciation Right hereunder, as promptly as practical after receipt of such notification, the Stock Appreciation Rights will be settled, by delivery to the Participant of an amount in cash or its equivalent (i.e., by check) equal to the product of (a) the number of Ordinary Shares in respect of such exercised Stock Appreciation Right and (b) the excess, if any, of (i) the Fair Market Value of one Ordinary Share on the date of the exercise notice over (ii) the Strike Price of such Stock Appreciation Rights, subject to Section 9 of this Stock Appreciation Right Agreement.

6. Company; Participant .

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

(b) Whenever the word “Participant” is used in any provision of this Stock Appreciation Right 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 Stock Appreciation Rights 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 Stock Appreciation Rights 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

Stock Appreciation Rights, 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 Stock Appreciation Rights shall terminate and become of no further effect.

8. No Rights as Shareholder . The Participant or a Permitted Transferee of the Stock Appreciation Rights shall have no rights as a shareholder with respect to any Ordinary Share covered by an Stock Appreciation Right and shall have none of the rights or privileges of a shareholder of the Company (including the right to vote or receive dividends) in respect of Stock Appreciation Rights subject to the Grant Notice.

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 Stock Appreciation Right 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 Stock Appreciation Right Agreement does not confer upon the Participant any right to continue as an employee or service provider to the Company.

12. Binding Effect . This Stock Appreciation Right 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 Stock Appreciation Right 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 Stock Appreciation Rights or (ii) requiring that the Participant forfeit any gain realized on the exercise of the Stock Appreciation Rights 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 Stock Appreciation Right 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 Stock Appreciation Rights shall be subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with applicable law.

15. Governing Law . This Stock Appreciation Right 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 Stock Appreciation Right 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 Stock Appreciation Right 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 Stock Appreciation Right Agreement (including the Grant Notice), the Plan shall govern and control.

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 September 29, 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:	November 2, 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 September 29, 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:	November 2, 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 September 29, 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:	November 2, 2018

/s/ David H. Naemura
David H. Naemura
Chief Financial Officer
(Principal Financial Officer)
Date:	November 2, 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.