10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 28, 2020

or

☐ 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 No.)

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)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary Shares, $0.01 par value per share	GTES	New York Stock Exchange

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 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.  ☐

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

As of May 1, 2020, there were 290,721,974 ordinary shares of $0.01 par value outstanding.

1

TABLE OF CONTENTS

Part I – Financial Information
Item 1.	Financial Statements (unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	42
Item 4.	Controls and Procedures	42
Part II – Other Information
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 6.	Exhibits	45
Signatures		45

2

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 or implied by our forward-looking statements, including but not limited to the factors described in Item 1A. “Risk Factors” in Part II of this quarterly report, and in Item 1A. “Risk Factors” in Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2019 (the “annual report”), as filed with the Securities and Exchange Commission (the “SEC”), which include the following: the duration and severity of and governmental, market and individual responses to the novel coronavirus (“COVID-19”) pandemic, conditions in the global and regional economy and the major end markets we serve; economic, political and other risks associated with international operations, including exchange rate fluctuations; 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; 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; insurance coverage of future losses we may incur; lives of products used in our end markets as well as the development of replacement markets; our ability to successfully integrate 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 shareholders, affiliates of The Blackstone Group Inc., over us, as such factors may be updated from time to time in the Company’s periodic filings with the SEC. Investors are urged to consider carefully the disclosure in this report and our other 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.

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 United States of America (the “United States” or “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, unless the context requires otherwise, to Gates Industrial Corporation plc and its consolidated subsidiaries; and

•“Blackstone” or “our Sponsor” refer to investment funds affiliated with The Blackstone Group Inc., which, although no individual fund owns a controlling interest in us, together represent 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
(dollars in millions, except per share amounts)	March 28, 2020		March 30, 2019
Net sales	$	710.1	$	804.9
Cost of sales	454.3		497.6
Gross profit	255.8		307.3
Selling, general and administrative expenses	193.4		200.5
Transaction-related (income) expenses	(0.2)		0.4
Restructuring expenses	1.9		3.3
Other operating expenses	2.3		2.9
Operating income from continuing operations	58.4		100.2
Interest expense	36.7		38.1
Other income	(2.1)		(3.3)
Income from continuing operations before taxes	23.8		65.4
Income tax benefit	(16.1)		(539.7)
Net income from continuing operations	39.9		605.1
Loss on disposal of discontinued operations, net of tax, respectively, of $0 and $0	—		0.3
Net income	39.9		604.8
Less: non-controlling interests	4.3		(8.9)
Net income attributable to shareholders	$	35.6	$	613.7
Earnings per share
Basic
Earnings per share from continuing operations	$	0.12	$	2.12
Earnings per share from discontinued operations	—		—
Earnings per share	$	0.12	$	2.12
Diluted
Earnings per share from continuing operations	$	0.12	$	2.08
Earnings per share from discontinued operations	—		—
Earnings per share	$	0.12	$	2.08

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
(dollars in millions)	March 28, 2020		March 30, 2019
Net income	$	39.9	$	604.8
Other comprehensive (loss) income
Foreign currency translation:
––Net translation (loss) gain on foreign operations, net of tax expense, respectively, of $0 and $0.2	(207.0)		27.2
––Gain on net investment hedges, net of tax expense, respectively, of $0 and $0	4.0		5.6
Total foreign currency translation movements	(203.0)		32.8
Cash flow hedges (Interest rate derivatives):
––Loss arising in the period, net of tax benefit, respectively, of $2.5 and $2.1	(13.4)		(11.2)
––Reclassification to net income, net of tax expense, respectively, of $0 and $0	1.7		0.1
Total cash flow hedges movements	(11.7)		(11.1)
Post-retirement benefits:
––Reclassification of prior year actuarial movements to net income, net of tax benefit, respectively, of $0 and $0.1	(0.1)		—
Total post-retirement benefit movements	(0.1)		—
Other comprehensive (loss) income	(214.8)		21.7
Comprehensive (loss) income for the period	$	(174.9)	$	626.5
Comprehensive (loss) income attributable to shareholders:
—(Loss) income arising from continuing operations	$	(171.8)	$	628.3
—Loss arising from discontinued operations	—		(0.3)
	(171.8)		628.0
Comprehensive income attributable to non-controlling interests	(3.1)		(1.5)
	$	(174.9)	$	626.5

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 March 28,2020		As of December 28,2019
Assets
Current assets
Cash and cash equivalents	$	626.3	$	635.3
Trade accounts receivable	717.2		694.7
Inventories	484.4		475.1
Taxes receivable	32.5		22.1
Prepaid expenses and other assets	137.5		131.4
Total current assets	1,997.9		1,958.6
Non-current assets
Property, plant and equipment, net	683.0		727.9
Goodwill	1,957.7		2,060.5
Pension surplus	36.2		38.1
Intangible assets, net	1,809.9		1,876.0
Operating lease right-of-use assets	118.3		123.0
Taxes receivable	24.1		23.0
Deferred income taxes	542.4		587.1
Other non-current assets	15.3		17.1
Total assets	$	7,184.8	$	7,411.3
Liabilities and equity
Current liabilities
Debt, current portion	$	54.9	$	46.1
Trade accounts payable	383.0		374.7
Taxes payable	26.5		48.5
Accrued expenses and other current liabilities	203.3		188.8
Total current liabilities	667.7		658.1
Non-current liabilities
Debt, less current portion	2,901.9		2,912.3
Post-retirement benefit obligations	146.8		151.2
Lease liabilities	111.8		116.2
Taxes payable	104.8		108.8
Deferred income taxes	322.7		369.3
Other non-current liabilities	87.7		84.7
Total liabilities	4,343.4		4,400.6
Commitments and contingencies (note 18)
Shareholders’ equity
—Shares, par value of $0.01 each - authorized shares: 3,000,000,000 ; outstanding shares: 290,666,538 (December 28, 2019: authorized shares: 3,000,000,000; outstanding shares: 290,157,299)	2.9		2.9
—Additional paid-in capital	2,440.1		2,434.5
—Accumulated other comprehensive loss	(1,065.8)		(858.4)
—Retained earnings	1,107.6		1,072.0
Total shareholders’ equity	2,484.8		2,651.0
Non-controlling interests	356.6		359.7
Total equity	2,841.4		3,010.7
Total liabilities and equity	$	7,184.8	$	7,411.3

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

5

Gates Industrial Corporation plc

Unaudited Condensed Consolidated Statements of Cash Flows

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Cash flows from operating activities
Net income	$	39.9	$	604.8
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization	54.9		56.1
Non-cash currency transaction gain on debt and hedging instruments	(5.3)		(13.6)
Other net non-cash financing costs	8.2		13.1
Share-based compensation expense	2.9		2.6
Decrease in post-employment benefit obligations, net	(1.8)		(2.4)
Deferred income taxes	3.7		(624.4)
Other operating activities	2.7		2.4
Changes in operating assets and liabilities, net of effects of acquisitions:
—Increase in accounts receivable	(42.1)		(46.1)
—Increase in inventories	(27.5)		(21.3)
—Increase (decrease) in accounts payable	19.5		(25.8)
—Increase in prepaid expenses and other assets	(6.1)		(12.4)
—(Decrease) increase in taxes payable	(38.3)		51.7
—Increase (decrease) in other liabilities	20.4		(32.4)
Net cash provided by (used in) operations	31.1		(47.7)
Cash flows from investing activities
Purchases of property, plant and equipment	(12.1)		(21.3)
Purchases of intangible assets	(2.8)		(1.6)
Cash paid under corporate-owned life insurance policies	(9.8)		(9.5)
Cash received under corporate-owned life insurance policies	—		0.7
Other investing activities	0.1		—
Net cash used in investing activities	(24.6)		(31.7)
Cash flows from financing activities
Issuance of shares, net of underwriting costs	2.1		1.2
Payments of long-term debt	(6.2)		(12.7)
Debt issuance costs paid	(0.3)		—
Dividends paid to non-controlling interests	—		(1.8)
Other financing activities	1.5		0.2
Net cash used in financing activities	(2.9)		(13.1)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(12.9)		2.8
Net decrease in cash and cash equivalents and restricted cash	(9.3)		(89.7)
Cash and cash equivalents and restricted cash at the beginning of the period	636.6		424.6
Cash and cash equivalents and restricted cash at the end of the period	$	627.3	$	334.9
Supplemental schedule of cash flow information
Interest paid	$	25.5	$	51.4
Income taxes paid, net	$	18.5	$	33.0
Accrued capital expenditures	$	1.9	$	0.4

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

6

Gates Industrial Corporation plc

Unaudited Condensed Consolidated Statements of Shareholders’ Equity

	Three months ended March 28, 2020
(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 28, 2019	$	2.9	$	2,434.5	$	(858.4)	$	1,072.0	$	2,651.0	$	359.7	$	3,010.7
Net income	—		—		—		35.6		35.6		4.3		39.9
Other comprehensive loss	—		—		(207.4)		—		(207.4)		(7.4)		(214.8)
Total comprehensive (loss) income	—		—		(207.4)		35.6		(171.8)		(3.1)		(174.9)
Other changes in equity:
—Issuance of shares	—		1.9		—		—		1.9		—		1.9
—Share-based compensation	—		3.7		—		—		3.7		—		3.7
As of March 28, 2020	$	2.9	$	2,440.1	$	(1,065.8)	$	1,107.6	$	2,484.8	$	356.6	$	2,841.4

	Three months ended March 30, 2019
(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 29, 2018	$	2.9	$	2,416.9	$	(854.3)	$	381.9	$	1,947.4	$	386.3	$	2,333.7
Net income (loss)	—		—		—		613.7		613.7		(8.9)		604.8
Other comprehensive income	—		—		14.3		—		14.3		7.4		21.7
Total comprehensive income (loss)	—		—		14.3		613.7		628.0		(1.5)		626.5
Other changes in equity:
—Issuance of shares	—		1.2		—		—		1.2		—		1.2
—Share-based compensation	—		2.5		—		—		2.5		—		2.5
—Dividends paid to non-controlling interests	—		—		—		—		—		(1.8)		(1.8)
As of March 30, 2019	$	2.9	$	2,420.6	$	(840.0)	$	995.6	$	2,579.1	$	383.0	$	2,962.1

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.

In these condensed consolidated financial statements and related notes, all references to “Gates,” “we,” “us,” and “our” refer, unless the context requires otherwise, to Gates Industrial Corporation plc and its consolidated subsidiaries.

B. Accounting periods

The Company prepares its annual consolidated financial statements for the period ending on the Saturday nearest December 31. Accordingly, the condensed consolidated balance sheet is presented as of March 28, 2020 and December 28, 2019 and the related condensed consolidated statements of operations, comprehensive income, cash flows, and shareholders’ equity are presented, where relevant, for the 91 day period from December 29, 2019 to March 28, 2020, with comparative information for the 91 day period from December 30, 2018 to March 30, 2019.

C. Basis of preparation

The condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are presented in U.S. dollars unless otherwise indicated. The condensed consolidated financial statements and related notes contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position as of March 28, 2020 and the results of its operations and cash flows for the periods ended March 28, 2020 and March 30, 2019. Interim period results are not necessarily indicative of the results to be expected for the full fiscal year.

The first quarter of 2020 marked the beginning of an unprecedented environment for the global economy, as governments, companies and communities implemented strict measures to minimize the spread of the novel coronavirus (“COVID-19”) pandemic. As a result of the unpredictable and evolving impact of the pandemic and measures being taken around the world to combat its spread, the timing and trajectory of the recovery are unclear at this time, and the adverse impact of the pandemic on the Company’s operations may be material but cannot be reasonably estimated at this time.

The preparation of consolidated financial statements under U.S. GAAP requires us to make assumptions and estimates concerning the future that affect the reported amounts of assets, liabilities, revenue and expenses. Estimates and assumptions are particularly important in accounting for items such as revenue, rebates, impairment of long-lived assets, intangible assets and goodwill, inventory valuation, financial instruments, expected credit losses, product warranties, income taxes and post-retirement benefits.

Due to the inherent uncertainty involved in making assumptions and estimates, events and changes in circumstances arising after March 28, 2020, including those resulting from the impacts of the COVID-19 pandemic, may result in actual outcomes that differ from those contemplated by our assumptions and estimates.

These condensed consolidated financial statements are unaudited and, except as noted below, have been prepared on substantially the same basis as Gates’ audited annual consolidated financial statements and related notes for the year ended December 28, 2019. The condensed consolidated balance sheet as of December 28, 2019 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 28, 2019 included in the Company’s Annual Report on Form 10-K.

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 2020 fiscal year of the following new Accounting Standard Updates (each, an “ASU”):

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

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•ASU 2020-02 “Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842)”

In June 2016, the Financial Accounting Standards Board (“FASB”) issued an ASU which broadens the information that an entity must consider when developing its expected credit loss estimate for financial assets. The measurement of expected credit losses should be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. 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. On transition, no cumulative-effect adjustment was recognized to retained earnings.

Our businesses develop their expected loss estimates based either on the aging profile of outstanding receivables or by applying a preset experience factor (either a percentage of sales or a percentage of open receivables). These methodologies are based primarily on historical trends and experience, but credit controllers also regularly assess individual customer accounts to identify any potential increases or decreases in the level of expected credit loss needed to be applied to each customer based on current circumstances and future expectations.

Before accepting a new customer, we assess their credit quality and establish a credit limit. Credit quality is assessed by using data maintained by reputable credit rating agencies, by checking of references included in credit applications and, where they are available, by reviewing the customer’s recent financial statements. Credit limits are subject to multiple levels of authorization and are reviewed on a regular basis.

Although Gates has a wide variety of customers from multinational original equipment manufacturers and distributors to small family-owned businesses, the majority of our sales are generated from large companies with low credit risk. Recent global developments related to the COVID-19 pandemic and its impact on our customers’ ability to pay us are being closely monitored and taken into account in the determination of our expected credit loss estimates.

The following ASUs that were also adopted on the first day of the 2020 fiscal year did not have a significant impact on our results, financial position or disclosures:

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

• 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

2. Recent accounting pronouncements not yet adopted

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

•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 2019-12 “Simplifying the Accounting for Income Taxes” (Topic 740): Income Taxes

In December 2019, the FASB issued an ASU to simplify and reduce the complexity of general principles in Topic 740: Income Taxes. Such simplifications include the elimination of certain exceptions to: 1) the incremental approach for intraperiod tax allocation, 2) the requirement to recognize a deferred income tax liability for equity method investments when a foreign subsidiary becomes an equity method investment, 3) the ability not to recognize a deferred income tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary, and 4) the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.

9

The amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The ASU provides for a number of different approaches to applying the changes, depending on the amendment, from full retrospective to modified retrospective to fully prospective. The impact on our consolidated financial statements of adopting this ASU is still being evaluated.

•ASU 2020-04 “Reference Rate Reform” (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

In March 2020, the FASB issued an ASU to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The amendments in this update are effective as of March 12, 2020 through December 31, 2022. As certain of our debt uses LIBOR or EURIBOR as a benchmark for establishing the rate of interest, and we apply hedge accounting in respect of derivatives to manage interest and currency risks associated with our debt, we expect that this ASU will have an impact on our consolidated financial statements, but this is still being evaluated.

3. Segment information

A. Background

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. The chief executive officer (“CEO”) of Gates serves as the chief operating decision maker. These decisions are based on net sales and Adjusted EBITDA (defined below).

B. Operating segments and segment assets

Gates manufactures a wide range of power transmission and fluid power products and components for a large variety of industrial and automotive applications, both in the aftermarket and 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.

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.

C. Segment net sales and disaggregated net sales

Sales between reporting segments and the impact of such sales on Adjusted EBITDA for each segment are not included in internal reports presented to the CEO and have therefore not been included below.

	Net Sales
	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Power Transmission	$	441.2	$	499.5
Fluid Power	268.9		305.4
Continuing operations	$	710.1	$	804.9

Our commercial function is organized by region and therefore, in addition to reviewing net sales by our reporting segments, the CEO also reviews net sales information disaggregated by region, including between emerging and developed markets.

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

	Net Sales
	Three months ended
	March 28, 2020				March 30, 2019
(dollars in millions)	Power Transmission		Fluid Power		Power Transmission		Fluid Power
U.S.	$	137.7	$	139.7	$	152.9	$	157.1
North America, excluding U.S.	40.3		41.7		42.0		46.6
United Kingdom (“U.K.”)	11.4		6.9		11.7		10.8
EMEA(1), excluding U.K.	129.2		44.0		133.3		47.2
East Asia and India	65.2		17.4		73.6		20.5
Greater China	44.3		13.0		68.9		15.1
South America	13.1		6.2		17.1		8.1
Net Sales	$	441.2	$	268.9	$	499.5	$	305.4

⁽¹⁾ Europe, Middle East and Africa (“EMEA”).

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

	Net Sales
	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Developed	$	475.8	$	543.7
Emerging	234.3		261.2
Net Sales	$	710.1	$	804.9

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 (income) 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 (income) expenses incurred in relation to business combinations and major corporate transactions, including acquisition integration activities;

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

•restructuring expenses, including severance-related expenses;

•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.

Adjusted EBITDA by segment was as follows:

	Adjusted EBITDA
	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Power Transmission	$	79.5	$	109.9
Fluid Power	41.3		55.6
Continuing operations	$	120.8	$	165.5

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Reconciliation of net income from continuing operations to Adjusted EBITDA:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Net income from continuing operations	$	39.9	$	605.1
Income tax benefit	(16.1)		(539.7)
Income from continuing operations before taxes	23.8		65.4
Interest expense	36.7		38.1
Other income	(2.1)		(3.3)
Operating income from continuing operations	58.4		100.2
Depreciation and amortization	54.9		56.1
Transaction-related (income) expenses (1)	(0.2)		0.4
Restructuring expenses	1.9		3.3
Share-based compensation expense	2.9		2.6
Sponsor fees (included in other operating expenses)	1.7		1.8
Severance-related expenses (included in cost of sales)	0.1		—
Severance-related expenses (benefits) (included in SG&A)	0.5		(0.2)
Other items not directly related to current operations	0.6		1.3
Adjusted EBITDA	$	120.8	$	165.5

⁽¹⁾ Transaction-related (income) expenses relate primarily to advisory fees and other costs recognized in respect of major corporate transactions, including the acquisition of businesses and debt refinancings.

4. Restructuring and other strategic initiatives

Gates continues to undertake various restructuring and other strategic initiatives to drive increased productivity in all aspects of our operations. These actions include efforts to consolidate our manufacturing and distribution footprint, scale operations to current demand levels, combine back-office workgroups and relocate certain operations to lower cost locations. Our recently completed manufacturing footprint investments and other productivity improvements in recent years have helped to position us to accelerate and expand upon our previously announced restructuring program, which is primarily intended to optimize our manufacturing and distribution footprint over the mid-term by removing structural fixed costs, and, to a lesser degree, to streamline our selling, general and administrative (“SG&A”) back-office functions.

Overall costs associated with our restructuring and other strategic initiatives have been recognized in the condensed consolidated statements as set forth below. Expenses incurred in relation to certain of these actions qualify as restructuring expenses under U.S. GAAP.

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Restructuring expenses:
—Severance	$	0.2	$	2.6
—Professional fees	0.2		0.6
—Other restructuring expenses	1.5		0.1
Total restructuring expenses	$	1.9	$	3.3
Expenses related to other strategic initiatives:
—Severance costs included in cost of sales	$	0.1	$	—
—Severance costs (benefits) included in SG&A	0.5		(0.2)
Total expenses related to other strategic initiatives	$	0.6	$	(0.2)

Restructuring and other strategic initiatives undertaken during the three months ended March 28, 2020 related primarily to the closure of two North American manufacturing facilities and reductions in workforce, primarily in the U.S. and Asia. Expenses incurred during

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the prior year in connection with our restructuring and other strategic initiatives related primarily to the closure of one of our facilities in France and a strategic restructuring of part of our Asian business.

Restructuring activities

As indicated above, restructuring expenses, as defined under U.S. GAAP, form a subset of our total expenses related to restructuring and other strategic initiatives. These expenses include the impairment of inventory, which is recognized in cost of sales. Analyzed by segment, our restructuring expenses were as follows:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Power Transmission	$	0.2	$	2.9
Fluid Power	1.7		0.4
Continuing operations	$	1.9	$	3.3

The following summarizes the reserve for restructuring expenses for the three months ended March 28, 2020 and March 30, 2019, respectively:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Balance as of the beginning of the period	$	2.9	$	2.6
Utilized during the period	(2.0)		(2.0)
Net charge for the period	2.4		3.3
Released during the period	(0.5)		—
Foreign currency translation	0.1		(0.1)
Balance as of the end of the period	$	2.9	$	3.8

Restructuring reserves, which are expected to be utilized in 2020 and 2021, are included in the condensed consolidated balance sheet within the accrued expenses and other current liabilities line.

5. Income taxes

We compute the year-to-date income tax provision by applying our estimated annual effective tax rate to our year-to-date pre-tax income and adjust for discrete tax items in the period in which they occur.

For the three months ended March 28, 2020, we had an income tax benefit of $16.1 million on pre-tax income of $23.8 million, which resulted in an effective tax rate of (67.6)%, compared with an income tax benefit of $539.7 million on pre-tax income of $65.4 million, which resulted in an effective tax rate of (825.2)% for the three months ended March 30, 2019.

The increase in the effective tax rate for the three months ended March 28, 2020 compared with the prior year period was due primarily to the recognition in the prior year of a discrete benefit of $617.3 million related to the release of valuation allowances, mainly related to Luxembourg net operating losses, partially offset by a discrete expense of $66.1 million related primarily to unrecognized tax benefits from the European business reorganization. The current year rate is driven mainly by discrete tax benefits of $24.7 million, related to the reversal of unrecognized tax benefits, net of settlement amounts, arising from the resolution of audits in Canada and Germany and $3.2 million from law changes in India with respect to the taxation of dividends. These current period benefits were offset partially by $6.3 million of discrete expenses arising from the enactment in the U.S. of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).

Deferred Tax Assets and Liabilities

We recognize deferred tax assets and liabilities for future tax consequences arising from differences between the carrying amounts of existing assets and liabilities under U.S. GAAP and their respective tax bases, and for net operating loss carryforwards and tax credit carryforwards. We evaluate the recoverability of our deferred tax assets, weighing all positive and negative evidence, and are required to establish or maintain a valuation allowance for these assets if we determine that it is more likely than not that some or all of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which the evidence can be objectively verified. If negative evidence exists, positive evidence is necessary to support a conclusion that a valuation allowance is not needed.

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Our framework for assessing the recoverability of deferred tax assets requires us to weigh all available evidence, including:

•taxable income in prior carry back years if carry back is permitted under the relevant tax law;

•future reversal of existing temporary differences;

•tax-planning strategies that are prudent and feasible; and

•future taxable income exclusive of reversing temporary differences and carryforwards.

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

Significant Events

On March 27, 2020, the CARES Act was enacted and signed into law in the U.S. in response to the COVID-19 pandemic. One of the provisions of this law is an increase to the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income for the 2019 and 2020 tax years. This modification significantly increases the current deductible interest expense of the Company for both years, which will result in a cash benefit while increasing our effective tax rate through requirements to allocate and apportion interest expense for certain other tax purposes, including in determining our global intangible low-taxed income inclusion, deduction for foreign derived intangible income, and the utilization of foreign tax credits.

6. Earnings per share

Basic earnings per share represents net income attributable to shareholders divided by the weighted average number of shares outstanding during the period. Diluted earnings 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.

The computation of earnings per share is presented below:

	Three months ended
(dollars in millions, except share numbers and per share amounts)	March 28, 2020		March 30, 2019
Net income attributable to shareholders	$	35.6	$	613.7
Weighted average number of shares outstanding	290,609,974		289,928,526
Dilutive effect of share-based awards	1,501,279		4,733,387
Diluted weighted average number of shares outstanding	292,111,253		294,661,913
Basic earnings per share	$	0.12	$	2.12
Diluted earnings per share	$	0.12	$	2.08

For the three months ended March 28, 2020 and March 30, 2019, shares totaling 5,508,174 and 3,809,508 shares, respectively, were excluded from the diluted earnings per share calculation because they were anti-dilutive.

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7. Inventories

(dollars in millions)	As of March 28,2020		As of December 28, 2019
Raw materials and supplies	$	120.6	$	118.9
Work in progress	36.9		33.6
Finished goods	326.9		322.6
Total inventories	$	484.4	$	475.1

8. Goodwill

(dollars in millions)	Power Transmission		Fluid Power		Total
Cost and carrying amount
As of December 28, 2019	$	1,377.5	$	683.0	$	2,060.5
Foreign currency translation	(53.0)		(49.8)		(102.8)
As of March 28, 2020	$	1,324.5	$	633.2	$	1,957.7

9. Intangible assets

	As of March 28, 2020						As of December 28, 2019
(dollars in millions)	Cost		Accumulated amortization and impairment		Net		Cost		Accumulated amortization and impairment		Net
Finite-lived:
—Customer relationships	$	1,964.8	$	(667.2)	$	1,297.6	$	2,021.8	$	(656.3)	$	1,365.5
—Technology	90.4		(87.8)		2.6		90.8		(87.8)		3.0
—Capitalized software	81.8		(41.5)		40.3		76.1		(38.0)		38.1
	2,137.0		(796.5)		1,340.5		2,188.7		(782.1)		1,406.6
Indefinite-lived:
—Brands and trade names	513.4		(44.0)		469.4		513.4		(44.0)		469.4
Total intangible assets	$	2,650.4	$	(840.5)	$	1,809.9	$	2,702.1	$	(826.1)	$	1,876.0

During the three months ended March 28, 2020, the amortization expense recognized in respect of intangible assets was $32.2 million, compared with $32.6 million for the three months ended March 30, 2019. In addition, movements in foreign currency exchange rates resulted in a decrease in the net carrying value of total intangible assets of $38.4 million for the three months ended March 28, 2020, compared with an increase of $3.3 million for the three months ended March 30, 2019.

10. 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 other comprehensive income (“OCI”) and reclassified into net income in the same period or periods during which the hedged transaction affects earnings.

Derivative instruments that have not been designated in an effective hedging relationship are considered economic hedges, and their change in fair value is recognized in net income in each period.

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The period end fair values of derivative financial instruments were as follows:

	As of March 28, 2020										As of December 28, 2019
(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	$	2.2	$	—	$	—	$	(14.8)	$	(12.6)	$	4.2	$	—	$	—	$	(19.3)	$	(15.1)
—Interest rate caps	—		—		(2.5)		(2.6)		(5.1)		—		—		(4.0)		(3.0)		(7.0)
—Interest rate swaps	—		—		(11.8)		(38.5)		(50.3)		—		—		(5.3)		(29.0)		(34.3)
Derivatives not designated as hedging instruments:
—Currency swaps	0.1		—		(0.7)		—		(0.6)		—		—		(0.1)		—		(0.1)
—Currency forward contracts	0.6		—		(0.3)		—		0.3		1.2		—		(0.2)		—		1.0
	$	2.9	$	—	$	(15.3)	$	(55.9)	$	(68.3)	$	5.4	$	—	$	(9.6)	$	(51.3)	$	(55.5)

A. Instruments designated as net investment hedges

We hold cross currency swaps that have been designated as net investment hedges of certain of our European operations. As of March 28, 2020 and December 28, 2019, the notional principal amount of these contracts was $270.0 million. During July 2019, we extended the maturity of these contracts from March 2020 to March 2022. In addition, we have designated €147.0 million of our Euro-denominated debt as a net investment hedge of certain of our European operations.

The fair value gains before tax recognized in OCI in relation to the instruments designated as net investment hedging instruments were as follows:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Net fair value gains recognized in OCI in relation to:
—Euro-denominated debt	$	1.5	$	0.7
—Designated cross currency swaps	2.5		4.9
Total net fair value gains	$	4.0	$	5.6

During the three months ended March 28, 2020, a net loss of $1.6 million was recognized in interest expense in relation to our cross currency swaps that have been designated as net investment hedges, compared with a net gain of $2.2 million during the three months ended March 30, 2019.

B. Instruments designated as cash flow hedges

We use interest rate swaps and interest rate caps as part of our interest rate risk management strategy to add stability to interest expense and to manage our exposure to interest rate movements. These instruments are all designated as cash flow hedges. As of March 28, 2020 and December 28, 2019, we held 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. Our interest rate caps involve the receipt of variable rate payments from a counterparty if interest rates rise above the strike rate on the contract in exchange for a premium. As of both March 28, 2020 and December 28, 2019, the notional amount of the interest rate cap contracts outstanding was $1.7 billion.

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The periods covered by our interest rate caps and their notional values are as follows:

(in millions)	Notional value
June 30, 2017 to June 30, 2020	$	200.0
June 28, 2019 to June 30, 2020	$	1,000.0
July 1, 2019 to June 30, 2023	€	425.0

The movements before tax recognized in OCI in relation to our cash flow hedges were as follows:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Movement recognized in OCI in relation to:
—Fair value loss on cash flow hedges	$	(15.9)	$	(13.3)
—Deferred premium reclassified from OCI to net income	1.7		0.1
Total movement	$	(14.2)	$	(13.2)

During the three months ended March 28, 2020, a net expense of $1.7 million was reclassified to interest expense in relation to our cash flow hedges, compared with net expense of $0.1 million during the three months ended March 30, 2019.

C. Derivative instruments not designated as hedging instruments

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, or the currency swap contracts that are used to manage the currency profile of Gates’ cash as hedging instruments for the purposes of hedge accounting.

As of March 28, 2020, the notional principal amount of outstanding currency swaps that are used to manage the currency profile of Gates’ cash was $32.3 million, compared with $16.7 million as of December 28, 2019.

As of March 28, 2020, the notional amount of outstanding currency forward contracts that are used to manage operational foreign exchange exposures was $64.3 million, compared with $82.5 million as of December 28, 2019.

The fair value gains recognized in net income in relation to derivative instruments that have not been designated as hedging instruments were as follows:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Fair value gains recognized in relation to:
—Currency forward contracts recognized in SG&A	$	0.3	$	2.7
—Currency swaps recognized in other income	0.5		0.2
Total	$	0.8	$	2.9

11. 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); and

•“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.

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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 March 28, 2020				As of December 28, 2019
(dollars in millions)	Carrying amount		Fair value		Carrying amount		Fair value
Current	$	54.9	$	44.8	$	46.1	$	45.9
Non-current	2,901.9		2,490.5		2,912.3		2,946.8
	$	2,956.8	$	2,535.3	$	2,958.4	$	2,992.7

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. The fair values of the term loans are derived from a market price, discounted for illiquidity. 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 their quoted market price.

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

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

(dollars in millions)	Quoted prices in active markets (Level 1)		Significant observable inputs (Level 2)		Total
As of March 28, 2020
Equity investments	$	1.0	$	—	$	1.0
Derivative assets	$	—	$	2.9	$	2.9
Derivative liabilities	$	—	$	(71.2)	$	(71.2)
As of December 28, 2019
Equity investments	$	1.1	$	—	$	1.1
Derivative assets	$	—	$	5.4	$	5.4
Derivative liabilities	$	—	$	(60.9)	$	(60.9)

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 derivative 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.

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

Gates has non-recurring fair value measurements related to certain assets, including goodwill, intangible assets, and property, plant, and equipment. No significant impairment was recognized during either the three months ended March 28, 2020 or the three months ended March 30, 2019.

12. Debt

(dollars in millions)	As of March 28,2020		As of December 28,2019
Secured debt:
—Dollar Term Loan	$	1,694.8	$	1,699.1
—Euro Term Loan	709.5		717.7
Unsecured debt:
—6.25% Dollar Senior Notes due 2026	568.0		568.0
—Other loans	0.1		0.2
Total principal of debt	2,972.4		2,985.0
Deferred issuance costs	(39.7)		(41.8)
Accrued interest	24.1		15.2
Total carrying value of debt	2,956.8		2,958.4
Debt, current portion	54.9		46.1
Debt, less current portion	$	2,901.9	$	2,912.3

Gates’ secured debt is jointly and severally, irrevocably and fully and unconditionally guaranteed by certain of its subsidiaries and is 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.

Dollar and Euro Term Loans

Our 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. 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 our option, LIBOR plus an applicable margin.

The Dollar Term Loan interest rate is currently LIBOR, subject to a floor of 1.00%, plus a margin of 2.75%, and as of March 28, 2020, borrowings under this facility bore interest at a rate of 4.35% per annum. The Dollar Term Loan interest rate is re-set on the last business day of each month. As of March 28, 2020, the Euro Term Loan bore interest at EURIBOR, which is currently below 0%, subject to a floor of 0%, plus a margin of 3.00%. The Euro Term Loan interest rate is re-set on the last business day of each quarter.

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 three months ended March 28, 2020, we made amortization payments against the Dollar Term Loan and the Euro Term Loan of $4.3 million and $1.8 million, respectively. During the three months ended March 30, 2019, we made amortization payments against the Dollar Term Loan and the Euro Term Loan of $8.7 million and $3.6 million, respectively.

Under the terms of the credit agreement, we are obligated 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 2019 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 is required to be made in 2020.

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During the periods presented, foreign exchange gains 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 our Euro investments, a corresponding portion of the foreign exchange gains (losses) were recognized in OCI.

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Gain recognized in statement of operations	$	4.9	$	13.4
Gain recognized in OCI	1.5		0.7
Total gain	$	6.4	$	14.1

The above net foreign exchange gains recognized in the other expenses (income) line of the condensed consolidated statement of operations have been substantially offset by net foreign exchange movements on Euro-denominated intercompany loans as part of our overall hedging strategy.

A wholly-owned U.S. subsidiary of Gates Global LLC is the principal obligor under the Term Loans for U.S. federal income tax purposes and makes the payments due on this tranche of debt. As a result, interest received by lenders of this tranche of debt is U.S. source income.

Unsecured Senior Notes

As of March 28, 2020, we had $568.0 million of Dollar Senior Notes outstanding that were issued in November 2019. These notes are scheduled to mature on January 15, 2026 and bear interest at an annual fixed rate of 6.25% with semi-annual interest payments.

On and after January 15, 2022, we may redeem the Dollar Senior Notes, at our 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:

	Redemption Price
During the year commencing:
—2023	103.125	%
—2024	101.563	%
—2025 and thereafter	100.000	%

Additionally, net cash proceeds from an equity offering can be utilized at any time prior to January 15, 2022, to redeem up to 40% of the notes at a redemption price equal to 106.250% of the principal amount thereof, plus accrued and unpaid interest through to the redemption date.

Upon the occurrence of a change of control or a certain qualifying asset sale, the holders of the notes will have the right to require us to make an offer to repurchase each holder's notes at a price equal to 101% (in the case of a change of control) or 100% (in the case of an asset sale) of their principal amount, plus accrued and unpaid interest.

Revolving credit facility

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, with a letter of credit sub-facility of $20.0 million. The facility matures on January 29, 2023.

As of both March 28, 2020 and December 28, 2019, there were no 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 our option, LIBOR, plus an applicable margin.

Asset-backed revolver

We have a revolving credit facility backed by certain of our assets in North America. The facility allows for loans of up to a maximum of $325.0 million ($301.2 million as of March 28, 2020, compared with $294.6 million as of December 28, 2019, 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. The facility matures on January 29, 2023.

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As of both March 28, 2020 and December 28, 2019, there were no drawings for cash under the asset-backed revolver, but there were letters of credit outstanding of $45.9 million and $50.1 million, respectively.

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 our option, LIBOR, plus an applicable margin.

13. 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 March 28, 2020						Three months ended March 30, 2019
(dollars in millions)	Pensions		Other post-retirement benefits		Total		Pensions		Other post-retirement benefits		Total
Reported in operating income:
—Employer service cost	$	1.4	$	—	$	1.4	$	1.4	$	—	$	1.4
Reported outside of operating income:
—Interest cost	4.6		0.4		5.0		5.9		0.6		6.5
—Expected return on plan assets	(5.5)		—		(5.5)		(7.0)		—		(7.0)
—Net amortization of prior period losses (gains)	0.3		(0.3)		—		0.2		(0.3)		(0.1)
—Settlements and curtailments	—		—		—		(0.7)		—		(0.7)
Net periodic benefit cost	$	0.8	$	0.1	$	0.9	$	(0.2)	$	0.3	$	0.1
Contributions	$	1.7	$	1.2	$	2.9	$	1.5	$	1.0	$	2.5

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 (income) line in the condensed consolidated statement of operations.

For 2020 as a whole, we expect to contribute approximately $4.3 million to our defined benefit pension plans and approximately $5.5 million to our other post-retirement benefit plans.

14. Share-based compensation

The Company operates a share-based incentive plan over its shares to provide incentives to Gates’ senior executives and other eligible employees. During the three months ended March 28, 2020, we recognized a charge of $2.9 million, compared with $2.6 million during the three months ended March 30, 2019.

Share-based incentive awards issued under the 2014 Omaha Topco Ltd. Stock Incentive Plan

Gates has a number of awards issued under the 2014 Omaha Topco Ltd. Stock Incentive Plan, which was assumed by the Company and renamed the Gates Industrial Corporation plc Stock Incentive Plan in connection with our initial public offering in January 2018. No new awards have been granted under this plan since 2017. The options are split equally into four tiers, each with specific vesting conditions. Tier I options vest evenly over 5 years from the grant date, subject to the participant continuing to provide service to Gates on the vesting date. Tier II, III and IV options vest on achievement of specified investment returns by our majority owners, who are various investment funds managed by affiliates of The Blackstone Group Inc. (“Blackstone” or our “Sponsor”), at the time of a defined liquidity event, which is also subject to the participant’s continued provision of service to Gates on the vesting date. The performance conditions associated with Tiers II, III and IV must be achieved on or prior to July 3, 2022 in order for vesting to occur. All the options expire ten years after the date of grant.

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Due to Chinese regulatory restrictions on foreign stock ownership, awards granted under this plan to Chinese employees have been issued as stock appreciation rights (“SARs”). The terms of these SARs are identical to those of the options described above with the exception that no share is issued on exercise; instead, cash equivalent to the increase in the value of the shares from the date of grant to the date of exercise is paid to the employee. These awards are therefore treated as liability awards under Topic 718 “Compensation - Stock Compensation” and are revalued to their fair value at each period end.

In addition to the above, in 2017, under the same plan, the Company issued 76,293 restricted stock units (“RSUs”). These RSUs vest evenly over three years from the date of grant, subject to the participant’s continued provision of service to Gates on the vesting date. The awards expire ten years after the date of grant, in December 2027.

Changes in the awards granted under this plan are summarized in the tables below.

Share-based incentive awards issued under the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan

In conjunction with the initial public offering in January 2018, Gates adopted a new equity-based compensation plan, which is a market-based long-term incentive program that allows for the issue of a variety of equity-based and cash-based awards, including stock options, SARs and RSUs.

The SARs and the majority of the share options issued under this plan vest evenly over either three years or four years from the grant date. The remainder of the options, the premium-priced options, vest evenly over a three year period, starting two years from the grant date. All options vest subject to the participant’s continued employment by Gates on the vesting date and expire ten years after the date of grant.

The RSUs issued under the plan consist of time-vesting RSUs and performance-based RSUs (“PRSUs”). The time-vesting RSUs vest evenly over either one or three years from the date of grant, subject to the participant’s continued provision of service to Gates on the vesting date. The PRSUs provide that 50% of the award will generally vest if Gates achieves a certain level of average annual adjusted return on invested capital as defined in the plan (“Adjusted ROIC”) and the remaining 50% of the PRSUs will generally vest if Gates achieves certain relative total shareholder return (“Relative TSR”) goals, in each case, measured over a three year performance period and subject to the participant’s continued employment through the end of the performance period. The total number of PRSUs that vest at the end of the performance period will range from 0% to 200% of the target based on actual performance against a pre-established scale.

New awards and movements in existing awards granted under this plan are summarized in the tables below.

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Summary of movements in options outstanding

	Three months ended
	March 28, 2020
	Number of options	Weighted average exercise price $
Outstanding at the beginning of the period:
—Tier I	3,825,855	$	7.07
—Tier II	4,405,340	$	7.01
—Tier III	4,405,340	$	7.01
—Tier IV	4,405,340	$	10.52
—SARs	772,450	$	8.72
—Share options	1,610,485	$	16.69
—Premium-priced options	796,460	$	19.00
	20,221,270	$	9.09
Granted during the period:
—SARs	69,361	$	12.08
—Share options	1,193,114	$	12.55
	1,262,475	$	12.52
Forfeited during the period:
—Tier I	(86,581)	$	6.74
—Tier II	(404,446)	$	6.63
—Tier III	(404,446)	$	6.63
—Tier IV	(404,446)	$	9.94
—Share options	(89,803)	$	16.46
	(1,389,722)	$	8.24
Exercised during the period:
—Tier I	(318,607)	$	6.60
	(318,607)	$	6.60
Outstanding at the end of the period:
—Tier I	3,420,667	$	7.12
—Tier II	4,000,894	$	7.05
—Tier III	4,000,894	$	7.05
—Tier IV	4,000,894	$	10.58
—SARs	841,811	$	9.00
—Share options	2,713,796	$	14.88
—Premium-priced options	796,460	$	19.00
	19,775,416	$	9.42
Exercisable at the end of the period	3,080,858	$	8.79
Vested and expected to vest at the end of the period	7,714,079	$	11.24

As of March 28, 2020, the aggregate intrinsic value of options that were vested or expected to vest was $2.5 million and these options had a weighted average remaining contractual term of 7.3 years. As of March 28, 2020, the aggregate intrinsic value of options that were exercisable was $1.9 million and these options had a weighted average remaining contractual term of 6.0 years.

As of March 28, 2020, the unrecognized compensation charge relating to the nonvested options other than Tier II, Tier III and Tier IV options, was $12.7 million, which is expected to be recognized over a weighted-average period of 2.5 years. The unrecognized compensation charge relating to the nonvested Tier II, Tier III and Tier IV options was $26.3 million, which will be recognized on occurrence of a liquidity event as described above.

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During the three months ended March 28, 2020, cash of $2.1 million was received in relation to the exercise of vested options, compared with $1.2 million during the three months ended March 30, 2019. The aggregate intrinsic value of options exercised during the three months ended March 28, 2020 was $2.0 million, compared with $1.7 million during the three months ended March 30, 2019.

Summary of movements in RSUs and PRSUs outstanding

	Three months ended
	March 28, 2020
	Number of awards	Weighted average grant date fair value $
Outstanding at the beginning of the period:
—RSUs	718,269	$	16.20
—PRSUs	248,550	20.07
	966,819	$	17.20
Granted during the period:
—RSUs	1,126,523	$	12.01
—PRSUs	365,258	14.41
	1,491,781	$	12.60
Forfeited during the period:
—RSUs	(35,135)	$	16.46
—PRSUs	(28,552)	20.07
	(63,687)	$	18.08
Vested during the period:
—RSUs	(218,556)	$	16.41
	(218,556)	$	16.41
Outstanding at the end of the period:
—RSUs	1,591,101	$	13.20
—PRSUs	585,256	16.53
	2,176,357	$	14.10

As of March 28, 2020, the unrecognized compensation charge relating to nonvested RSUs and PRSUs was $24.3 million, which is expected to be recognized over a weighted average period of 2.5 years, subject, where relevant, to the achievement of the performance conditions described above. The total fair value of RSUs and PRSUs vested during the three months ended March 28, 2020 was $2.7 million, compared with $0.2 million during the three months ended March 30, 2019.

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Valuation of awards granted during the period

The grant date fair value of the options and SARs was measured using a Black-Scholes valuation model. RSUs are valued at the share price on the date of grant. The premium-priced options and PRSUs were valued using Monte Carlo simulations. As Gates only has volatility data for its shares for the period since its initial public offering, this volatility has been weighted with the debt-levered volatility of a peer group of public companies in order to determine the expected volatility over the expected option life. The expected option life represents the period of time for which the options are expected to be outstanding and is based on consideration of the contractual life of the option, option vesting period, and historical exercise patterns. The weighted average fair values and relevant assumptions were as follows:

	Three months ended
	March 28, 2020			March 30, 2019
Grant date fair value:
—SARs	$	4.59		$	5.88
—Share options	$	4.78		$	5.88
—Premium-priced options	n/a			$	5.65
—RSUs	$	12.01		$	16.46
—PRSUs	$	14.41		$	20.07
Inputs to the model:
—Expected volatility - SARs	37.7		%	31.9		%
—Expected volatility - share options	37.6		%	31.9		%
—Expected volatility - premium-priced options	n/a			31.9		%
—Expected volatility - PRSUs	40.4		%	32.8		%
—Expected option life for SARs	6.0			6.0
—Expected option life for share options	6.0			6.0
—Expected option life for premium-priced options	n/a			7.0
—Risk-free interest rate:
SARs	1.25		%	2.51		%
Share options	1.33		%	2.51		%
Premium-priced options	n/a			2.53		%
PRSUs	1.29		%	2.48		%

15. Equity

Movements in the Company’s number of shares in issue for the three months ended March 28, 2020 and March 30, 2019, respectively, were as follows:

	Three months ended
(number of shares)	March 28, 2020	March 30, 2019
Balance as of the beginning of the period	290,157,299	289,847,574
Exercise of share options	318,607	190,034
Vesting of restricted stock units, net of withholding taxes	190,632	5,812
Balance as of the end of the period	290,666,538	290,043,420

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

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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)	Post- retirement benefit		Cumulative translation adjustment		Cash flow hedges		Accumulated OCI attributable to shareholders		Non- controlling interests		Accumulated OCI
As of December 28, 2019	$	(9.3)	$	(812.3)	$	(36.8)	$	(858.4)	$	(46.0)	$	(904.4)
Foreign currency translation	1.2		(196.8)		—		(195.6)		(7.4)		(203.0)
Cash flow hedges movements	—		—		(11.7)		(11.7)		—		(11.7)
Post-retirement benefit movements	(0.1)		—		—		(0.1)		—		(0.1)
Other comprehensive income (loss)	1.1		(196.8)		(11.7)		(207.4)		(7.4)		(214.8)
As of March 28, 2020	$	(8.2)	$	(1009.1)	$	(48.5)	$	(1065.8)	$	(53.4)	$	(1119.2)

(dollars in millions)	Post- retirement benefit		Cumulative translation adjustment		Cash flow hedges		Accumulated OCI attributable to shareholders		Non- controlling interests		Accumulated OCI
As of December 29, 2018	$	7.6	$	(850.0)	$	(11.9)	$	(854.3)	$	(43.6)	$	(897.9)
Foreign currency translation	—		25.4		—		25.4		7.4		32.8
Cash flow hedges movements	—		—		(11.1)		(11.1)		—		(11.1)
Other comprehensive income (loss)	—		25.4		(11.1)		14.3		7.4		21.7
As of March 30, 2019	$	7.6	$	(824.6)	$	(23.0)	$	(840.0)	$	(36.2)	$	(876.2)

17. Related party transactions

A. Entities affiliated with Blackstone

In January 2018, Gates and 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 new Transaction and Monitoring Fee Agreement (the “New Monitoring Fee Agreement”). Under this agreement, Gates Industrial Corporation plc 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 March 28, 2020, Gates incurred $1.7 million, compared with $1.8 million during the prior year period, in respect of these oversight services and out-of-pocket expenses, of which there was no amount owing at March 28, 2020 or December 28, 2019.

Monitoring fee obligations under the New Monitoring Fee Agreement terminated in January 2020 upon the second anniversary of the closing date of the initial public offering of Gates.

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In addition, in connection with the initial public offering, we entered into a new Support and Services Agreement with BMP, under which Gates Industrial Corporation plc 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. This agreement 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.

B. Equity method investees

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

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Sales	$	0.3	$	0.3
Purchases	$	(3.6)	$	(4.1)

Amounts outstanding in respect of these transactions were payables of $0.2 million as of March 28, 2020, compared with $0.2 million as of December 28, 2019. During the three months ended March 28, 2020, we received dividends of $0 from our equity method investees, compared with $0 in the prior year period.

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

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

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Sales	$	12.5	$	13.4
Purchases	$	(5.1)	$	(5.4)

Amounts outstanding in respect of these transactions were as follows:

(dollars in millions)	As of March 28,2020		As of December 28,2019
Receivables	$	4.6	$	4.2
Payables	$	(5.3)	$	(5.9)

D. Majority-owned subsidiaries

During 2019, we finalized an agreement with the non-controlling interest holder in certain of our consolidated, majority-owned subsidiaries, regarding the scope of business of such subsidiaries, which resulted in a smaller share of net income allocated to non-controlling interests. This change was retrospectively effective from the beginning of 2019 and included a one-time adjustment of $15.0 million, which was recorded in the first quarter of 2019.

18. Commitments and contingencies

A. Performance bonds, letters of credit and bank guarantees

As of March 28, 2020, letters of credit totaling $45.9 million were outstanding against the asset-backed revolving facility, compared with $50.1 million as of December 28, 2019. Gates had additional outstanding performance bonds, letters of credit and bank guarantees amounting to $3.9 million, compared with $4.1 million as of December 28, 2019.

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B. Contingencies

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

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

C. Warranties

The following summarizes the movements in the warranty liability for the three months ended March 28, 2020 and March 30, 2019, respectively:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Balance as of the beginning of the fiscal year	$	17.7	$	14.3
Charge for the period	4.2		2.6
Payments made	(2.6)		(2.2)
Released during the period	(0.8)		—
Foreign currency translation	(0.2)		0.1
Balance as of the end of the period	$	18.3	$	14.8

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Item 2: Management’s Discussion and Analysis

of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the 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, Part I, Item 1A. “Risk Factors” in our annual report and Part II, Item 1A. “Risk Factors” below.

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 often 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, and remain, highly correlated with industrial activity and utilization and not with any single end market given the diversification of our business and high exposure to replacement 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.

During the three months ended March 28, 2020, sales into replacement channels accounted for approximately 63% of our total net sales. Our replacement sales cover a very broad range of applications and industries and, accordingly, are highly correlated with industrial activity and utilization and not a single end market. Replacement products are principally sold through distribution partners that may carry a very broad line of products or may specialize in products associated with a smaller set of end market applications.

During the three months ended March 28, 2020, sales into first-fit channels accounted for approximately 37% of our total net sales. First-fit sales are to a variety of industrial and automotive customers. 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 7% of our total net sales for the three months ended March 28, 2020, 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 consolidated net sales have had any meaningful correlation to global automotive production but are positively correlated to industrial production.

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Our recently completed manufacturing footprint investments and other productivity improvements in recent years have helped to position us to continue to make progress on our restructuring program, which is primarily intended to optimize our manufacturing and distribution footprint over the mid-term by removing structural fixed costs and, to a lesser degree, to streamline our selling, general and administrative (“SG&A”) back-office functions. We anticipate that most of the costs associated with these actions will be incurred during 2020 and 2021. Some of these costs will, in accordance with U.S. GAAP, be classified in cost of sales, negatively impacting gross margin, but due to their nature and impact of hindering comparison of the performance of our businesses on a period-over-period basis or with other businesses, they will be excluded from Adjusted EBITDA, consistent with the treatment of similar costs in the current and prior years.

Impact of COVID-19 Pandemic

The first quarter of 2020 marked the beginning of an unprecedented environment for the global economy, as governments, companies and communities implemented strict measures to minimize the spread of the COVID-19 pandemic. We are prioritizing the health and safety of our employees and the communities around the world in which we operate, taking additional protective measures in our plants to safely maintain operational continuity in support of our global customer base.

In early February, as our business in China was being impacted, we mobilized a centralized crisis response team that developed and is tactically engaged in the implementation of our countermeasure actions across our global footprint. We are adhering to local government mandates and guidance provided by health authorities and have proactively implemented quarantine protocols, social distancing policies, working from home arrangements, travel suspensions, frequent and extensive disinfecting of our workspaces, provision of personal protective equipment, and mandatory temperature monitoring at our facilities. We expect to continue to implement these measures and we may take further actions if required or recommended by government authorities or if we determine them to be in the best interests of our employees, customers, and suppliers.

Our operations are supported largely by local supply chains. Where necessary, we have taken steps to qualify additional suppliers to ensure we are able to maintain continuity of supply. Although we have not experienced any significant disruptions to date, certain of our suppliers have, or may in the future, temporarily close operations, delay order fulfillment or limit production due to the pandemic. Continued disruptions, shipping delays or insolvency of key vendors in our supply chain could make it difficult or more costly for us to obtain the raw materials or other inputs we need for our operations.

Gates employs an in-region, for-region manufacturing strategy, under which local operations primarily support local demand. In those cases where local production supports demand in other regions, contingency plans have been activated as appropriate. In addition to the handful of plants that were temporarily closed by government mandates, we have proactively managed our output to expected demand levels and occasionally suspended production at other plants for short periods of time. We may continue to experience these production disruptions, which could place constraints on our ability to produce our products and meet customer demand. Of these temporary closures in the first quarter, the most significant for us was in Greater China, where we closed all of our production facilities for approximately three weeks. We have since safely returned these plants to more normalized capacity. Our two largest regions of Europe and North America did not begin to see an impact from COVID-19 until late March. With large portions of the economies in these regions having effectively been shut down since the beginning of April, we expect the second quarter to be the most difficult of the year, with core revenue likely to sequentially decline in the range of 15-25% compared with the first quarter.

As shelter-in-place requirements ease and there is continued progress in the fight against COVID-19, we expect the second half of the year to improve sequentially from the second quarter. Given the magnitude of the decline we expect to experience in the first half of the year and the different rates of demand recovery we believe we will see across different end markets and geographies, we expect the full year to result in a revenue decline compared with the prior year. Reflecting the progress we made last year in right-sizing the business, we would expect our full-year decremental margin to be an improvement from what we saw in 2019, despite the relatively unexpected and significant decline in revenue as a result of the pandemic.

We have strength and flexibility in our liquidity position, which includes committed borrowing headroom of $440.3 million under our lines of credit (none of which are currently expected to be drawn in the foreseeable future), in addition to cash balances of $626.3 million as of March 28, 2020. Our business also has a demonstrated ability to generate free cash flow even in challenging environments.

As a result of the unpredictable and evolving impact of the pandemic and measures being taken around the world to combat its spread, the timing and trajectory of the recovery are unclear at this time, and the adverse impact of the pandemic on Gates’ operations may be material. In addition, see Item 1A. “Risk Factors” in Part II of this quarterly report for updates to our risk factors regarding risks associated with the COVID-19 pandemic.

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Despite this highly uncertain environment, our experience in China and subsequently has helped frame our response to this crisis and our focus in 2020 will continue to be on:

•safely supporting our employees, customers and the communities in which we operate;

•actively managing what we can control in terms of our supply chains and operations;

•managing our compressible spending to the prevailing demand conditions by tightly controlling discretionary spending; and

•funding our key growth initiatives to enhance our differentiation in the market and allow us to emerge from this downturn in an even stronger competitive position.

Results for the three months ended March 28, 2020 compared with the results for the three months ended March 30, 2019

Summary Gates Performance

	Three months ended
(dollars in millions)	March 28, 2020			March 30, 2019
Net sales	$	710.1		$	804.9
Cost of sales	454.3			497.6
Gross profit	255.8			307.3
Selling, general and administrative expenses	193.4			200.5
Transaction-related (income) expenses	(0.2)			0.4
Restructuring expenses	1.9			3.3
Other operating expenses	2.3			2.9
Operating income from continuing operations	58.4			100.2
Interest expense	36.7			38.1
Other income	(2.1)			(3.3)
Income from continuing operations before taxes	23.8			65.4
Income tax benefit	(16.1)			(539.7)
Net income from continuing operations	$	39.9		$	605.1
Adjusted EBITDA(1)	$	120.8		$	165.5
Adjusted EBITDA margin	17.0		%	20.6		%

⁽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.

Net sales

Net sales during the three months ended March 28, 2020 were $710.1 million, down by 11.8%, or $94.8 million, compared with net sales during the prior year period of $804.9 million. Please see “—Analysis by Operating Segment” for a discussion of changes in net sales for each of our segments. Our net sales for the three months ended March 28, 2020 were adversely impacted by movements in average currency exchange rates of $13.7 million compared with the prior year period, due principally to the strengthening of the U.S. dollar against a number of currencies, including the Euro and the Brazilian Real. Excluding this impact, core sales decreased by $81.1 million, or 10.1%, during the three months ended March 28, 2020 compared with the prior year period. This decrease was due primarily to lower volumes.

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Core sales in our Power Transmission and Fluid Power businesses declined by 9.8% and 10.6%, respectively, for the three months ended March 28, 2020. These declines came from sales to both our industrial and automotive customers, and in almost every region, due to slowing demand driven by the impact of the COVID-19 pandemic. These declines were primarily concentrated in sales to first-fit customers, which declined globally by 14.9% during the three months ended March 28, 2020 compared with the prior year period, while sales into the replacement channels declined by 7.0% during the same period. During the three months ended March 28, 2020, sales in North America were down by 9.2%, driven by an 18.3% decrease in sales to industrial first-fit customers, while overall sales in Greater China were lower by 30.1%, primarily the result of a 44.5% decline in automotive first-fit sales. Industrial sales were particularly weak in the construction and general industrial end markets, which declined globally by 15.3% and 11.0%, respectively, during the three months ended March 28, 2020 compared with the prior year period, primarily in North America. Greater China sales into the automotive end market were down by 38.9% during the three months ended March 28, 2020 compared with the prior year period, primarily due to the impact of approximately three weeks of production shutdown as a result of the measures taken in response to the COVID-19 pandemic. Automotive end market sales in EMEA were 3.7% higher during the three months ended March 28, 2020 compared with the prior year period, but declines in sales into the construction and general industrial end markets in EMEA more than offset this growth.

Cost of sales

Cost of sales for the three months ended March 28, 2020 was $454.3 million, a decrease of 8.7%, or $43.3 million, compared with $497.6 million for the prior year period. The decrease was driven primarily by lower volumes of $39.4 million and favorable movements in average currency exchange rates of $9.2 million. These decreases were offset primarily by $12.9 million from lower manufacturing performance driven by the lower absorption of fixed costs on lower production volumes and some excess variable costs as we continued to adjust our production costs to the current demand levels.

Gross profit

As a result of the factors described above, gross profit for the three months ended March 28, 2020 was $255.8 million, down 16.8% from $307.3 million for the prior year period. Our gross profit margin accordingly dropped by 220 basis points to 36.0% for the three months ended March 28, 2020, down from 38.2% for the prior year period.

Selling, general and administrative expenses

SG&A expenses for the three months ended March 28, 2020 were $193.4 million compared with $200.5 million for the prior year period. This decrease of $7.1 million was driven primarily by favorable legal settlements of $4.5 million as well as lower outbound freight due to lower volumes, and travel cost savings due to measures put in place in response to the COVID-19 pandemic.

Transaction-related (income) expenses

Transaction-related income for the three months ended March 28, 2020 was $0.2 million compared with an expense of $0.4 million for the prior year period. The net income for the three months ended March 28, 2020 related primarily to discounts on professional services in relation to a terminated acquisition project. The transaction-related expenses incurred in the prior year period related primarily to corporate transactions.

Restructuring expenses

As described further under the “Business Trends” section of this report, we are accelerating and expanding upon our previously announced restructuring program, which is primarily intended to optimize our manufacturing and distribution footprint over the mid-term by removing structural fixed costs, and, to a lesser degree, to streamline our SG&A back-office functions.

Restructuring expenses of $1.9 million were recognized during the three months ended March 28, 2020, related primarily to the closure of two North American manufacturing facilities and reductions in workforce, primarily in the U.S. and Asia. Restructuring expenses of $3.3 million were recognized during the prior year period, relating primarily to the closure of one of our facilities in France and a strategic restructuring of part of our Asian business.

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Interest expense

Our interest expense was as follows:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Debt:
Dollar Term Loan	$	18.8	$	20.7
Euro Term Loan	5.7		5.6
Dollar Senior Notes	8.8		8.6
	33.3		34.9
Amortization of deferred issuance costs	2.4		2.5
Other interest expense	1.0		0.7
	$	36.7	$	38.1

Details of our long-term debt are presented in note 12 to the condensed consolidated financial statements included elsewhere in this report. Interest on debt for the three months ended March 28, 2020 decreased when compared with the equivalent prior year period due primarily to the lower interest rates applicable on the floating rate Dollar Term Loan.

Other income

Our other income were as follows:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Interest income on bank deposits	$	(2.0)	$	(1.1)
Foreign currency loss (gain) on net debt and hedging instruments	0.3		(0.9)
Net adjustments related to post-retirement benefits	(0.5)		(1.3)
Other	0.1		—
	$	(2.1)	$	(3.3)

Other income for the three months ended March 28, 2020 was $2.1 million, compared with an expense of $3.3 million in the prior year period. This change was driven primarily by the impact on our net debt of movements in the Euro relative to the U.S. dollar. Lower expected returns on plan assets based on the most recent actuarial valuations also drove some of the decrease in other income during the three months ended March 28, 2020 compared with the prior year period, but this was offset by higher interest income on bank deposits due to the higher average cash balance on hand.

Income tax expense

We compute the year-to-date income tax provision by applying our estimated annual effective tax rate to our year-to-date pre-tax income and adjust for discrete tax items in the period in which they occur.

For the three months ended March 28, 2020, we had an income tax benefit of $16.1 million on pre-tax income of $23.8 million, which resulted in an effective tax rate of (67.6)%, compared with an income tax benefit of $539.7 million on pre-tax income of $65.4 million, which resulted in an effective tax rate of (825.2)% for the three months ended March 30, 2019.

The increase in the effective tax rate for the three months ended March 28, 2020 compared with the prior year period was due primarily to the recognition in the prior year of a discrete benefit of $617.3 million related to the release of valuation allowances, mainly related to Luxembourg net operating losses, partially offset by a discrete expense of $66.1 million related primarily to unrecognized tax benefits from the European business reorganization. The current year rate is driven mainly by discrete tax benefits of $24.7 million, related to the reversal of unrecognized tax benefits, net of settlement amounts, arising from the resolution of audits in Canada and Germany and $3.2 million from law changes in India with respect to the taxation of dividends. These current period benefits were offset partially by $6.3 million of discrete expenses arising from the enactment in the U.S. of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).

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Deferred Tax Assets and Liabilities

We recognize deferred tax assets and liabilities for future tax consequences arising from differences between the carrying amounts of existing assets and liabilities under U.S. GAAP and their respective tax bases, and for net operating loss carryforwards and tax credit carryforwards. We evaluate the recoverability of our deferred tax assets, weighing all positive and negative evidence, and are required to establish or maintain a valuation allowance for these assets if we determine that it is more likely than not that some or all of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which the evidence can be objectively verified. If negative evidence exists, positive evidence is necessary to support a conclusion that a valuation allowance is not needed.

Our framework for assessing the recoverability of deferred tax assets requires us to weigh all available evidence, including:

•taxable income in prior carry back years if carry back is permitted under the relevant tax law;

•future reversal of existing temporary differences;

•tax-planning strategies that are prudent and feasible; and

•future taxable income exclusive of reversing temporary differences and carryforwards.

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

Significant Events

On March 27, 2020, the CARES Act was enacted and signed into law in the U.S. in response to the COVID-19 pandemic. One of the provisions of this law is an increase to the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income for the 2019 and 2020 tax years. This modification significantly increases the current deductible interest expense of the Company for both years, which will result in a cash benefit while increasing our effective tax rate through requirements to allocate and apportion interest expense for certain other tax purposes, including in determining our global intangible low-taxed income inclusion, deduction for foreign derived intangible income, and the utilization of foreign tax credits.

Adjusted EBITDA

Adjusted EBITDA for the three months ended March 28, 2020 was $120.8 million, a decrease of 27.0% or $44.7 million, compared with Adjusted EBITDA of $165.5 million for the prior year period. Adjusted EBITDA margin was 17.0% for the three months ended March 28, 2020, a 360 basis point decrease from the prior year period margin of 20.6%. The decrease in Adjusted EBITDA was driven primarily by reduced gross profit of $51.5 million, which was the result of lower sales of $94.8 million, as well as the impact of lower fixed cost absorption on cost of sales as described above. Partially offsetting this decrease were lower 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.”

Analysis by Operating Segment

Power Transmission (62.1% of Gates’ net sales for the three months ended March 28, 2020)

	Three months ended
(dollars in millions)	March 28, 2020			March 30, 2019			Period over Period Change
Net sales	$	441.2		$	499.5		(11.7	%)
Adjusted EBITDA	$	79.5		$	109.9		(27.7	%)
Adjusted EBITDA margin	18.0		%	22.0		%

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Net sales in Power Transmission for the three months ended March 28, 2020 were $441.2 million, a decrease of 11.7%, or $58.3 million, when compared with the prior year period net sales of $499.5 million. Excluding the adverse impact of movements in average currency exchange rates of $9.5 million, core sales decreased by 9.8%, or $48.8 million, compared with the prior year period. The majority of this decrease was due to lower sales volumes.

Power Transmission’s core sales decline was driven by lower sales to automotive first-fit and industrial replacement customers, which declined by 15.3% and 13.9%, respectively, during the three months ended March 28, 2020 compared with the prior year period. These declines were due primarily to weak demand in Greater China resulting from a combination of market softness and widespread shutdowns resulting from measures put in place in response to the COVID-19 pandemic. Sales to automotive replacement customers declined by 10.3% and 40.6% in North America and Greater China, respectively, during the three months ended March 28, 2020 compared with the prior year period, but this was offset partially by strong growth of 12.6% in EMEA. Industrial sales declined across all end markets during the three months ended March 28, 2020 compared with the prior year period, predominantly in the construction and general industrial end markets, driven by weakness in North America and Greater China.

Our Power Transmission Adjusted EBITDA for the three months ended March 28, 2020 was $79.5 million, a decrease of 27.7% or $30.4 million, compared with the prior year period Adjusted EBITDA of $109.9 million. The decrease in Adjusted EBITDA was driven by lower volumes and lower manufacturing performance resulting in decreases in Adjusted EBITDA of $25.9 million and $6.3 million, respectively. Adjusted EBITDA margin for the three months ended March 28, 2020 was 18.0%, a 400 basis point decline from the prior year period Adjusted EBITDA margin of 22.0%, driven by the impacts described above.

Fluid Power (37.9% of Gates’ net sales for the three months ended March 28, 2020)

	Three months ended
(dollars in millions)	March 28, 2020			March 30, 2019			Period over Period Change
Net sales	$	268.9		$	305.4		(12.0	%)
Adjusted EBITDA	$	41.3		$	55.6		(25.7	%)
Adjusted EBITDA margin	15.4		%	18.2		%

Net sales in Fluid Power for the three months ended March 28, 2020 were $268.9 million, a decrease of 12.0%, or $36.5 million, compared with net sales during the prior year period of $305.4 million. Excluding the adverse impact of movements in average currency exchange rates of $4.2 million, core sales decreased by 10.6%, or $32.3 million, compared with the prior year period. This decrease was due primarily to lower volumes.

The core sales decline in the three months ended March 28, 2020 was driven almost exclusively by lower sales to industrial first-fit customers, which declined by 19.6% compared with the prior year period. Industrial sales into the construction and general industrial end markets were particularly weak, declining by 14.2% and 14.9%, respectively, during the three months ended March 28, 2020, compared with the prior year period. This was driven primarily by North America, but construction end markets in EMEA were also weak, declining by 18.1% during the three months ended March 28, 2020, compared with the prior year period.

 Adjusted EBITDA for the three months ended March 28, 2020 was $41.3 million, a decrease of 25.7%, or $14.3 million, compared with the prior year period Adjusted EBITDA of $55.6 million. The decrease in Adjusted EBITDA was driven primarily lower volumes of $20.4 million and manufacturing performance impacts of $6.6 million driven by lower fixed cost absorption on lower volumes and some excess variable costs. These impacts were offset partially by a $5.2 million benefit from favorable, inflation-mitigating pricing actions and a $5.4 million benefit from lower SG&A expenses. The Adjusted EBITDA margin consequently decreased by 280 basis points.

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.

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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 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 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 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. While we have seen a decline in our business in the first quarter of 2020, and the duration and extent of the impacts of the COVID-19 pandemic on our business are difficult to predict, we do not currently anticipate any material long-term deterioration in our overall liquidity position in the foreseeable future. Further, we do not have any meaningful debt maturities until 2024 and we do not currently expect to need to draw down under our committed lines of credit in the foreseeable future. We therefore believe that as of March 28, 2020, we have adequate liquidity and capital resources for the next twelve months.

Cash Flow

Three months ended March 28, 2020 compared with the three months ended March 30, 2019

Cash provided by operations was $31.1 million during the three months ended March 28, 2020 compared with cash used in operations of $47.7 million during the prior year. This increase was driven primarily by an increase of $19.5 million in accounts payable during the current year period, compared with a decrease of $25.8 million in the prior year period, largely due to timing in both periods. Interest paid was lower at $25.5 million during the three months ended March 28, 2020, compared with $51.4 million in the prior year period, due primarily to the timing of quarterly interest payments on the term loans as well as the absence of the usual biannual January interest payment on the Dollar Senior Notes as a result of the refinancing completed in November 2019. Net income taxes paid were also lower, with $18.5 million paid during the three months ended March 28, 2020 compared with $33.0 million in the prior year period, largely a function of the lower operational performance.

Net cash used in investing activities during the three months ended March 28, 2020 was $24.6 million, compared with $31.7 million in the prior year. This decrease was driven by lower capital expenditures, which decreased by $8.0 million from $22.9 million in the three months ended March 30, 2019 to $14.9 million in the three months ended March 28, 2020.

Net cash used in financing activities was $2.9 million during the three months ended March 28, 2020, compared with $13.1 million in the prior year. This decrease was driven primarily by an additional quarterly amortization payment on our term loans in the prior year period due to the timing of our fiscal year end. In addition, dividend payments of $1.8 million were made to non-controlling shareholders of certain majority-owned subsidiaries in the prior year period with no similar payments in the current period.

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Indebtedness

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

	Carrying amount				Principal amount
(dollars in millions)	As of March 28,2020		As of December 28, 2019		As of March 28,2020		As of December 28, 2019
Debt:
—Secured
Term Loans (U.S. dollar and Euro denominated)	$	2,384.4	$	2,395.0	$	2,404.3	$	2,416.8
—Unsecured
Senior Notes (U.S. dollar)	572.2		563.2		568.0		568.0
Other debt	0.2		0.2		0.1		0.2
	$	2,956.8	$	2,958.4	$	2,972.4	$	2,985.0

Details of our long-term debt are presented in note 12 to the condensed consolidated financial statements included elsewhere in this quarterly report.

Dollar and Euro Term Loans

Our 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. These term loan facilities bear interest at a floating rate. As of March 28, 2020, 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 4.35% per annum. The Dollar Term Loan interest rate is re-set on the last business day of each month. As of March 28, 2020, the Euro Term Loan bore interest at EURIBOR, which is currently below 0%, subject to a floor of 0%, plus a margin of 3.00%. The Euro Term Loan interest rate is re-set on the last business day of each quarter.

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 three months ended March 28, 2020, we made amortization payments against the Dollar Term Loan and the Euro Term Loan of $4.3 million and $1.8 million, respectively. During the three months ended March 30, 2019, we made amortization payments against the Dollar Term Loan and the Euro Term Loan of $8.7 million and $3.6 million, respectively.

During the periods presented, foreign exchange gains 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 our Euro investments, a corresponding portion of the foreign exchange gains (losses) were recognized in other comprehensive income (“OCI”).

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Gain recognized in statement of operations	$	4.9	$	13.4
Gain recognized in OCI	1.5		0.7
Total gain	$	6.4	$	14.1

During the three months ended March 28, 2020, the above net foreign exchange gains recognized in the other expenses (income) line have been substantially offset by net foreign exchange movements on Euro-denominated intercompany loans as part of our overall hedging strategy.

Our Term Loans, which mature after 2021, use LIBOR as a benchmark for establishing the rate of interest. LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform and is not expected to be maintained after 2021. The transition to alternatives to LIBOR could be modestly disruptive to credit markets, and while we don't believe that the impact would be material to us, we do not yet have insight into what those impacts might be.

Unsecured Senior Notes

As of December 28, 2019, we had $568.0 million of 6.25% Dollar Senior Notes outstanding that were issued in November 2019. These notes are scheduled to mature on January 15, 2026 and bear interest at an annual fixed rate of 6.25% with semi-annual interest payments.

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On and after January 15, 2022, we may redeem the 6.25% Dollar Senior Notes, at our 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:

	Redemption Price
During the year commencing:
—2023	103.125	%
—2024	101.563	%
—2025 and thereafter	100.000	%

Additionally, net cash proceeds from an equity offering can be utilized at any time prior to January 15, 2022, to redeem up to 40% of the notes at a redemption price equal to 106.250% of the principal amount thereof, plus accrued and unpaid interest through to the redemption date.

Upon the occurrence of a change of control or a certain qualifying asset sale, the holders of the notes will have the right to require us to make an offer to repurchase each holder's notes at a price equal to 101% (in the case of a change of control) or 100% (in the case of an asset sale) of their principal amount, plus accrued and unpaid interest.

Revolving Credit Facility

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, with a letter of credit sub-facility of $20.0 million. This facility matures on January 29, 2023.

As of both March 28, 2020 and December 28, 2019, there were no drawings for cash under the revolving credit facility and there were no letters of credit outstanding.

Asset-Backed Revolver

We have a revolving credit facility backed by certain of our assets in North America. The facility allows for loans of up to a maximum of $325.0 million ($301.2 million as of March 28, 2020, compared with $294.6 million as of December 28, 2019, 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. The facility matures on January 29, 2023.

As of both March 28, 2020 and December 28, 2019, there were no drawings for cash under the asset-backed revolver, but there were letters of credit outstanding of $45.9 million and $50.1 million, respectively.

Non-guarantor subsidiaries

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

For the three months ended March 28, 2020, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 70% of our net sales and 63% of our EBITDA as defined in the financial covenants attaching to the senior secured credit facilities. As of March 28, 2020, before intercompany eliminations, our non-guarantor subsidiaries represented approximately 52% of our total assets and approximately 20% of our total liabilities.

Net Debt

Net debt is a non-GAAP measure representing the principal amount of our debt less the carrying amount of cash and cash equivalents. During the three months ended March 28, 2020, our net debt decreased by $3.6 million from $2,349.7 million as of December 28, 2019 to $2,346.1 million as of March 28, 2020. This was primarily due to movements in foreign currency exchange rates, which had a favorable net impact of $6.5 million on net debt during the three months ended March 28, 2020, with the majority of the movement relating to the impact of the weakening of the Euro against the U.S. dollar on our Euro-denominated debt.

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Borrowing Headroom

As of March 28, 2020, our asset-backed revolving credit facility had a borrowing base of $301.2 million, being the maximum amount we can draw down based on the current value of the secured assets. The facility was undrawn for cash, but there were letters of credit outstanding against the facility amounting to $45.9 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 $440.3 million, in addition to cash balances of $626.3 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).

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 (income) expenses incurred in relation to business combinations and major corporate transactions, including acquisition integration activities;

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

•restructuring expenses, including severance-related expenses;

•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 acquisition-related costs that are required to be expensed in accordance with U.S. GAAP. In particular, we exclude 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 (income) expenses and severance-related expenses that reflect 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; 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; and fees paid to our private equity sponsor.

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

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

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Net income from continuing operations	$	39.9	$	605.1
Income tax benefit	(16.1)		(539.7)
Net interest and other expenses	34.6		34.8
Depreciation and amortization	54.9		56.1
EBITDA	113.3		156.3
Transaction-related (income) expenses	(0.2)		0.4
Restructuring expenses	1.9		3.3
Share-based compensation expense	2.9		2.6
Sponsor fees (included in other operating expenses)	1.7		1.8
Severance-related expenses (included in cost of sales)	0.1		—
Severance-related expenses (benefits) (included in SG&A)	0.5		(0.2)
Other items not directly related to current operations	0.6		1.3
Adjusted EBITDA	$	120.8	$	165.5

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
(dollars in millions)	March 28, 2020			March 30, 2019
Net sales	$	710.1		$	804.9
Adjusted EBITDA	$	120.8		$	165.5
Adjusted EBITDA margin	17.0		%	20.6		%

Core growth reconciliations

Core revenue growth is a non-GAAP measure that represents net sales for the period excluding the impacts of movements in average currency exchange rates and the first-year impacts of acquisitions and disposals, when applicable. We present core growth because it allows for a meaningful comparison of year-over-year performance without the volatility caused by foreign currency gains or losses or the incomparability that would be caused by impacts of acquisitions or disposals. Management believes that this measure is therefore useful for securities analysts, investors and other interested parties to assist in their assessment of the operating performance of our businesses. The closest GAAP measure is net sales.

	Three months ended March 28, 2020
(dollars in millions)	Power Transmission			Fluid Power			Total
Net sales for the three months ended March 28, 2020	$	441.2		$	268.9		$	710.1
Impact on net sales of movements in currency rates	9.5			4.2			13.7
Core revenue for the three months ended March 28, 2020	$	450.7		$	273.1		$	723.8
Net sales for the three months ended March 30, 2019	499.5			305.4			804.9
Decrease in net sales on a core basis (core revenue)	$	(48.8)		$	(32.3)		$	(81.1)
Core revenue growth	(9.8		%)	(10.6		%)	(10.1		%)

40

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 principal amount of our debt; and

• the carrying amount of cash and cash equivalents.

Net debt was as follows:

(dollars in millions)	As of March 28,2020		As of December 28, 2019
Principal amount of debt	$	2,972.4	$	2,985.0
Less: Cash and cash equivalents	(626.3)		(635.3)
Net debt	$	2,346.1	$	2,349.7

The principal amount of debt is reconciled to the carrying amount of debt as follows:

(dollars in millions)	As of March 28,2020		As of December 28, 2019
Principal amount of debt	$	2,972.4	$	2,985.0
Accrued interest	24.1		15.2
Deferred issuance costs	(39.7)		(41.8)
Carrying amount of debt	$	2,956.8	$	2,958.4

Adjusted EBITDA adjustments for ratio calculation purposes

The financial maintenance ratio in our revolving credit agreement and other ratios related to incurrence-based covenants (measured only upon the taking of certain actions, including the incurrence of additional indebtedness) under our revolving credit facility, our term loan facility and the indenture governing our outstanding notes are calculated in part based on financial measures similar to Adjusted EBITDA as presented elsewhere in this report, which financial measures are determined at the Gates Global LLC level and adjust for certain additional items such as severance costs, the pro forma impacts of acquisitions and the pro forma impacts of cost-saving initiatives. These additional adjustments during the last 12 months, as calculated pursuant to such agreements, resulted in a net benefit to Adjusted EBITDA for ratio calculation purposes of $12.1 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 report is a receivable of $0.6 million and $9.2 million as of March 28, 2020 and December 28, 2019, respectively, 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 $1.3 million and $2.0 million as of March 28, 2020 and December 28, 2019, respectively.

41

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, and the credit risk of our customers and third party depository institutions that hold our cash and short term deposits. 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 March 28, 2020, 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.

42

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 Item 1A “Risk Factors” in Part I of 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. Apart from the additional risk factor described below, there have been no material changes to the risk factors disclosed in the annual report.

In light of developments relating to the COVID-19 pandemic occurring subsequent to the filing of our annual report, the Company is supplementing the risk factors discussed in that report with the following risk factor, which should be read in conjunction with the risk factors contained in our annual report:

The current COVID-19 pandemic has caused severe disruption in the global economy and had and is expected to continue to have an adverse impact on our business, operating results, cash flows and/or financial condition, and that impact may be material.

In late December 2019, a novel coronavirus disease was first reported and over the next few months the number of cases and affected countries increased rapidly. In March 2020, the World Health Organization designated COVID-19 as a pandemic and numerous countries have declared national emergencies with respect to COVID-19. The global impact of the pandemic has been rapidly evolving, and many countries have reacted by instituting quarantines and restrictions on travel, and limiting operations of non-essential businesses. Such actions are creating disruption in global supply chains, increasing rates of unemployment and adversely impacting many industries and may trigger a period of global economic slowdown. The extent to which this may impact our future results of operations and overall financial performance remains uncertain.

The scale and scope of the COVID-19 pandemic may heighten the potential adverse effects on our business, operating results, cash flows and/or financial condition described in the risk factors contained in our annual report or result in new risks, due to the impact of:

•unfavorable economic conditions on our customers. We are unable to predict the degree to which the pandemic will impact our customers’ businesses, but it has resulted in and could continue to result in customers reducing orders, delaying projects, deferring capital equipment purchases, making late payments or being unable to make payments. Further, travel restrictions and social distancing has reduced or eliminated, and may continue to reduce or eliminate, in-person sales meetings, attendance at trade shows and industry events. As a result, our sales and selling activities have been and may continue to be adversely impacted;

•a significant disruption in service within our operations, among our key suppliers and supply chains, or other third parties. We have experienced instances of suppliers temporarily closing operations, delaying order fulfillment or limiting production due to the pandemic. Continued disruptions, shipping delays or insolvency of key vendors in our supply chain could make it difficult or more costly for us to obtain the raw materials or other inputs we need for our operations;

•facility closures or disruptions. We manufacture and provide essential products to a variety of customers around the globe and intend to continue providing our products to the extent possible. While most of our facilities are still operating, we have experienced temporary disruptions at certain facilities and may continue to experience these due to regulatory shut-downs or other quarantine measures or illness, which could place constraints on our ability to produce our products and meet customer demand;

43

•challenges in product delivery. We have faced, and may continue to face, increased delays in the delivery of our product to our customers as a result of shipping delays, port closures and congestion, increased border controls and other transportation and shipping constraints, which may increase our costs of doing business and affect our ability to timely meet customer demand;

•compliance with substantial government regulation, including new laws or regulations or changes in existing laws or regulations, which laws or regulations may vary significantly by jurisdiction;

•fluctuations in equity market prices, interest rates and credit spreads limiting our ability to raise or deploy capital and affecting our overall liquidity. The Company continues to generate cash from operations and believes it has adequate liquidity and capital resources at this time; however, unanticipated consequences of the pandemic and resulting economic uncertainty could adversely affect our ability to raise additional funds when and as needed or lead to higher costs of borrowing;

•cyberattacks or other privacy or data security incidents. The Company has experienced and expects to continue to experience an increase in phishing and hacking attempts and other fraudulent schemes due to the pandemic. Such additional cyberattacks increase the Company’s risk of security breaches, and mitigation efforts require an increased investment of time and resources;

•changes and challenges to our workforce, including decreased worker productivity due to remote working arrangements, increased medical, emergency or other leave, redirection of management’s focus on managing and mitigating the impacts of the pandemic, the ability to meet staffing needs in our various facilities and delays in implementation of our organizational efficiency and business continuity plans; and

•delays in responsiveness by governments and other third parties in other matters arising in the ordinary course of business due to their prioritization of matters relating to COVID-19.

The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the development of vaccines or other medical advances, the extent and effectiveness of containment actions, the impact of labor market interruptions, the impact of government interventions, the potential of a longer term economic slowdown or recession and the impact of these and other factors on our employees, customers, suppliers and partners. Such impact on our business, operating results, cash flows and/or financial condition could be material and could result in asset impairment charges, including impairments of property, plant and equipment, goodwill or other intangible assets.

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

Purchases of Equity Securities by Affiliated Purchasers(1)
Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs(2)	Maximum number of shares that may yet be purchased under the plans or programs
12/29/2019 - 1/31/2020	—	$	—	N/A	N/A
2/1/2020 - 2/29/2020	—	$	—	N/A	N/A
3/1/2020 - 3/28/2020	520,400	$	8.77	N/A	N/A
Total	520,400	$	8.77	N/A	N/A

⁽¹⁾ The table reflects open market purchases of our common stock by Omaha Aggregator (Cayman) L.P. (“Omaha”), an entity affiliated with Blackstone, and is based upon Omaha’s filings with the SEC. Under Exchange Act Rule 10b-18, Omaha may be deemed to be an “affiliated purchaser” because it may be considered to be under common control with us. We did not repurchase any shares of our common stock during the periods reflected in the table.

⁽²⁾ No purchases reflected in the table were made pursuant to a publicly announced plan or program.

44

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, effective October 7, 2019
10.1	Separation Agreement, effective March 13, 2020, between the Company and Jamey S. Seely (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on March 18, 2020 (File No. 001-38366)).
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 months ended March 28, 2020, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Statements of Operations for the three months ended March 28, 2020 and March 30, 2019, (ii) Condensed Consolidated Statements of Comprehensive Income for the three months ended March 28, 2020 and March 30, 2019, (iii) Condensed Consolidated Balance Sheets as of March 28, 2020 and December 28, 2019, (iv) Condensed Consolidated Statements of Cash Flows for the three months ended March 28, 2020 and March 30, 2019, (v) Condensed Consolidated Statements of Shareholders’ Equity, and (vi) Notes to the Condensed Consolidated Financial Statements.*

* Filed herewith.

** Furnished herewith.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

45

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/ L. Brooks Mallard
	Name:	L. Brooks Mallard
	Title:	Chief Financial Officer
		(Principal Financial Officer)

Date: May 6, 2020

46

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Ivo Jurek, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 28, 2020 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Date:	May 6, 2020
/s/ Ivo Jurek
Ivo Jurek
Chief Executive Officer
(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, L. Brooks Mallard, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 28, 2020 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Date:	May 6, 2020
/s/ L. Brooks Mallard
L. Brooks Mallard
Chief Financial Officer
(Principal Financial Officer)

EX-32.1

Exhibit 32.1

Certification pursuant to

18 U.S.C. Section 1350,

as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Gates Industrial Corporation plc (the “Company”) for the period ended March 28, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned certifies, in his capacity as an officer of the Company and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

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

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

/s/ Ivo Jurek
Ivo Jurek
Chief Executive Officer
(Principal Executive Officer)
Date:	May 6, 2020
/s/ L. Brooks Mallard
L. Brooks Mallard
Chief Financial Officer
(Principal Financial Officer)
Date:	May 6, 2020

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.

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Goodwill

3 Months Ended

Mar. 28, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill

(dollars in millions)	Power Transmission		Fluid Power		Total
Cost and carrying amount
As of December 28, 2019	$	1,377.5	$	683.0	$	2,060.5
Foreign currency translation	(53.0)		(49.8)		(102.8)
As of March 28, 2020	$	1,324.5	$	633.2	$	1,957.7

XML

Restructuring and other strategic initiatives

3 Months Ended

Mar. 28, 2020

Restructuring and Related Activities [Abstract]

Restructuring and other strategic initiatives

Restructuring and other strategic initiatives

Gates continues to undertake various restructuring and other strategic initiatives to drive increased productivity in all aspects of our operations. These actions include efforts to consolidate our manufacturing and distribution footprint, scale operations to current demand levels, combine back-office workgroups and relocate certain operations to lower cost locations. Our recently completed manufacturing footprint investments and other productivity improvements in recent years have helped to position us to accelerate and expand upon our previously announced restructuring program, which is primarily intended to optimize our manufacturing and distribution footprint over the mid-term by removing structural fixed costs, and, to a lesser degree, to streamline our selling, general and administrative (“SG&A”) back-office functions.

Overall costs associated with our restructuring and other strategic initiatives have been recognized in the condensed consolidated statements as set forth below. Expenses incurred in relation to certain of these actions qualify as restructuring expenses under U.S. GAAP.

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Restructuring expenses:
—Severance	$	0.2	$	2.6
—Professional fees	0.2		0.6
—Other restructuring expenses	1.5		0.1
Total restructuring expenses	$	1.9	$	3.3
Expenses related to other strategic initiatives:
—Severance costs included in cost of sales	$	0.1	$	—
—Severance costs (benefits) included in SG&A	0.5		(0.2)
Total expenses related to other strategic initiatives	$	0.6	$	(0.2)

Restructuring and other strategic initiatives undertaken during the three months ended March 28, 2020 related primarily to the closure of two North American manufacturing facilities and reductions in workforce, primarily in the U.S. and Asia. Expenses incurred during

the prior year in connection with our restructuring and other strategic initiatives related primarily to the closure of one of our facilities in France and a strategic restructuring of part of our Asian business.

Restructuring activities

As indicated above, restructuring expenses, as defined under U.S. GAAP, form a subset of our total expenses related to restructuring and other strategic initiatives. These expenses include the impairment of inventory, which is recognized in cost of sales. Analyzed by segment, our restructuring expenses were as follows:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Power Transmission	$	0.2	$	2.9
Fluid Power	1.7		0.4
Continuing operations	$	1.9	$	3.3

The following summarizes the reserve for restructuring expenses for the three months ended March 28, 2020 and March 30, 2019, respectively:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Balance as of the beginning of the period	$	2.9	$	2.6
Utilized during the period	(2.0)		(2.0)
Net charge for the period	2.4		3.3
Released during the period	(0.5)		—
Foreign currency translation	0.1		(0.1)
Balance as of the end of the period	$	2.9	$	3.8

Restructuring reserves, which are expected to be utilized in 2020 and 2021, are included in the condensed consolidated balance sheet within the accrued expenses and other current liabilities line.

XML

Segment information (Tables)

3 Months Ended

Mar. 28, 2020

Segment Reporting [Abstract]

Schedule of net sales by operating segment

Sales between reporting segments and the impact of such sales on Adjusted EBITDA for each segment are not included in internal reports presented to the CEO and have therefore not been included below.

	Net Sales
	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Power Transmission	$	441.2	$	499.5
Fluid Power	268.9		305.4
Continuing operations	$	710.1	$	804.9

Adjusted EBITDA by segment was as follows:

	Adjusted EBITDA
	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Power Transmission	$	79.5	$	109.9
Fluid Power	41.3		55.6
Continuing operations	$	120.8	$	165.5

Schedule of net sales by key geographic regions and markets

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

	Net Sales
	Three months ended
	March 28, 2020				March 30, 2019
(dollars in millions)	Power Transmission		Fluid Power		Power Transmission		Fluid Power
U.S.	$	137.7	$	139.7	$	152.9	$	157.1
North America, excluding U.S.	40.3		41.7		42.0		46.6
United Kingdom (“U.K.”)	11.4		6.9		11.7		10.8
EMEA(1), excluding U.K.	129.2		44.0		133.3		47.2
East Asia and India	65.2		17.4		73.6		20.5
Greater China	44.3		13.0		68.9		15.1
South America	13.1		6.2		17.1		8.1
Net Sales	$	441.2	$	268.9	$	499.5	$	305.4

⁽¹⁾ Europe, Middle East and Africa (“EMEA”).

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

	Net Sales
	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Developed	$	475.8	$	543.7
Emerging	234.3		261.2
Net Sales	$	710.1	$	804.9

Reconciliation of Adjusted EBITDA to net income from continuing operations

Reconciliation of net income from continuing operations to Adjusted EBITDA:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Net income from continuing operations	$	39.9	$	605.1
Income tax benefit	(16.1)		(539.7)
Income from continuing operations before taxes	23.8		65.4
Interest expense	36.7		38.1
Other income	(2.1)		(3.3)
Operating income from continuing operations	58.4		100.2
Depreciation and amortization	54.9		56.1
Transaction-related (income) expenses (1)	(0.2)		0.4
Restructuring expenses	1.9		3.3
Share-based compensation expense	2.9		2.6
Sponsor fees (included in other operating expenses)	1.7		1.8
Severance-related expenses (included in cost of sales)	0.1		—
Severance-related expenses (benefits) (included in SG&A)	0.5		(0.2)
Other items not directly related to current operations	0.6		1.3
Adjusted EBITDA	$	120.8	$	165.5

⁽¹⁾ Transaction-related (income) expenses relate primarily to advisory fees and other costs recognized in respect of major corporate transactions, including the acquisition of businesses and debt refinancings.

XML

Goodwill (Tables)

3 Months Ended

Mar. 28, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of goodwill

(dollars in millions)	Power Transmission		Fluid Power		Total
Cost and carrying amount
As of December 28, 2019	$	1,377.5	$	683.0	$	2,060.5
Foreign currency translation	(53.0)		(49.8)		(102.8)
As of March 28, 2020	$	1,324.5	$	633.2	$	1,957.7

XML

Debt (Tables)

3 Months Ended

Mar. 28, 2020

Debt Disclosure [Abstract]

Schedule of long-term debt

(dollars in millions)	As of March 28,2020		As of December 28,2019
Secured debt:
—Dollar Term Loan	$	1,694.8	$	1,699.1
—Euro Term Loan	709.5		717.7
Unsecured debt:
—6.25% Dollar Senior Notes due 2026	568.0		568.0
—Other loans	0.1		0.2
Total principal of debt	2,972.4		2,985.0
Deferred issuance costs	(39.7)		(41.8)
Accrued interest	24.1		15.2
Total carrying value of debt	2,956.8		2,958.4
Debt, current portion	54.9		46.1
Debt, less current portion	$	2,901.9	$	2,912.3

Foreign exchange gains (losses)

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Gain recognized in statement of operations	$	4.9	$	13.4
Gain recognized in OCI	1.5		0.7
Total gain	$	6.4	$	14.1

Schedule of redemption prices plus accrued and unpaid interest

On and after January 15, 2022, we may redeem the Dollar Senior Notes, at our 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:

	Redemption Price
During the year commencing:
—2023	103.125	%
—2024	101.563	%
—2025 and thereafter	100.000	%

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Derivative financial instruments - Net Investment Hedging Instruments in OCI (Details) - Net investment hedges - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Derivative Instruments, Gain (Loss)
Total net fair value gains (losses)	$ 4.0	$ 5.6
—Interest rate caps
Derivative Instruments, Gain (Loss)
Total net fair value gains (losses)	1.5	0.7
—Currency swaps
Derivative Instruments, Gain (Loss)
Total net fair value gains (losses)	$ 2.5	$ 4.9

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Intangible assets - Finite-Lived and Indefinite-Lived Intangible Assets (Details) - USD ($) $ in Millions	Mar. 28, 2020	Dec. 28, 2019
Finite-Lived Intangible Assets
Finite-lived, cost	$ 2,137.0	$ 2,188.7
Finite-lived, accumulated amortization	(796.5)	(782.1)
Finite-lived, net	1,340.5	1,406.6
Indefinite-lived, cost	513.4	513.4
Indefinite-lived, accumulated impairment	(44.0)	(44.0)
Indefinite-lived, net	469.4	469.4
Cost	2,650.4	2,702.1
Accumulated amortization and impairment	(840.5)	(826.1)
Net	1,809.9	1,876.0
—Customer relationships
Finite-Lived Intangible Assets
Finite-lived, cost	1,964.8	2,021.8
Finite-lived, accumulated amortization	(667.2)	(656.3)
Finite-lived, net	1,297.6	1,365.5
—Technology
Finite-Lived Intangible Assets
Finite-lived, cost	90.4	90.8
Finite-lived, accumulated amortization	(87.8)	(87.8)
Finite-lived, net	2.6	3.0
—Capitalized software
Finite-Lived Intangible Assets
Finite-lived, cost	81.8	76.1
Finite-lived, accumulated amortization	(41.5)	(38.0)
Finite-lived, net	$ 40.3	$ 38.1

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Income taxes - Narratives (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Operating Loss Carryforwards
Income tax benefit	$ (16.1)	$ (539.7)
Income from continuing operations before income taxes	$ 23.8	$ 65.4
Reported effective income tax rate (percent)	(67.60%)	(825.20%)
Change in valuation allowance		$ (617.3)
Discrete tax expense (benefit)	$ (24.7)	$ 66.1
Effect of change in tax laws	6.3
India
Operating Loss Carryforwards
Discrete tax expense (benefit)	$ (3.2)

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Related party transactions - Narrative (Details) - USD ($)	1 Months Ended	3 Months Ended		12 Months Ended
	Jan. 31, 2018	Mar. 28, 2020	Mar. 30, 2019	Dec. 28, 2019	Jul. 03, 2014
Related Party Transaction
Net sales		$ 710,100,000	$ 804,900,000
Dividends received from equity method investees		0	0
Effects of change in ownership interest			15,000,000.0
Sponsor | Former transaction and monitoring fee agreement
Related Party Transaction
Related party transaction, fee as a percentage of EBITDA					1.00%
Related party transaction, expenses incurred		1,700,000		$ 1,800,000
Sponsor | Support and services agreement
Related Party Transaction
Related party transaction, ownership percentage threshold which terminates milestone payment	5.00%
Related party transaction, fair value of equity threshold which terminates milestone payment	$ 25,000,000.0
Equity method investees
Related Party Transaction
Sales		300,000	$ 300,000
Payables to related parties		$ 200,000		$ 200,000

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Debt - Asset-backed revolver Narratives (Details) - Asset-backed revolver - USD ($)	Mar. 28, 2020	Dec. 28, 2019
Revolving credit facility
Line of Credit Facility
Maximum borrowing capacity of credit facility	$ 325,000,000.0
Current borrowing capacity of credit facility	301,200,000	$ 294,600,000
Line of credit carrying value	0	0
Letter of credit sub-facility
Line of Credit Facility
Maximum borrowing capacity of credit facility	150,000,000.0
Line of credit carrying value	$ 45,900,000	$ 50,100,000

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Share-based compensation - Stock Option and SAR Rollforward (Details) - $ / shares	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Number of options
Beginning balance (shares)	20,221,270
Granted (shares)	1,262,475
Forfeited (shares)	(1,389,722)
Exercised (shares)	(318,607)	(190,034)
Ending balance (shares)	19,775,416
Weighted average exercise price $
Beginning balance (usd per share)	$ 9.09
Granted (usd per share)	12.52
Forfeited (usd per share)	8.24
Exercised (usd per share)	6.60
Ending balance (usd per share)	$ 9.42
—Share options
Number of options
Beginning balance (shares)	1,610,485
Granted (shares)	1,193,114
Forfeited (shares)	(89,803)
Ending balance (shares)	2,713,796
Weighted average exercise price $
Beginning balance (usd per share)	$ 16.69
Granted (usd per share)	12.55
Forfeited (usd per share)	16.46
Ending balance (usd per share)	$ 14.88
Exercisable at the end of the period (shares)	3,080,858
Exercisable at the end of the period (usd per share)	$ 8.79
Vested and expected to vest at the end of the period (shares)	7,714,079
Vested and expected to vest at the end of the period (usd per share)	$ 11.24
—Share options | —Tier I
Number of options
Beginning balance (shares)	3,825,855
Forfeited (shares)	(86,581)
Exercised (shares)	(318,607)
Ending balance (shares)	3,420,667
Weighted average exercise price $
Beginning balance (usd per share)	$ 7.07
Forfeited (usd per share)	6.74
Exercised (usd per share)	6.60
Ending balance (usd per share)	$ 7.12
—Share options | —Tier II
Number of options
Beginning balance (shares)	4,405,340
Forfeited (shares)	(404,446)
Ending balance (shares)	4,000,894
Weighted average exercise price $
Beginning balance (usd per share)	$ 7.01
Forfeited (usd per share)	6.63
Ending balance (usd per share)	$ 7.05
—Share options | —Tier III
Number of options
Beginning balance (shares)	4,405,340
Forfeited (shares)	(404,446)
Ending balance (shares)	4,000,894
Weighted average exercise price $
Beginning balance (usd per share)	$ 7.01
Forfeited (usd per share)	6.63
Ending balance (usd per share)	$ 7.05
—Share options | —Tier IV
Number of options
Beginning balance (shares)	4,405,340
Forfeited (shares)	(404,446)
Ending balance (shares)	4,000,894
Weighted average exercise price $
Beginning balance (usd per share)	$ 10.52
Forfeited (usd per share)	9.94
Ending balance (usd per share)	$ 10.58
—SARs
Number of options
Beginning balance (shares)	772,450
Granted (shares)	69,361
Ending balance (shares)	841,811
Weighted average exercise price $
Beginning balance (usd per share)	$ 8.72
Granted (usd per share)	12.08
Ending balance (usd per share)	$ 9.00
—Premium-priced options
Number of options
Beginning balance (shares)	796,460
Ending balance (shares)	796,460
Weighted average exercise price $
Beginning balance (usd per share)	$ 19.00
Ending balance (usd per share)	$ 19.00

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Commitments and contingencies - Warranty Liability (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Warranty reserves
Balance as of the beginning of the fiscal year	$ 17.7	$ 14.3
Charge for the period	4.2	2.6
Payments made	(2.6)	(2.2)
Released during the period	(0.8)	0.0
Foreign currency translation	(0.2)	0.1
Balance as of the end of the period	$ 18.3	$ 14.8

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Share-based compensation (Tables)

3 Months Ended

Mar. 28, 2020

Share-based Payment Arrangement [Abstract]

Schedule of stock option activity

Summary of movements in options outstanding

	Three months ended
	March 28, 2020
	Number of options	Weighted average exercise price $
Outstanding at the beginning of the period:
—Tier I	3,825,855	$	7.07
—Tier II	4,405,340	$	7.01
—Tier III	4,405,340	$	7.01
—Tier IV	4,405,340	$	10.52
—SARs	772,450	$	8.72
—Share options	1,610,485	$	16.69
—Premium-priced options	796,460	$	19.00
	20,221,270	$	9.09
Granted during the period:
—SARs	69,361	$	12.08
—Share options	1,193,114	$	12.55
	1,262,475	$	12.52
Forfeited during the period:
—Tier I	(86,581)	$	6.74
—Tier II	(404,446)	$	6.63
—Tier III	(404,446)	$	6.63
—Tier IV	(404,446)	$	9.94
—Share options	(89,803)	$	16.46
	(1,389,722)	$	8.24
Exercised during the period:
—Tier I	(318,607)	$	6.60
	(318,607)	$	6.60
Outstanding at the end of the period:
—Tier I	3,420,667	$	7.12
—Tier II	4,000,894	$	7.05
—Tier III	4,000,894	$	7.05
—Tier IV	4,000,894	$	10.58
—SARs	841,811	$	9.00
—Share options	2,713,796	$	14.88
—Premium-priced options	796,460	$	19.00
	19,775,416	$	9.42
Exercisable at the end of the period	3,080,858	$	8.79
Vested and expected to vest at the end of the period	7,714,079	$	11.24

Schedule of RSU and PRSU activity

Summary of movements in RSUs and PRSUs outstanding

	Three months ended
	March 28, 2020
	Number of awards	Weighted average grant date fair value $
Outstanding at the beginning of the period:
—RSUs	718,269	$	16.20
—PRSUs	248,550	20.07
	966,819	$	17.20
Granted during the period:
—RSUs	1,126,523	$	12.01
—PRSUs	365,258	14.41
	1,491,781	$	12.60
Forfeited during the period:
—RSUs	(35,135)	$	16.46
—PRSUs	(28,552)	20.07
	(63,687)	$	18.08
Vested during the period:
—RSUs	(218,556)	$	16.41
	(218,556)	$	16.41
Outstanding at the end of the period:
—RSUs	1,591,101	$	13.20
—PRSUs	585,256	16.53
	2,176,357	$	14.10

Schedule of share based compensation valuation techniques

The premium-priced options and PRSUs were valued using Monte Carlo simulations. As Gates only has volatility data for its shares for the period since its initial public offering, this volatility has been weighted with the debt-levered volatility of a peer group of public companies in order to determine the expected volatility over the expected option life. The expected option life represents the period of time for which the options are expected to be outstanding and is based on consideration of the contractual life of the option, option vesting period, and historical exercise patterns. The weighted average fair values and relevant assumptions were as follows:

	Three months ended
	March 28, 2020			March 30, 2019
Grant date fair value:
—SARs	$	4.59		$	5.88
—Share options	$	4.78		$	5.88
—Premium-priced options	n/a			$	5.65
—RSUs	$	12.01		$	16.46
—PRSUs	$	14.41		$	20.07
Inputs to the model:
—Expected volatility - SARs	37.7		%	31.9		%
—Expected volatility - share options	37.6		%	31.9		%
—Expected volatility - premium-priced options	n/a			31.9		%
—Expected volatility - PRSUs	40.4		%	32.8		%
—Expected option life for SARs	6.0			6.0
—Expected option life for share options	6.0			6.0
—Expected option life for premium-priced options	n/a			7.0
—Risk-free interest rate:
SARs	1.25		%	2.51		%
Share options	1.33		%	2.51		%
Premium-priced options	n/a			2.53		%
PRSUs	1.29		%	2.48		%

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Commitments and contingencies (Tables)

3 Months Ended

Mar. 28, 2020

Commitments and Contingencies Disclosure [Abstract]

Schedule of warranty liabilities

The following summarizes the movements in the warranty liability for the three months ended March 28, 2020 and March 30, 2019, respectively:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Balance as of the beginning of the fiscal year	$	17.7	$	14.3
Charge for the period	4.2		2.6
Payments made	(2.6)		(2.2)
Released during the period	(0.8)		—
Foreign currency translation	(0.2)		0.1
Balance as of the end of the period	$	18.3	$	14.8

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Restructuring and other strategic initiatives - Income Statement Location (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Restructuring Cost and Reserve
Restructuring expenses	$ 1.9	$ 3.3
Total expenses related to other strategic initiatives	0.6	(0.2)
Restructuring expenses: | —Severance
Restructuring Cost and Reserve
Restructuring expenses	0.2	2.6
Restructuring expenses: | —Professional fees
Restructuring Cost and Reserve
Restructuring expenses	0.2	0.6
Restructuring expenses: | —Other restructuring expenses
Restructuring Cost and Reserve
Restructuring expenses	1.5	0.1
Cost of sales
Restructuring Cost and Reserve
Severance-related expenses (included in cost of sales)	0.1	0.0
SG&A
Restructuring Cost and Reserve
Severance-related expenses (included in cost of sales)	$ 0.5	$ (0.2)

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Debt - Dollar and Euro Term Loans Narratives (Details) - Secured debt - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Dollar Term Loan
Debt Instrument
Interest rate during period on debt	4.35%
Quarterly amortization payment rate	0.25%
Quarterly amortization payment on debt	$ 4.3	$ 8.7
Dollar Term Loan | LIBOR
Debt Instrument
Variable interest rate on debt (percent)	2.75%
Dollar Term Loan | LIBOR | Minimum
Debt Instrument
Variable interest rate on debt (percent)	1.00%
Euro Term Loan
Debt Instrument
Interest rate during period on debt	0.00%
Quarterly amortization payment rate	0.25%
Quarterly amortization payment on debt	$ 1.8	$ 3.6
Euro Term Loan | EURIBOR
Debt Instrument
Variable interest rate on debt (percent)	3.00%
Euro Term Loan | EURIBOR | Minimum
Debt Instrument
Variable interest rate on debt (percent)	0.00%

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Fair value measurement - Schedule of carrying amount and fair value of debt (Details) - USD ($) $ in Millions	Mar. 28, 2020	Dec. 28, 2019
Carrying amount
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Current	$ 54.9	$ 46.1
Non-current	2,901.9	2,912.3
Fair value of debt	2,956.8	2,958.4
Fair value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Current	44.8	45.9
Non-current	2,490.5	2,946.8
Fair value of debt	$ 2,535.3	$ 2,992.7

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Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Income Statement [Abstract]
Loss (income) on disposal of discontinued operations, tax	$ 0	$ 0

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Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 28, 2020	Dec. 28, 2019
Statement of Financial Position [Abstract]
Par value (usd per share)	$ 0.01	$ 0.01
Authorized shares (in shares)	3,000,000,000	3,000,000,000
Outstanding shares ( in shares)	290,666,538	290,157,299

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Introduction (Policies)

3 Months Ended

Mar. 28, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Background

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.

In these condensed consolidated financial statements and related notes, all references to “Gates,” “we,” “us,” and “our” refer, unless the context requires otherwise, to Gates Industrial Corporation plc and its consolidated subsidiaries.

Accounting periods

Accounting periodsThe Company prepares its annual consolidated financial statements for the period ending on the Saturday nearest December 31. Accordingly, the condensed consolidated balance sheet is presented as of March 28, 2020 and December 28, 2019 and the related condensed consolidated statements of operations, comprehensive income, cash flows, and shareholders’ equity are presented, where relevant, for the 91 day period from December 29, 2019 to March 28, 2020, with comparative information for the 91 day period from December 30, 2018 to March 30, 2019.

Basis of presentation

The condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are presented in U.S. dollars unless otherwise indicated. The condensed consolidated financial statements and related notes contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position as of March 28, 2020 and the results of its operations and cash flows for the periods ended March 28, 2020 and March 30, 2019. Interim period results are not necessarily indicative of the results to be expected for the full fiscal year.

The first quarter of 2020 marked the beginning of an unprecedented environment for the global economy, as governments, companies and communities implemented strict measures to minimize the spread of the novel coronavirus (“COVID-19”) pandemic. As a result of the unpredictable and evolving impact of the pandemic and measures being taken around the world to combat its spread, the timing and trajectory of the recovery are unclear at this time, and the adverse impact of the pandemic on the Company’s operations may be material but cannot be reasonably estimated at this time.

The preparation of consolidated financial statements under U.S. GAAP requires us to make assumptions and estimates concerning the future that affect the reported amounts of assets, liabilities, revenue and expenses. Estimates and assumptions are particularly important in accounting for items such as revenue, rebates, impairment of long-lived assets, intangible assets and goodwill, inventory valuation, financial instruments, expected credit losses, product warranties, income taxes and post-retirement benefits.

Due to the inherent uncertainty involved in making assumptions and estimates, events and changes in circumstances arising after March 28, 2020, including those resulting from the impacts of the COVID-19 pandemic, may result in actual outcomes that differ from those contemplated by our assumptions and estimates.

These condensed consolidated financial statements are unaudited and, except as noted below, have been prepared on substantially the same basis as Gates’ audited annual consolidated financial statements and related notes for the year ended December 28, 2019. The condensed consolidated balance sheet as of December 28, 2019 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 28, 2019 included in the Company’s Annual Report on Form 10-K.

New accounting pronouncements adopted and not yet adopted

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 2020 fiscal year of the following new Accounting Standard Updates (each, an “ASU”):

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

•ASU 2020-02 “Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842)”

In June 2016, the Financial Accounting Standards Board (“FASB”) issued an ASU which broadens the information that an entity must consider when developing its expected credit loss estimate for financial assets. The measurement of expected credit losses should be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. 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. On transition, no cumulative-effect adjustment was recognized to retained earnings.

Our businesses develop their expected loss estimates based either on the aging profile of outstanding receivables or by applying a preset experience factor (either a percentage of sales or a percentage of open receivables). These methodologies are based primarily on historical trends and experience, but credit controllers also regularly assess individual customer accounts to identify any potential increases or decreases in the level of expected credit loss needed to be applied to each customer based on current circumstances and future expectations.

Before accepting a new customer, we assess their credit quality and establish a credit limit. Credit quality is assessed by using data maintained by reputable credit rating agencies, by checking of references included in credit applications and, where they are available, by reviewing the customer’s recent financial statements. Credit limits are subject to multiple levels of authorization and are reviewed on a regular basis.

Although Gates has a wide variety of customers from multinational original equipment manufacturers and distributors to small family-owned businesses, the majority of our sales are generated from large companies with low credit risk. Recent global developments related to the COVID-19 pandemic and its impact on our customers’ ability to pay us are being closely monitored and taken into account in the determination of our expected credit loss estimates.

The following ASUs that were also adopted on the first day of the 2020 fiscal year did not have a significant impact on our results, financial position or disclosures:

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

• 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

Recent accounting pronouncements not yet adopted

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

•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 2019-12 “Simplifying the Accounting for Income Taxes” (Topic 740): Income Taxes

In December 2019, the FASB issued an ASU to simplify and reduce the complexity of general principles in Topic 740: Income Taxes. Such simplifications include the elimination of certain exceptions to: 1) the incremental approach for intraperiod tax allocation, 2) the requirement to recognize a deferred income tax liability for equity method investments when a foreign subsidiary becomes an equity method investment, 3) the ability not to recognize a deferred income tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary, and 4) the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.

The amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The ASU provides for a number of different approaches to applying the changes, depending on the amendment, from full retrospective to modified retrospective to fully prospective. The impact on our consolidated financial statements of adopting this ASU is still being evaluated.

•ASU 2020-04 “Reference Rate Reform” (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

In March 2020, the FASB issued an ASU to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The amendments in this update are effective as of March 12, 2020 through December 31, 2022. As certain of our debt uses LIBOR or EURIBOR as a benchmark for establishing the rate of interest, and we apply hedge accounting in respect of derivatives to manage interest and currency risks associated with our debt, we expect that this ASU will have an impact on our consolidated financial statements, but this is still being evaluated.

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Analysis of accumulated other comprehensive (loss) income

3 Months Ended

Mar. 28, 2020

Equity [Abstract]

Analysis of accumulated other comprehensive (loss) income

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)	Post- retirement benefit		Cumulative translation adjustment		Cash flow hedges		Accumulated OCI attributable to shareholders		Non- controlling interests		Accumulated OCI
As of December 28, 2019	$	(9.3)	$	(812.3)	$	(36.8)	$	(858.4)	$	(46.0)	$	(904.4)
Foreign currency translation	1.2		(196.8)		—		(195.6)		(7.4)		(203.0)
Cash flow hedges movements	—		—		(11.7)		(11.7)		—		(11.7)
Post-retirement benefit movements	(0.1)		—		—		(0.1)		—		(0.1)
Other comprehensive income (loss)	1.1		(196.8)		(11.7)		(207.4)		(7.4)		(214.8)
As of March 28, 2020	$	(8.2)	$	(1009.1)	$	(48.5)	$	(1065.8)	$	(53.4)	$	(1119.2)

(dollars in millions)	Post- retirement benefit		Cumulative translation adjustment		Cash flow hedges		Accumulated OCI attributable to shareholders		Non- controlling interests		Accumulated OCI
As of December 29, 2018	$	7.6	$	(850.0)	$	(11.9)	$	(854.3)	$	(43.6)	$	(897.9)
Foreign currency translation	—		25.4		—		25.4		7.4		32.8
Cash flow hedges movements	—		—		(11.1)		(11.1)		—		(11.1)
Other comprehensive income (loss)	—		25.4		(11.1)		14.3		7.4		21.7
As of March 30, 2019	$	7.6	$	(824.6)	$	(23.0)	$	(840.0)	$	(36.2)	$	(876.2)

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Debt

3 Months Ended

Mar. 28, 2020

Debt Disclosure [Abstract]

Debt

Debt

(dollars in millions)	As of March 28,2020		As of December 28,2019
Secured debt:
—Dollar Term Loan	$	1,694.8	$	1,699.1
—Euro Term Loan	709.5		717.7
Unsecured debt:
—6.25% Dollar Senior Notes due 2026	568.0		568.0
—Other loans	0.1		0.2
Total principal of debt	2,972.4		2,985.0
Deferred issuance costs	(39.7)		(41.8)
Accrued interest	24.1		15.2
Total carrying value of debt	2,956.8		2,958.4
Debt, current portion	54.9		46.1
Debt, less current portion	$	2,901.9	$	2,912.3

Gates’ secured debt is jointly and severally, irrevocably and fully and unconditionally guaranteed by certain of its subsidiaries and is 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.

Dollar and Euro Term Loans

Our 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. 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 our option, LIBOR plus an applicable margin.

The Dollar Term Loan interest rate is currently LIBOR, subject to a floor of 1.00%, plus a margin of 2.75%, and as of March 28, 2020, borrowings under this facility bore interest at a rate of 4.35% per annum. The Dollar Term Loan interest rate is re-set on the last business day of each month. As of March 28, 2020, the Euro Term Loan bore interest at EURIBOR, which is currently below 0%, subject to a floor of 0%, plus a margin of 3.00%. The Euro Term Loan interest rate is re-set on the last business day of each quarter.

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 three months ended March 28, 2020, we made amortization payments against the Dollar Term Loan and the Euro Term Loan of $4.3 million and $1.8 million, respectively. During the three months ended March 30, 2019, we made amortization payments against the Dollar Term Loan and the Euro Term Loan of $8.7 million and $3.6 million, respectively.

Under the terms of the credit agreement, we are obligated 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 2019 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 is required to be made in 2020.

During the periods presented, foreign exchange gains 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 our Euro investments, a corresponding portion of the foreign exchange gains (losses) were recognized in OCI.

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Gain recognized in statement of operations	$	4.9	$	13.4
Gain recognized in OCI	1.5		0.7
Total gain	$	6.4	$	14.1

The above net foreign exchange gains recognized in the other expenses (income) line of the condensed consolidated statement of operations have been substantially offset by net foreign exchange movements on Euro-denominated intercompany loans as part of our overall hedging strategy.

A wholly-owned U.S. subsidiary of Gates Global LLC is the principal obligor under the Term Loans for U.S. federal income tax purposes and makes the payments due on this tranche of debt. As a result, interest received by lenders of this tranche of debt is U.S. source income.

Unsecured Senior Notes

As of March 28, 2020, we had $568.0 million of Dollar Senior Notes outstanding that were issued in November 2019. These notes are scheduled to mature on January 15, 2026 and bear interest at an annual fixed rate of 6.25% with semi-annual interest payments.

On and after January 15, 2022, we may redeem the Dollar Senior Notes, at our 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:

	Redemption Price
During the year commencing:
—2023	103.125	%
—2024	101.563	%
—2025 and thereafter	100.000	%

Additionally, net cash proceeds from an equity offering can be utilized at any time prior to January 15, 2022, to redeem up to 40% of the notes at a redemption price equal to 106.250% of the principal amount thereof, plus accrued and unpaid interest through to the redemption date.

Upon the occurrence of a change of control or a certain qualifying asset sale, the holders of the notes will have the right to require us to make an offer to repurchase each holder's notes at a price equal to 101% (in the case of a change of control) or 100% (in the case of an asset sale) of their principal amount, plus accrued and unpaid interest.

Revolving credit facility

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, with a letter of credit sub-facility of $20.0 million. The facility matures on January 29, 2023.

As of both March 28, 2020 and December 28, 2019, there were no 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 our option, LIBOR, plus an applicable margin.

Asset-backed revolver

We have a revolving credit facility backed by certain of our assets in North America. The facility allows for loans of up to a maximum of $325.0 million ($301.2 million as of March 28, 2020, compared with $294.6 million as of December 28, 2019, 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. The facility matures on January 29, 2023.

As of both March 28, 2020 and December 28, 2019, there were no drawings for cash under the asset-backed revolver, but there were letters of credit outstanding of $45.9 million and $50.1 million, respectively.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 our option, LIBOR, plus an applicable margin.

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Restructuring and other strategic initiatives - Restructuring Costs by Segment (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Restructuring Cost and Reserve
Restructuring expenses	$ 1.9	$ 3.3
Power Transmission
Restructuring Cost and Reserve
Restructuring expenses	0.2	2.9
Fluid Power
Restructuring Cost and Reserve
Restructuring expenses	$ 1.7	$ 0.4

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Equity (Tables)

3 Months Ended

Mar. 28, 2020

Equity [Abstract]

Schedule of movement in number of shares in issue

Movements in the Company’s number of shares in issue for the three months ended March 28, 2020 and March 30, 2019, respectively, were as follows:

	Three months ended
(number of shares)	March 28, 2020	March 30, 2019
Balance as of the beginning of the period	290,157,299	289,847,574
Exercise of share options	318,607	190,034
Vesting of restricted stock units, net of withholding taxes	190,632	5,812
Balance as of the end of the period	290,666,538	290,043,420

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Segment information - Sales and Adjusted EBITDA by Reporting Segment (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Segment Reporting Information
Net sales	$ 710.1	$ 804.9
Adjusted EBITDA	120.8	165.5
Power Transmission
Segment Reporting Information
Net sales	441.2	499.5
Adjusted EBITDA	79.5	109.9
Fluid Power
Segment Reporting Information
Net sales	268.9	305.4
Adjusted EBITDA	$ 41.3	$ 55.6

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Debt - Schedule of Long-term debt (Details) - USD ($) $ in Millions	Mar. 28, 2020	Dec. 28, 2019
Debt Instrument
Total principal of debt	$ 2,972.4	$ 2,985.0
Deferred issuance costs	(39.7)	(41.8)
Accrued interest	24.1	15.2
Total carrying value of debt	2,956.8	2,958.4
Debt, current portion	54.9	46.1
Debt, less current portion	2,901.9	2,912.3
Secured debt: | —Dollar Term Loan
Debt Instrument
Total principal of debt	1,694.8	1,699.1
Secured debt: | —Euro Term Loan
Debt Instrument
Total principal of debt	$ 709.5	717.7
Unsecured debt: | —6.25% Dollar Senior Notes due 2026
Debt Instrument
Stated interest rate on debt (percent)	6.25%
Total principal of debt	$ 568.0	568.0
Unsecured debt: | —Other loans
Debt Instrument
Total principal of debt	$ 0.1	$ 0.2

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Derivative financial instruments - Gain Loss From Derivative Instruments Not Designated As Hedging Instruments (Details) - Not designated as hedging instrument - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Derivative Instruments, Gain (Loss)
Gain (loss) on derivative, recognized in the income statement	$ 0.8	$ 2.9
Currency forward contracts | SG&A
Derivative Instruments, Gain (Loss)
Gain (loss) on derivative, recognized in the income statement	0.3	2.7
Currency swap | Other expense (income)
Derivative Instruments, Gain (Loss)
Gain (loss) on derivative, recognized in the income statement	$ 0.5	$ 0.2

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Unaudited Condensed Consolidated Statements of Operations - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Income Statement [Abstract]
Net sales	$ 710.1	$ 804.9
Cost of sales	454.3	497.6
Gross profit	255.8	307.3
Selling, general and administrative expenses	193.4	200.5
Transaction-related (income) expenses	(0.2)	0.4
Restructuring expenses	1.9	3.3
Other operating expenses	2.3	2.9
Operating income from continuing operations	58.4	100.2
Interest expense	36.7	38.1
Other income	(2.1)	(3.3)
Income from continuing operations before taxes	23.8	65.4
Income tax benefit	(16.1)	(539.7)
Net income from continuing operations	39.9	605.1
Loss on disposal of discontinued operations, net of tax, respectively, of $0 and $0	0.0	0.3
Net income	39.9	604.8
Less: non-controlling interests	4.3	(8.9)
Net income attributable to shareholders	$ 35.6	$ 613.7
Basic
Earnings per share from continuing operations (in usd per share)	$ 0.12	$ 2.12
Earnings per share from discontinued operations (in usd per share)	0	0
Earnings per share (in usd per share)	0.12	2.12
Diluted
Earnings per share from continuing operations (in usd per share)	0.12	2.08
Earnings per share from discontinued operations (in usd per share)	0	0
Earnings per share (in usd per share)	$ 0.12	$ 2.08

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Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Millions	Mar. 28, 2020	Dec. 28, 2019
Current assets
Cash and cash equivalents	$ 626.3	$ 635.3
Trade accounts receivable	717.2	694.7
Inventories	484.4	475.1
Taxes receivable	32.5	22.1
Prepaid expenses and other assets	137.5	131.4
Total current assets	1,997.9	1,958.6
Non-current assets
Property, plant and equipment, net	683.0	727.9
Goodwill	1,957.7	2,060.5
Pension surplus	36.2	38.1
Intangible assets, net	1,809.9	1,876.0
Operating lease right-of-use assets	118.3	123.0
Taxes receivable	24.1	23.0
Deferred income taxes	542.4	587.1
Other non-current assets	15.3	17.1
Total assets	7,184.8	7,411.3
Current liabilities
Debt, current portion	54.9	46.1
Trade accounts payable	383.0	374.7
Taxes payable	26.5	48.5
Accrued expenses and other current liabilities	203.3	188.8
Total current liabilities	667.7	658.1
Non-current liabilities
Debt, less current portion	2,901.9	2,912.3
Post-retirement benefit obligations	146.8	151.2
Lease liabilities	111.8	116.2
Taxes payable	104.8	108.8
Deferred income taxes	322.7	369.3
Other non-current liabilities	87.7	84.7
Total liabilities	4,343.4	4,400.6
Commitments and contingencies (note 18)
Shareholders’ equity
—Shares, par value of $0.01 each - authorized shares: 3,000,000,000 ; outstanding shares: 290,666,538 (December 28, 2019: authorized shares: 3,000,000,000; outstanding shares: 290,157,299)	2.9	2.9
—Additional paid-in capital	2,440.1	2,434.5
—Accumulated other comprehensive loss	(1,065.8)	(858.4)
—Retained earnings	1,107.6	1,072.0
Total shareholders’ equity	2,484.8	2,651.0
Non-controlling interests	356.6	359.7
Total equity	2,841.4	3,010.7
Total liabilities and equity	$ 7,184.8	$ 7,411.3

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Equity

3 Months Ended

Mar. 28, 2020

Equity [Abstract]

Equity

Equity

Movements in the Company’s number of shares in issue for the three months ended March 28, 2020 and March 30, 2019, respectively, were as follows:

	Three months ended
(number of shares)	March 28, 2020	March 30, 2019
Balance as of the beginning of the period	290,157,299	289,847,574
Exercise of share options	318,607	190,034
Vesting of restricted stock units, net of withholding taxes	190,632	5,812
Balance as of the end of the period	290,666,538	290,043,420

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

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Fair value measurement

3 Months Ended

Mar. 28, 2020

Fair Value Disclosures [Abstract]

Fair value measurement

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); and

•“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 March 28, 2020				As of December 28, 2019
(dollars in millions)	Carrying amount		Fair value		Carrying amount		Fair value
Current	$	54.9	$	44.8	$	46.1	$	45.9
Non-current	2,901.9		2,490.5		2,912.3		2,946.8
	$	2,956.8	$	2,535.3	$	2,958.4	$	2,992.7

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. The fair values of the term loans are derived from a market price, discounted for illiquidity. 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 their quoted market price.

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

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

(dollars in millions)	Quoted prices in active markets (Level 1)		Significant observable inputs (Level 2)		Total
As of March 28, 2020
Equity investments	$	1.0	$	—	$	1.0
Derivative assets	$	—	$	2.9	$	2.9
Derivative liabilities	$	—	$	(71.2)	$	(71.2)
As of December 28, 2019
Equity investments	$	1.1	$	—	$	1.1
Derivative assets	$	—	$	5.4	$	5.4
Derivative liabilities	$	—	$	(60.9)	$	(60.9)

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 derivative 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 three months ended March 28, 2020 or the three months ended March 30, 2019.

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Subsequent Events	3 Months Ended
	Mar. 28, 2020
Subsequent Events [Abstract]
Subsequent events	Subsequent events[To be determined]

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Inventories

3 Months Ended

Mar. 28, 2020

Inventory Disclosure [Abstract]

Inventories

Inventories

(dollars in millions)	As of March 28,2020		As of December 28, 2019
Raw materials and supplies	$	120.6	$	118.9
Work in progress	36.9		33.6
Finished goods	326.9		322.6
Total inventories	$	484.4	$	475.1

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Segment information

3 Months Ended

Mar. 28, 2020

Segment Reporting [Abstract]

Segment information

Segment information

A. Background

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. The chief executive officer (“CEO”) of Gates serves as the chief operating decision maker. These decisions are based on net sales and Adjusted EBITDA (defined below).

B. Operating segments and segment assets

Gates manufactures a wide range of power transmission and fluid power products and components for a large variety of industrial and automotive applications, both in the aftermarket and 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.

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.

C. Segment net sales and disaggregated net sales

Sales between reporting segments and the impact of such sales on Adjusted EBITDA for each segment are not included in internal reports presented to the CEO and have therefore not been included below.

	Net Sales
	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Power Transmission	$	441.2	$	499.5
Fluid Power	268.9		305.4
Continuing operations	$	710.1	$	804.9

Our commercial function is organized by region and therefore, in addition to reviewing net sales by our reporting segments, the CEO also reviews net sales information disaggregated by region, including between emerging and developed markets.

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

	Net Sales
	Three months ended
	March 28, 2020				March 30, 2019
(dollars in millions)	Power Transmission		Fluid Power		Power Transmission		Fluid Power
U.S.	$	137.7	$	139.7	$	152.9	$	157.1
North America, excluding U.S.	40.3		41.7		42.0		46.6
United Kingdom (“U.K.”)	11.4		6.9		11.7		10.8
EMEA(1), excluding U.K.	129.2		44.0		133.3		47.2
East Asia and India	65.2		17.4		73.6		20.5
Greater China	44.3		13.0		68.9		15.1
South America	13.1		6.2		17.1		8.1
Net Sales	$	441.2	$	268.9	$	499.5	$	305.4

⁽¹⁾ Europe, Middle East and Africa (“EMEA”).

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

	Net Sales
	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Developed	$	475.8	$	543.7
Emerging	234.3		261.2
Net Sales	$	710.1	$	804.9

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 (income) 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 (income) expenses incurred in relation to business combinations and major corporate transactions, including acquisition integration activities;

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

•restructuring expenses, including severance-related expenses;

•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.

Adjusted EBITDA by segment was as follows:

	Adjusted EBITDA
	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Power Transmission	$	79.5	$	109.9
Fluid Power	41.3		55.6
Continuing operations	$	120.8	$	165.5

Reconciliation of net income from continuing operations to Adjusted EBITDA:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Net income from continuing operations	$	39.9	$	605.1
Income tax benefit	(16.1)		(539.7)
Income from continuing operations before taxes	23.8		65.4
Interest expense	36.7		38.1
Other income	(2.1)		(3.3)
Operating income from continuing operations	58.4		100.2
Depreciation and amortization	54.9		56.1
Transaction-related (income) expenses (1)	(0.2)		0.4
Restructuring expenses	1.9		3.3
Share-based compensation expense	2.9		2.6
Sponsor fees (included in other operating expenses)	1.7		1.8
Severance-related expenses (included in cost of sales)	0.1		—
Severance-related expenses (benefits) (included in SG&A)	0.5		(0.2)
Other items not directly related to current operations	0.6		1.3
Adjusted EBITDA	$	120.8	$	165.5

⁽¹⁾ Transaction-related (income) expenses relate primarily to advisory fees and other costs recognized in respect of major corporate transactions, including the acquisition of businesses and debt refinancings.

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Post-retirement benefits (Tables)

3 Months Ended

Mar. 28, 2020

Postemployment Benefits [Abstract]

Schedule of components of net periodic benefit cost for pensions and other post-retirement benefits

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

	Three months ended March 28, 2020						Three months ended March 30, 2019
(dollars in millions)	Pensions		Other post-retirement benefits		Total		Pensions		Other post-retirement benefits		Total
Reported in operating income:
—Employer service cost	$	1.4	$	—	$	1.4	$	1.4	$	—	$	1.4
Reported outside of operating income:
—Interest cost	4.6		0.4		5.0		5.9		0.6		6.5
—Expected return on plan assets	(5.5)		—		(5.5)		(7.0)		—		(7.0)
—Net amortization of prior period losses (gains)	0.3		(0.3)		—		0.2		(0.3)		(0.1)
—Settlements and curtailments	—		—		—		(0.7)		—		(0.7)
Net periodic benefit cost	$	0.8	$	0.1	$	0.9	$	(0.2)	$	0.3	$	0.1
Contributions	$	1.7	$	1.2	$	2.9	$	1.5	$	1.0	$	2.5

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Restructuring and other strategic initiatives (Tables)

3 Months Ended

Mar. 28, 2020

Restructuring and Related Activities [Abstract]

Schedule of restructuring costs

Overall costs associated with our restructuring and other strategic initiatives have been recognized in the condensed consolidated statements as set forth below. Expenses incurred in relation to certain of these actions qualify as restructuring expenses under U.S. GAAP.

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Restructuring expenses:
—Severance	$	0.2	$	2.6
—Professional fees	0.2		0.6
—Other restructuring expenses	1.5		0.1
Total restructuring expenses	$	1.9	$	3.3
Expenses related to other strategic initiatives:
—Severance costs included in cost of sales	$	0.1	$	—
—Severance costs (benefits) included in SG&A	0.5		(0.2)
Total expenses related to other strategic initiatives	$	0.6	$	(0.2)

These expenses include the impairment of inventory, which is recognized in cost of sales. Analyzed by segment, our restructuring expenses were as follows:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Power Transmission	$	0.2	$	2.9
Fluid Power	1.7		0.4
Continuing operations	$	1.9	$	3.3

Schedule of restructuring reserves activity

The following summarizes the reserve for restructuring expenses for the three months ended March 28, 2020 and March 30, 2019, respectively:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Balance as of the beginning of the period	$	2.9	$	2.6
Utilized during the period	(2.0)		(2.0)
Net charge for the period	2.4		3.3
Released during the period	(0.5)		—
Foreign currency translation	0.1		(0.1)
Balance as of the end of the period	$	2.9	$	3.8

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Intangible assets (Tables)

3 Months Ended

Mar. 28, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of finite-lived intangible assets

	As of March 28, 2020						As of December 28, 2019
(dollars in millions)	Cost		Accumulated amortization and impairment		Net		Cost		Accumulated amortization and impairment		Net
Finite-lived:
—Customer relationships	$	1,964.8	$	(667.2)	$	1,297.6	$	2,021.8	$	(656.3)	$	1,365.5
—Technology	90.4		(87.8)		2.6		90.8		(87.8)		3.0
—Capitalized software	81.8		(41.5)		40.3		76.1		(38.0)		38.1
	2,137.0		(796.5)		1,340.5		2,188.7		(782.1)		1,406.6
Indefinite-lived:
—Brands and trade names	513.4		(44.0)		469.4		513.4		(44.0)		469.4
Total intangible assets	$	2,650.4	$	(840.5)	$	1,809.9	$	2,702.1	$	(826.1)	$	1,876.0

Schedule of indefinite-lived intangible assets

	As of March 28, 2020						As of December 28, 2019
(dollars in millions)	Cost		Accumulated amortization and impairment		Net		Cost		Accumulated amortization and impairment		Net
Finite-lived:
—Customer relationships	$	1,964.8	$	(667.2)	$	1,297.6	$	2,021.8	$	(656.3)	$	1,365.5
—Technology	90.4		(87.8)		2.6		90.8		(87.8)		3.0
—Capitalized software	81.8		(41.5)		40.3		76.1		(38.0)		38.1
	2,137.0		(796.5)		1,340.5		2,188.7		(782.1)		1,406.6
Indefinite-lived:
—Brands and trade names	513.4		(44.0)		469.4		513.4		(44.0)		469.4
Total intangible assets	$	2,650.4	$	(840.5)	$	1,809.9	$	2,702.1	$	(826.1)	$	1,876.0

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Goodwill (Details) $ in Millions	3 Months Ended
	Mar. 28, 2020 USD ($)
Cost and carrying amount
Beginning balance	$ 2,060.5
Foreign currency translation	(102.8)
Ending balance	1,957.7
Power Transmission
Cost and carrying amount
Beginning balance	1,377.5
Foreign currency translation	(53.0)
Ending balance	1,324.5
Fluid Power
Cost and carrying amount
Beginning balance	683.0
Foreign currency translation	(49.8)
Ending balance	$ 633.2

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Restructuring and other strategic initiatives - Restructuring Reserve Activity (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Restructuring reserves
Balance as of the beginning of the period	$ 2.9	$ 2.6
Utilized during the period	(2.0)	(2.0)
Net charge for the period	2.4	3.3
Released during the period	(0.5)	0.0
Foreign currency translation	0.1	(0.1)
Balance as of the end of the period	$ 2.9	$ 3.8

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Derivative financial instruments - Narratives (Details)	3 Months Ended
	Mar. 28, 2020 USD ($) instrument	Mar. 30, 2019 USD ($)	Mar. 28, 2020 EUR (€) instrument	Dec. 28, 2019 USD ($) instrument
Interest rate swaps due June 30, 2020 through June 30, 2023
Derivative
Notional amount of derivative contracts	$ 870,000,000.0			$ 870,000,000.0
Number of derivative instruments (instruments) | instrument	3		3	3
Interest rate cap
Derivative
Notional amount of derivative contracts	$ 1,700,000,000			$ 1,700,000,000
Not designated as hedging instrument
Derivative
Gain (loss) on derivative, recognized in the income statement	800,000	$ 2,900,000
Not designated as hedging instrument | —Currency swaps
Derivative
Notional amount of derivative contracts	270,000,000.0			270,000,000.0
Not designated as hedging instrument | Currency forward contracts
Derivative
Notional amount of derivative contracts	32,300,000			16,700,000
Not designated as hedging instrument | Forward contracts
Derivative
Notional amount of derivative contracts	64,300,000			$ 82,500,000
Derivatives designated as hedging instruments: | Euro Term Loan | Secured debt | Net investment hedges
Derivative
Debt instrument principal amount | €			€ 147,000,000.0
Derivatives designated as hedging instruments: | —Currency swaps | Net investment hedges | Interest expense
Derivative
Gain (loss) on derivative, recognized in the income statement	$ (1,600,000)	$ 2,200,000

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Related party transactions - Sales and Purchases with Equity Method Investees (Details) - Equity method investees - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Related Party Transaction
Sales	$ 0.3	$ 0.3
Purchases	$ (3.6)	$ (4.1)

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Post-retirement benefits - Narratives (Details) $ in Millions	Mar. 28, 2020 USD ($)
Pensions
Defined Benefit Plans and Other Postretirement Benefit Plans
Expected future employer contributions in current fiscal year	$ 4.3
Other post-retirement benefits
Defined Benefit Plans and Other Postretirement Benefit Plans
Expected future employer contributions in current fiscal year	$ 5.5

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Share-based compensation - RSU and PRSU Rollforward (Details)	3 Months Ended
	Mar. 28, 2020 $ / shares shares
Number of awards
Beginning balance (shares) | shares	966,819
Granted (shares) | shares	1,491,781
Forfeited (shares) | shares	(63,687)
Vested (shares) | shares	(218,556)
Ending balance (shares) | shares	2,176,357
Weighted average grant date fair value $
Beginning balance (usd per share) | $ / shares	$ 17.20
Granted (usd per share) | $ / shares	12.60
Forfeited (usd per share) | $ / shares	18.08
Vested (usd per share) | $ / shares	16.41
Ending balance (usd per share) | $ / shares	$ 14.10
—RSUs
Number of awards
Beginning balance (shares) | shares	718,269
Granted (shares) | shares	1,126,523
Forfeited (shares) | shares	(35,135)
Vested (shares) | shares	(218,556)
Ending balance (shares) | shares	1,591,101
Weighted average grant date fair value $
Beginning balance (usd per share) | $ / shares	$ 16.20
Granted (usd per share) | $ / shares	12.01
Forfeited (usd per share) | $ / shares	16.46
Vested (usd per share) | $ / shares	16.41
Ending balance (usd per share) | $ / shares	$ 13.20
—PRSUs
Number of awards
Beginning balance (shares) | shares	248,550
Granted (shares) | shares	365,258
Forfeited (shares) | shares	(28,552)
Ending balance (shares) | shares	585,256
Weighted average grant date fair value $
Beginning balance (usd per share) | $ / shares	$ 20.07
Granted (usd per share) | $ / shares	14.41
Forfeited (usd per share) | $ / shares	20.07
Ending balance (usd per share) | $ / shares	$ 16.53

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Debt - Foreign exchange gains and losses (Details) - Secured debt - Euro Term Loan - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Debt Instrument
Gain recognized in statement of operations	$ 4.9	$ 13.4
Gain recognized in OCI	1.5	0.7
Total gain	$ 6.4	$ 14.1

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Fair value measurement - Narrative (Details)	3 Months Ended
	Mar. 28, 2020
Secured credit facilities | Secured debt | LIBOR
Debt Instrument
Variable rate floor (percent)	1.00%
Euro Term Loan | Term loan | EURIBOR
Debt Instrument
Variable rate floor (percent)	0.00%

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Derivative financial instruments - Interest Rate Caps (Details) - Mar. 28, 2020	USD ($)	EUR (€)
June 30, 2017 to June 30, 2020
Derivative
Notional amount of derivative contracts	$ 200,000,000.0
June 28, 2019 to June 30, 2020
Derivative
Notional amount of derivative contracts	$ 1,000,000,000.0
July 1, 2019 to June 30, 2023
Derivative
Notional amount of derivative contracts | €		€ 425,000,000.0

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Related party transactions (Tables)

3 Months Ended

Mar. 28, 2020

Related Party Transactions [Abstract]

Schedule of related party transactions

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

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Sales	$	0.3	$	0.3
Purchases	$	(3.6)	$	(4.1)

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

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Sales	$	12.5	$	13.4
Purchases	$	(5.1)	$	(5.4)

Amounts outstanding in respect of these transactions were as follows:

(dollars in millions)	As of March 28,2020		As of December 28,2019
Receivables	$	4.6	$	4.2
Payables	$	(5.3)	$	(5.9)

D

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Segment information - Reconciliation of Adjusted EBITDA to Net Income (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Segment Reporting Information
Net income from continuing operations	$ 39.9	$ 605.1
Income tax benefit	(16.1)	(539.7)
Income from continuing operations before taxes	23.8	65.4
Interest expense	36.7	38.1
Other income	(2.1)	(3.3)
Operating income from continuing operations	58.4	100.2
Depreciation and amortization	54.9	56.1
Transaction-related (income) expenses	(0.2)	0.4
Restructuring expenses	1.9	3.3
Share-based compensation expense	2.9	2.6
Sponsor fees (included in other operating expenses)	1.7	1.8
Other items not directly related to current operations	0.6	1.3
Adjusted EBITDA	120.8	165.5
Cost of sales
Segment Reporting Information
Severance-related expenses (included in cost of sales)	0.1	0.0
SG&A
Segment Reporting Information
Severance-related expenses (benefits) (included in SG&A)	$ 0.5	$ (0.2)

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Related party transactions

3 Months Ended

Mar. 28, 2020

Related Party Transactions [Abstract]

Related party transactions

Related party transactions

A. Entities affiliated with Blackstone

In January 2018, Gates and 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 new Transaction and Monitoring Fee Agreement (the “New Monitoring Fee Agreement”). Under this agreement, Gates Industrial Corporation plc 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 March 28, 2020, Gates incurred $1.7 million, compared with $1.8 million during the prior year period, in respect of these oversight services and out-of-pocket expenses, of which there was no amount owing at March 28, 2020 or December 28, 2019.

Monitoring fee obligations under the New Monitoring Fee Agreement terminated in January 2020 upon the second anniversary of the closing date of the initial public offering of Gates.

In addition, in connection with the initial public offering, we entered into a new Support and Services Agreement with BMP, under which Gates Industrial Corporation plc 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. This agreement 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.

B. Equity method investees

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

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Sales	$	0.3	$	0.3
Purchases	$	(3.6)	$	(4.1)

Amounts outstanding in respect of these transactions were payables of $0.2 million as of March 28, 2020, compared with $0.2 million as of December 28, 2019. During the three months ended March 28, 2020, we received dividends of $0 from our equity method investees, compared with $0 in the prior year period.

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

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

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Sales	$	12.5	$	13.4
Purchases	$	(5.1)	$	(5.4)

Amounts outstanding in respect of these transactions were as follows:

(dollars in millions)	As of March 28,2020		As of December 28,2019
Receivables	$	4.6	$	4.2
Payables	$	(5.3)	$	(5.9)

D. Majority-owned subsidiaries

During 2019, we finalized an agreement with the non-controlling interest holder in certain of our consolidated, majority-owned subsidiaries, regarding the scope of business of such subsidiaries, which resulted in a smaller share of net income allocated to non-controlling interests. This change was retrospectively effective from the beginning of 2019 and included a one-time adjustment of $15.0 million, which was recorded in the first quarter of 2019.

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Post-retirement benefits

3 Months Ended

Mar. 28, 2020

Postemployment Benefits [Abstract]

Post-retirement benefits

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 March 28, 2020						Three months ended March 30, 2019
(dollars in millions)	Pensions		Other post-retirement benefits		Total		Pensions		Other post-retirement benefits		Total
Reported in operating income:
—Employer service cost	$	1.4	$	—	$	1.4	$	1.4	$	—	$	1.4
Reported outside of operating income:
—Interest cost	4.6		0.4		5.0		5.9		0.6		6.5
—Expected return on plan assets	(5.5)		—		(5.5)		(7.0)		—		(7.0)
—Net amortization of prior period losses (gains)	0.3		(0.3)		—		0.2		(0.3)		(0.1)
—Settlements and curtailments	—		—		—		(0.7)		—		(0.7)
Net periodic benefit cost	$	0.8	$	0.1	$	0.9	$	(0.2)	$	0.3	$	0.1
Contributions	$	1.7	$	1.2	$	2.9	$	1.5	$	1.0	$	2.5

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 (income) line in the condensed consolidated statement of operations.

For 2020 as a whole, we expect to contribute approximately $4.3 million to our defined benefit pension plans and approximately $5.5 million to our other post-retirement benefit plans.

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Unaudited Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Net income	$ 39.9	$ 604.8
Foreign currency translation:
Net translation (loss) gain on foreign operations, net of tax expense, respectively, of $0 and $0.2	(207.0)	27.2
Gain on net investment hedges, net of tax expense, respectively, of $0 and $0	4.0	5.6
Total foreign currency translation movements	(203.0)	32.8
Cash flow hedges (Interest rate derivatives):
Loss arising in the period, net of tax benefit, respectively, of $2.5 and $2.1	(13.4)	(11.2)
Reclassification to net income, net of tax expense, respectively, of $0 and $0	1.7	0.1
Total cash flow hedges movements	(11.7)	(11.1)
Post-retirement benefits:
Reclassification of prior year actuarial movements to net income, net of tax benefit, respectively, of $0 and $0.1	(0.1)	0.0
Total post-retirement benefit movements	(0.1)	0.0
Other comprehensive (loss) income	(214.8)	21.7
Comprehensive (loss) income for the period	(174.9)	626.5
Comprehensive (loss) income attributable to shareholders:
Comprehensive income attributable to parent	(171.8)	628.0
Comprehensive income attributable to non-controlling interests	(3.1)	(1.5)
—(Loss) income arising from continuing operations
Comprehensive (loss) income attributable to shareholders:
Comprehensive income attributable to parent	(171.8)	628.3
—Loss arising from discontinued operations
Comprehensive (loss) income attributable to shareholders:
Comprehensive income attributable to parent	$ 0.0	$ (0.3)

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Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Cash flows from operating activities
Net income	$ 39.9	$ 604.8
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization	54.9	56.1
Non-cash currency transaction gain on debt and hedging instruments	(5.3)	(13.6)
Other net non-cash financing costs	8.2	13.1
Share-based compensation expense	2.9	2.6
Decrease in post-employment benefit obligations, net	(1.8)	(2.4)
Deferred income taxes	3.7	(624.4)
Other operating activities	2.7	2.4
Changes in operating assets and liabilities, net of effects of acquisitions:
—Increase in accounts receivable	(42.1)	(46.1)
—Increase in inventories	(27.5)	(21.3)
—Increase (decrease) in accounts payable	19.5	(25.8)
—Increase in prepaid expenses and other assets	(6.1)	(12.4)
—(Decrease) increase in taxes payable	(38.3)	51.7
—Increase (decrease) in other liabilities	20.4	(32.4)
Net cash provided by (used in) operations	31.1	(47.7)
Cash flows from investing activities
Purchases of property, plant and equipment	(12.1)	(21.3)
Purchases of intangible assets	(2.8)	(1.6)
Cash paid under corporate-owned life insurance policies	(9.8)	(9.5)
Cash received under corporate-owned life insurance policies	0.0	0.7
Other investing activities	0.1	0.0
Net cash used in investing activities	(24.6)	(31.7)
Cash flows from financing activities
Issuance of shares, net of underwriting costs	2.1	1.2
Payments of long-term debt	(6.2)	(12.7)
Debt issuance costs paid	(0.3)	0.0
Dividends paid to non-controlling interests	0.0	(1.8)
Other financing activities	1.5	0.2
Net cash used in financing activities	(2.9)	(13.1)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(12.9)	2.8
Net decrease in cash and cash equivalents and restricted cash	(9.3)	(89.7)
Cash and cash equivalents and restricted cash at the beginning of the period	636.6	424.6
Cash and cash equivalents and restricted cash at the end of the period	627.3	334.9
Supplemental schedule of cash flow information
Interest paid	25.5	51.4
Income taxes paid, net	18.5	33.0
Accrued capital expenditures	$ 1.9	$ 0.4

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Inventories (Tables)

3 Months Ended

Mar. 28, 2020

Inventory Disclosure [Abstract]

Schedule of inventories

(dollars in millions)	As of March 28,2020		As of December 28, 2019
Raw materials and supplies	$	120.6	$	118.9
Work in progress	36.9		33.6
Finished goods	326.9		322.6
Total inventories	$	484.4	$	475.1

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Fair value measurement (Tables)

3 Months Ended

Mar. 28, 2020

Fair Value Disclosures [Abstract]

Schedule of carrying amount and fair value of debt

The carrying amount and fair value of our debt are set out below:

	As of March 28, 2020				As of December 28, 2019
(dollars in millions)	Carrying amount		Fair value		Carrying amount		Fair value
Current	$	54.9	$	44.8	$	46.1	$	45.9
Non-current	2,901.9		2,490.5		2,912.3		2,946.8
	$	2,956.8	$	2,535.3	$	2,958.4	$	2,992.7

Schedule of assets and liabilities measured at fair value on a recurring basis

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

(dollars in millions)	Quoted prices in active markets (Level 1)		Significant observable inputs (Level 2)		Total
As of March 28, 2020
Equity investments	$	1.0	$	—	$	1.0
Derivative assets	$	—	$	2.9	$	2.9
Derivative liabilities	$	—	$	(71.2)	$	(71.2)
As of December 28, 2019
Equity investments	$	1.1	$	—	$	1.1
Derivative assets	$	—	$	5.4	$	5.4
Derivative liabilities	$	—	$	(60.9)	$	(60.9)

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Intangible assets

3 Months Ended

Mar. 28, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible assets

Intangible assets

	As of March 28, 2020						As of December 28, 2019
(dollars in millions)	Cost		Accumulated amortization and impairment		Net		Cost		Accumulated amortization and impairment		Net
Finite-lived:
—Customer relationships	$	1,964.8	$	(667.2)	$	1,297.6	$	2,021.8	$	(656.3)	$	1,365.5
—Technology	90.4		(87.8)		2.6		90.8		(87.8)		3.0
—Capitalized software	81.8		(41.5)		40.3		76.1		(38.0)		38.1
	2,137.0		(796.5)		1,340.5		2,188.7		(782.1)		1,406.6
Indefinite-lived:
—Brands and trade names	513.4		(44.0)		469.4		513.4		(44.0)		469.4
Total intangible assets	$	2,650.4	$	(840.5)	$	1,809.9	$	2,702.1	$	(826.1)	$	1,876.0

During the three months ended March 28, 2020, the amortization expense recognized in respect of intangible assets was $32.2 million, compared with $32.6 million for the three months ended March 30, 2019. In addition, movements in foreign currency exchange rates resulted in a decrease in the net carrying value of total intangible assets of $38.4 million for the three months ended March 28, 2020, compared with an increase of $3.3 million for the three months ended March 30, 2019.

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Income taxes

3 Months Ended

Mar. 28, 2020

Income Tax Disclosure [Abstract]

Income taxes

Income taxes

We compute the year-to-date income tax provision by applying our estimated annual effective tax rate to our year-to-date pre-tax income and adjust for discrete tax items in the period in which they occur.

For the three months ended March 28, 2020, we had an income tax benefit of $16.1 million on pre-tax income of $23.8 million, which resulted in an effective tax rate of (67.6)%, compared with an income tax benefit of $539.7 million on pre-tax income of $65.4 million, which resulted in an effective tax rate of (825.2)% for the three months ended March 30, 2019.

The increase in the effective tax rate for the three months ended March 28, 2020 compared with the prior year period was due primarily to the recognition in the prior year of a discrete benefit of $617.3 million related to the release of valuation allowances, mainly related to Luxembourg net operating losses, partially offset by a discrete expense of $66.1 million related primarily to unrecognized tax benefits from the European business reorganization. The current year rate is driven mainly by discrete tax benefits of $24.7 million, related to the reversal of unrecognized tax benefits, net of settlement amounts, arising from the resolution of audits in Canada and Germany and $3.2 million from law changes in India with respect to the taxation of dividends. These current period benefits were offset partially by $6.3 million of discrete expenses arising from the enactment in the U.S. of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).

Deferred Tax Assets and Liabilities

We recognize deferred tax assets and liabilities for future tax consequences arising from differences between the carrying amounts of existing assets and liabilities under U.S. GAAP and their respective tax bases, and for net operating loss carryforwards and tax credit carryforwards. We evaluate the recoverability of our deferred tax assets, weighing all positive and negative evidence, and are required to establish or maintain a valuation allowance for these assets if we determine that it is more likely than not that some or all of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which the evidence can be objectively verified. If negative evidence exists, positive evidence is necessary to support a conclusion that a valuation allowance is not needed.

Our framework for assessing the recoverability of deferred tax assets requires us to weigh all available evidence, including:

•taxable income in prior carry back years if carry back is permitted under the relevant tax law;

•future reversal of existing temporary differences;

•tax-planning strategies that are prudent and feasible; and

•future taxable income exclusive of reversing temporary differences and carryforwards.

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Introduction

3 Months Ended

Mar. 28, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Introduction

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.

In these condensed consolidated financial statements and related notes, all references to “Gates,” “we,” “us,” and “our” refer, unless the context requires otherwise, to Gates Industrial Corporation plc and its consolidated subsidiaries.

B. Accounting periods

The Company prepares its annual consolidated financial statements for the period ending on the Saturday nearest December 31. Accordingly, the condensed consolidated balance sheet is presented as of March 28, 2020 and December 28, 2019 and the related condensed consolidated statements of operations, comprehensive income, cash flows, and shareholders’ equity are presented, where relevant, for the 91 day period from December 29, 2019 to March 28, 2020, with comparative information for the 91 day period from December 30, 2018 to March 30, 2019.

C. Basis of preparation

The condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are presented in U.S. dollars unless otherwise indicated. The condensed consolidated financial statements and related notes contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position as of March 28, 2020 and the results of its operations and cash flows for the periods ended March 28, 2020 and March 30, 2019. Interim period results are not necessarily indicative of the results to be expected for the full fiscal year.

The first quarter of 2020 marked the beginning of an unprecedented environment for the global economy, as governments, companies and communities implemented strict measures to minimize the spread of the novel coronavirus (“COVID-19”) pandemic. As a result of the unpredictable and evolving impact of the pandemic and measures being taken around the world to combat its spread, the timing and trajectory of the recovery are unclear at this time, and the adverse impact of the pandemic on the Company’s operations may be material but cannot be reasonably estimated at this time.

The preparation of consolidated financial statements under U.S. GAAP requires us to make assumptions and estimates concerning the future that affect the reported amounts of assets, liabilities, revenue and expenses. Estimates and assumptions are particularly important in accounting for items such as revenue, rebates, impairment of long-lived assets, intangible assets and goodwill, inventory valuation, financial instruments, expected credit losses, product warranties, income taxes and post-retirement benefits.

Due to the inherent uncertainty involved in making assumptions and estimates, events and changes in circumstances arising after March 28, 2020, including those resulting from the impacts of the COVID-19 pandemic, may result in actual outcomes that differ from those contemplated by our assumptions and estimates.

These condensed consolidated financial statements are unaudited and, except as noted below, have been prepared on substantially the same basis as Gates’ audited annual consolidated financial statements and related notes for the year ended December 28, 2019. The condensed consolidated balance sheet as of December 28, 2019 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 28, 2019 included in the Company’s Annual Report on Form 10-K.

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 2020 fiscal year of the following new Accounting Standard Updates (each, an “ASU”):

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

•ASU 2020-02 “Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842)”

In June 2016, the Financial Accounting Standards Board (“FASB”) issued an ASU which broadens the information that an entity must consider when developing its expected credit loss estimate for financial assets. The measurement of expected credit losses should be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. 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. On transition, no cumulative-effect adjustment was recognized to retained earnings.

Our businesses develop their expected loss estimates based either on the aging profile of outstanding receivables or by applying a preset experience factor (either a percentage of sales or a percentage of open receivables). These methodologies are based primarily on historical trends and experience, but credit controllers also regularly assess individual customer accounts to identify any potential increases or decreases in the level of expected credit loss needed to be applied to each customer based on current circumstances and future expectations.

Before accepting a new customer, we assess their credit quality and establish a credit limit. Credit quality is assessed by using data maintained by reputable credit rating agencies, by checking of references included in credit applications and, where they are available, by reviewing the customer’s recent financial statements. Credit limits are subject to multiple levels of authorization and are reviewed on a regular basis.

Although Gates has a wide variety of customers from multinational original equipment manufacturers and distributors to small family-owned businesses, the majority of our sales are generated from large companies with low credit risk. Recent global developments related to the COVID-19 pandemic and its impact on our customers’ ability to pay us are being closely monitored and taken into account in the determination of our expected credit loss estimates.

The following ASUs that were also adopted on the first day of the 2020 fiscal year did not have a significant impact on our results, financial position or disclosures:

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

• 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

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Analysis of accumulated other comprehensive (loss) income (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax
Beginning Balance	$ 3,010.7	$ 2,333.7
Other comprehensive (loss) income, net of tax, attributable to parent	(195.6)
Other comprehensive income (loss)	(214.8)	21.7
Ending Balance	2,841.4	2,962.1
Accumulated OCI attributable to shareholders
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax
Beginning Balance	(858.4)	(854.3)
Other comprehensive (loss) income, net of tax, attributable to parent	(207.4)	14.3
Other comprehensive income (loss)	(207.4)	14.3
Ending Balance	(1,065.8)	(840.0)
Post- retirement benefit
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax
Beginning Balance	(9.3)	7.6
Other comprehensive (loss) income, net of tax, attributable to parent	1.1
Other comprehensive income (loss)	(0.1)
Ending Balance	(8.2)	7.6
Foreign currency translation
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax
Other comprehensive (loss) income, net of tax, attributable to parent	1.2
Cumulative translation adjustment
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax
Beginning Balance	(812.3)	(850.0)
Other comprehensive (loss) income, net of tax, attributable to parent	(196.8)	25.4
Other comprehensive (loss) income, net of tax, attributable to noncontrolling interest	(7.4)	7.4
Other comprehensive income (loss)	(203.0)	32.8
Ending Balance	(1,009.1)	(824.6)
Cash flow hedges
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax
Beginning Balance	(36.8)	(11.9)
Other comprehensive (loss) income, net of tax, attributable to parent	(11.7)	(11.1)
Ending Balance	(48.5)	(23.0)
Non- controlling interests
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax
Beginning Balance	(46.0)	(43.6)
Other comprehensive (loss) income, net of tax, attributable to noncontrolling interest	(7.4)	7.4
Ending Balance	(53.4)	(36.2)
Accumulated OCI
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax
Beginning Balance	(904.4)	(897.9)
Ending Balance	$ (1,119.2)	$ (876.2)

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Debt - Revolving credit facility Narratives (Details) - Secured multi-currency facility - USD ($)	Mar. 28, 2020	Dec. 28, 2019
Revolving credit facility
Line of Credit Facility
Maximum borrowing capacity of credit facility	$ 185,000,000.0
Line of credit carrying value	0	$ 0
Letter of credit sub-facility
Line of Credit Facility
Maximum borrowing capacity of credit facility	20,000,000.0
Line of credit carrying value	$ 0	$ 0

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Share-based compensation - Narratives (Details) - USD ($) $ in Millions	3 Months Ended			12 Months Ended
	Mar. 28, 2020	Mar. 30, 2019	Mar. 31, 2018	Dec. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award
Share based compensation expense recognized	$ 2.9	$ 2.6
Proceeds from stock options exercised	2.1	1.2
—Share options
Share-based Compensation Arrangement by Share-based Payment Award
Aggregate intrinsic value of options that were vested or expected to vest	$ 2.5
Contractual term of options that were vested or expect to vest	7 years 3 months 18 days
Aggregate intrinsic value of options exercisable	$ 1.9
Contractual term of options exercisable	6 years
Unrecognized compensation relating to non-vested awards	$ 12.7
Unrecognized compensation relating to non-vested awards, recognition period (term)	2 years 6 months
Unrecognized compensation relating to non-vested awards recognizable upon liquidity	$ 26.3
Aggregate intrinsic value of options exercised	$ 2.0	1.7
—PRSUs
Share-based Compensation Arrangement by Share-based Payment Award
Unrecognized compensation relating to non-vested awards, recognition period (term)	2 years 6 months
Unrecognized compensation relating to non-vested awards other than option	$ 24.3
RSU's and PRSU's
Share-based Compensation Arrangement by Share-based Payment Award
Unrecognized compensation relating to non-vested awards, recognition period (term)	2 years 6 months
Unrecognized compensation relating to non-vested awards other than option	$ 24.3
Aggregate intrinsic value of non options vested	$ 2.7	$ 0.2
Omaha Topco Ltd. Stock Incentive Plan | Tranche One
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	20.00%
Omaha Topco Ltd. Stock Incentive Plan | Tranche Two
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	20.00%
Omaha Topco Ltd. Stock Incentive Plan | Tranche Three
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	20.00%
Omaha Topco Ltd. Stock Incentive Plan | Tranche Four
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	20.00%
Omaha Topco Ltd. Stock Incentive Plan | Tranche Five
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	20.00%
Omaha Topco Ltd. Stock Incentive Plan | —RSUs
Share-based Compensation Arrangement by Share-based Payment Award
Vesting period				3 years
Shares granted (shares)				76,293
Term of award				10 years
Omaha Topco Ltd. Stock Incentive Plan | —Tier I | —Share options
Share-based Compensation Arrangement by Share-based Payment Award
Vesting period			5 years
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —Share options | Minimum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting period	3 years
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —Share options | Maximum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting period	4 years
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —Share options | Tranche One | Minimum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	33.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —Share options | Tranche One | Maximum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	25.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —Share options | Tranche Two | Minimum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	33.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —Share options | Tranche Two | Maximum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	25.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —Share options | Tranche Three | Minimum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	33.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —Share options | Tranche Three | Maximum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	25.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —Share options | Tranche Four | Maximum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	25.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —RSUs | Minimum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting period	1 year
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —RSUs | Maximum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting period	3 years
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —RSUs | Tranche One
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	33.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —RSUs | Tranche Two
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	33.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —RSUs | Tranche Three
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	33.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —PRSUs
Share-based Compensation Arrangement by Share-based Payment Award
Percentage of shares expected to vest upon achievement of average annual adjusted return on invested capital (percentage)	50.00%
Percentage of shares expected to vest upon achievement of certain relative shareholders return (percentage)	50.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —PRSUs | Minimum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting period	1 year
Total number of shares expected to vest at term of award arrangement (percentage)	0.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —PRSUs | Maximum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting period	3 years
Total number of shares expected to vest at term of award arrangement (percentage)	200.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —PRSUs | Tranche One
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	33.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —PRSUs | Tranche Two
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	33.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —PRSUs | Tranche Three
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	33.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —SARs | Tranche One | Minimum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	33.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —SARs | Tranche One | Maximum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	25.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —SARs | Tranche Two | Minimum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	33.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —SARs | Tranche Two | Maximum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	25.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —SARs | Tranche Three | Minimum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	33.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —SARs | Tranche Three | Maximum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	25.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —SARs | Tranche Four | Maximum
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	25.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —Premium-priced options
Share-based Compensation Arrangement by Share-based Payment Award
Vesting period	3 years
Term of award	10 years
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —Premium-priced options | Tranche One
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	33.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —Premium-priced options | Tranche Two
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	33.00%
Gates Industrial Corporation Plc 2018 Omnibus Incentive Plan | —Premium-priced options | Tranche Three
Share-based Compensation Arrangement by Share-based Payment Award
Vesting percentage	33.00%

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Commitments and contingencies - Narratives (Details) - USD ($) $ in Millions	Mar. 28, 2020	Dec. 28, 2019
Commitments and Contingencies Disclosure [Abstract]
Letters of credit outstanding	$ 45.9	$ 50.1
Bonds, letters of credit, and bank guarantees	$ 3.9	$ 4.1

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Equity - Movement in Number of Shares in Issue (Details) - shares	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Increase (Decrease) in Stockholders' Equity
Balance as of the beginning of the period (in shares)	290,157,299	289,847,574
Exercise of share options (in shares)	318,607	190,034
Vesting of restricted stock units, net of witholding taxes (in shares)	190,632	5,812
Balance as of the end of the period (in shares)	290,666,538	290,043,420

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Intangible assets - Narrative (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 32.2	$ 32.6
Intangible assets, foreign currency translation gain (loss)	$ (38.4)	$ 3.3

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Earnings per share (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Earnings Per Share [Abstract]
Net income attributable to shareholders	$ 35.6	$ 613.7
Weighted average number of shares outstanding (in shares)	290,609,974	289,928,526
Dilutive effect of share-based awards (in shares)	1,501,279	4,733,387
Diluted weighted average number of shares outstanding (in shares)	292,111,253	294,661,913
Basic earnings per share (in usd per share)	$ 0.12	$ 2.12
Diluted earnings per share (in usd per share)	$ 0.12	$ 2.08
Anti-dilutive shares excluded from diluted income per share calculation (in shares)	5,508,174	3,809,508

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Earnings per share (Tables)

3 Months Ended

Mar. 28, 2020

Earnings Per Share [Abstract]

Schedule of computation of net income per share

The computation of earnings per share is presented below:

	Three months ended
(dollars in millions, except share numbers and per share amounts)	March 28, 2020		March 30, 2019
Net income attributable to shareholders	$	35.6	$	613.7
Weighted average number of shares outstanding	290,609,974		289,928,526
Dilutive effect of share-based awards	1,501,279		4,733,387
Diluted weighted average number of shares outstanding	292,111,253		294,661,913
Basic earnings per share	$	0.12	$	2.12
Diluted earnings per share	$	0.12	$	2.08

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Derivative financial instruments (Tables)

3 Months Ended

Mar. 28, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of fair values of derivative financial instruments

The period end fair values of derivative financial instruments were as follows:

	As of March 28, 2020										As of December 28, 2019
(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	$	2.2	$	—	$	—	$	(14.8)	$	(12.6)	$	4.2	$	—	$	—	$	(19.3)	$	(15.1)
—Interest rate caps	—		—		(2.5)		(2.6)		(5.1)		—		—		(4.0)		(3.0)		(7.0)
—Interest rate swaps	—		—		(11.8)		(38.5)		(50.3)		—		—		(5.3)		(29.0)		(34.3)
Derivatives not designated as hedging instruments:
—Currency swaps	0.1		—		(0.7)		—		(0.6)		—		—		(0.1)		—		(0.1)
—Currency forward contracts	0.6		—		(0.3)		—		0.3		1.2		—		(0.2)		—		1.0
	$	2.9	$	—	$	(15.3)	$	(55.9)	$	(68.3)	$	5.4	$	—	$	(9.6)	$	(51.3)	$	(55.5)

Schedule of derivative effect on OCI

The fair value gains before tax recognized in OCI in relation to the instruments designated as net investment hedging instruments were as follows:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Net fair value gains recognized in OCI in relation to:
—Euro-denominated debt	$	1.5	$	0.7
—Designated cross currency swaps	2.5		4.9
Total net fair value gains	$	4.0	$	5.6

The movements before tax recognized in OCI in relation to our cash flow hedges were as follows:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Movement recognized in OCI in relation to:
—Fair value loss on cash flow hedges	$	(15.9)	$	(13.3)
—Deferred premium reclassified from OCI to net income	1.7		0.1
Total movement	$	(14.2)	$	(13.2)

Schedule of interest rate caps

The periods covered by our interest rate caps and their notional values are as follows:

(in millions)	Notional value
June 30, 2017 to June 30, 2020	$	200.0
June 28, 2019 to June 30, 2020	$	1,000.0
July 1, 2019 to June 30, 2023	€	425.0

Gain recognized from derivative instruments

The fair value gains recognized in net income in relation to derivative instruments that have not been designated as hedging instruments were as follows:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Fair value gains recognized in relation to:
—Currency forward contracts recognized in SG&A	$	0.3	$	2.7
—Currency swaps recognized in other income	0.5		0.2
Total	$	0.8	$	2.9

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Earnings per share

3 Months Ended

Mar. 28, 2020

Earnings Per Share [Abstract]

Earnings per share

Earnings per share

Basic earnings per share represents net income attributable to shareholders divided by the weighted average number of shares outstanding during the period. Diluted earnings 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.

The computation of earnings per share is presented below:

	Three months ended
(dollars in millions, except share numbers and per share amounts)	March 28, 2020		March 30, 2019
Net income attributable to shareholders	$	35.6	$	613.7
Weighted average number of shares outstanding	290,609,974		289,928,526
Dilutive effect of share-based awards	1,501,279		4,733,387
Diluted weighted average number of shares outstanding	292,111,253		294,661,913
Basic earnings per share	$	0.12	$	2.12
Diluted earnings per share	$	0.12	$	2.08

For the three months ended March 28, 2020 and March 30, 2019, shares totaling 5,508,174 and 3,809,508 shares, respectively, were excluded from the diluted earnings per share calculation because they were anti-dilutive.

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Recent accounting pronouncements not yet adopted

3 Months Ended

Mar. 28, 2020

Accounting Policies [Abstract]

Recent accounting pronouncements not yet adopted

Recent accounting pronouncements not yet adopted

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

•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 2019-12 “Simplifying the Accounting for Income Taxes” (Topic 740): Income Taxes

In December 2019, the FASB issued an ASU to simplify and reduce the complexity of general principles in Topic 740: Income Taxes. Such simplifications include the elimination of certain exceptions to: 1) the incremental approach for intraperiod tax allocation, 2) the requirement to recognize a deferred income tax liability for equity method investments when a foreign subsidiary becomes an equity method investment, 3) the ability not to recognize a deferred income tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary, and 4) the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.

The amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The ASU provides for a number of different approaches to applying the changes, depending on the amendment, from full retrospective to modified retrospective to fully prospective. The impact on our consolidated financial statements of adopting this ASU is still being evaluated.

•ASU 2020-04 “Reference Rate Reform” (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

In March 2020, the FASB issued an ASU to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The amendments in this update are effective as of March 12, 2020 through December 31, 2022. As certain of our debt uses LIBOR or EURIBOR as a benchmark for establishing the rate of interest, and we apply hedge accounting in respect of derivatives to manage interest and currency risks associated with our debt, we expect that this ASU will have an impact on our consolidated financial statements, but this is still being evaluated.

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Derivative financial instruments

3 Months Ended

Mar. 28, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative financial instruments

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 other comprehensive income (“OCI”) and reclassified into net income in the same period or periods during which the hedged transaction affects earnings.

Derivative instruments that have not been 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 period end fair values of derivative financial instruments were as follows:

	As of March 28, 2020										As of December 28, 2019
(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	$	2.2	$	—	$	—	$	(14.8)	$	(12.6)	$	4.2	$	—	$	—	$	(19.3)	$	(15.1)
—Interest rate caps	—		—		(2.5)		(2.6)		(5.1)		—		—		(4.0)		(3.0)		(7.0)
—Interest rate swaps	—		—		(11.8)		(38.5)		(50.3)		—		—		(5.3)		(29.0)		(34.3)
Derivatives not designated as hedging instruments:
—Currency swaps	0.1		—		(0.7)		—		(0.6)		—		—		(0.1)		—		(0.1)
—Currency forward contracts	0.6		—		(0.3)		—		0.3		1.2		—		(0.2)		—		1.0
	$	2.9	$	—	$	(15.3)	$	(55.9)	$	(68.3)	$	5.4	$	—	$	(9.6)	$	(51.3)	$	(55.5)

A. Instruments designated as net investment hedges

We hold cross currency swaps that have been designated as net investment hedges of certain of our European operations. As of March 28, 2020 and December 28, 2019, the notional principal amount of these contracts was $270.0 million. During July 2019, we extended the maturity of these contracts from March 2020 to March 2022. In addition, we have designated €147.0 million of our Euro-denominated debt as a net investment hedge of certain of our European operations.

The fair value gains before tax recognized in OCI in relation to the instruments designated as net investment hedging instruments were as follows:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Net fair value gains recognized in OCI in relation to:
—Euro-denominated debt	$	1.5	$	0.7
—Designated cross currency swaps	2.5		4.9
Total net fair value gains	$	4.0	$	5.6

During the three months ended March 28, 2020, a net loss of $1.6 million was recognized in interest expense in relation to our cross currency swaps that have been designated as net investment hedges, compared with a net gain of $2.2 million during the three months ended March 30, 2019.

B. Instruments designated as cash flow hedges

We use interest rate swaps and interest rate caps as part of our interest rate risk management strategy to add stability to interest expense and to manage our exposure to interest rate movements. These instruments are all designated as cash flow hedges. As of March 28, 2020 and December 28, 2019, we held 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. Our interest rate caps involve the receipt of variable rate payments from a counterparty if interest rates rise above the strike rate on the contract in exchange for a premium. As of both March 28, 2020 and December 28, 2019, the notional amount of the interest rate cap contracts outstanding was $1.7 billion.

The periods covered by our interest rate caps and their notional values are as follows:

(in millions)	Notional value
June 30, 2017 to June 30, 2020	$	200.0
June 28, 2019 to June 30, 2020	$	1,000.0
July 1, 2019 to June 30, 2023	€	425.0

The movements before tax recognized in OCI in relation to our cash flow hedges were as follows:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Movement recognized in OCI in relation to:
—Fair value loss on cash flow hedges	$	(15.9)	$	(13.3)
—Deferred premium reclassified from OCI to net income	1.7		0.1
Total movement	$	(14.2)	$	(13.2)

During the three months ended March 28, 2020, a net expense of $1.7 million was reclassified to interest expense in relation to our cash flow hedges, compared with net expense of $0.1 million during the three months ended March 30, 2019.

C. Derivative instruments not designated as hedging instruments

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, or the currency swap contracts that are used to manage the currency profile of Gates’ cash as hedging instruments for the purposes of hedge accounting.

As of March 28, 2020, the notional principal amount of outstanding currency swaps that are used to manage the currency profile of Gates’ cash was $32.3 million, compared with $16.7 million as of December 28, 2019.

As of March 28, 2020, the notional amount of outstanding currency forward contracts that are used to manage operational foreign exchange exposures was $64.3 million, compared with $82.5 million as of December 28, 2019.

The fair value gains recognized in net income in relation to derivative instruments that have not been designated as hedging instruments were as follows:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Fair value gains recognized in relation to:
—Currency forward contracts recognized in SG&A	$	0.3	$	2.7
—Currency swaps recognized in other income	0.5		0.2
Total	$	0.8	$	2.9

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Share-based compensation - Fair value and valuation assumptions (Details) - $ / shares	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019	Dec. 28, 2019
—SARs
Share-based Compensation Arrangement by Share-based Payment Award
Assumed fair value exercise price (usd per share)	$ 4.59		$ 5.88
Expected volatility (percentage)	37.70%	31.90%
Expected option life (years)	6 years	6 years
Risk-free interest rate (percentage)	1.25%	2.51%
—Share options
Share-based Compensation Arrangement by Share-based Payment Award
Assumed fair value exercise price (usd per share)	$ 4.78		5.88
Expected volatility (percentage)	37.60%	31.90%
Expected option life (years)	6 years	6 years
Risk-free interest rate (percentage)	1.33%	2.51%
—Premium-priced options
Share-based Compensation Arrangement by Share-based Payment Award
Assumed fair value exercise price (usd per share)		$ 5.65
Expected volatility (percentage)		31.90%
Expected option life (years)		7 years
Risk-free interest rate (percentage)		2.53%
—RSUs
Share-based Compensation Arrangement by Share-based Payment Award
Assumed fair value exercise price (usd per share)	$ 12.01		$ 16.46
—PRSUs
Share-based Compensation Arrangement by Share-based Payment Award
Assumed fair value exercise price (usd per share)	$ 14.41	$ 20.07
Expected volatility (percentage)	40.40%	32.80%
Risk-free interest rate (percentage)	1.29%	2.48%

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Equity - Narrative (Details) - $ / shares	Mar. 28, 2020	Dec. 28, 2019
Equity [Abstract]
Par value (usd per share)	$ 0.01	$ 0.01

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Debt - Schedule of redemption prices plus accrued and unpaid interest (Details) - Unsecured debt - Dollar Senior Note redemption price	3 Months Ended
	Mar. 28, 2020
—2023
Debt Instrument, Redemption
Redemption price (percent)	103.125%
—2024
Debt Instrument, Redemption
Redemption price (percent)	101.563%
—2025 and thereafter
Debt Instrument, Redemption
Redemption price (percent)	100.00%

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Post-retirement benefits - Components of net periodic benefit cost (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Defined Benefit Plan, Net Periodic Benefit Cost (Credit)
—Employer service cost	$ 1.4	$ 1.4
—Interest cost	5.0	6.5
—Expected return on plan assets	(5.5)	(7.0)
—Net amortization of prior period losses (gains)	0.0	(0.1)
—Settlements and curtailments	0.0	(0.7)
Net periodic benefit cost	0.9	0.1
Contributions	2.9	2.5
Pensions
Defined Benefit Plan, Net Periodic Benefit Cost (Credit)
—Employer service cost	1.4	1.4
—Interest cost	4.6	5.9
—Expected return on plan assets	(5.5)	(7.0)
—Net amortization of prior period losses (gains)	0.3	0.2
—Settlements and curtailments	0.0	(0.7)
Net periodic benefit cost	0.8	(0.2)
Contributions	1.7	1.5
Other post-retirement benefits
Defined Benefit Plan, Net Periodic Benefit Cost (Credit)
—Employer service cost	0.0	0.0
—Interest cost	0.4	0.6
—Expected return on plan assets	0.0	0.0
—Net amortization of prior period losses (gains)	(0.3)	(0.3)
—Settlements and curtailments	0.0	0.0
Net periodic benefit cost	0.1	0.3
Contributions	$ 1.2	$ 1.0

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Related party transactions - Transactions with Non-Gates entities (Details) - Non-Gates entities controlled by non-controlling shareholders - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019	Dec. 28, 2019
Related Party Transaction
Sales	$ 12.5	$ 13.4
Purchases	(5.1)	$ (5.4)
Receivables	4.6		$ 4.2
Payables	$ (5.3)		$ (5.9)

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Derivative financial instruments - Fair Values of Derivative Instruments (Details) - USD ($) $ in Millions	Mar. 28, 2020	Dec. 28, 2019
Derivatives, Fair Value
Net	$ (68.3)	$ (55.5)
Prepaid expenses and other assets
Derivatives, Fair Value
Derivative assets	2.9	5.4
Other non- current assets
Derivatives, Fair Value
Derivative assets	0.0	0.0
Accrued expenses and other current liabilities
Derivatives, Fair Value
Derivative liabilities	(15.3)	(9.6)
Other non- current liabilities
Derivatives, Fair Value
Derivative liabilities	(55.9)	(51.3)
Derivatives designated as hedging instruments: | —Currency swaps
Derivatives, Fair Value
Net	(12.6)	(15.1)
Derivatives designated as hedging instruments: | —Currency swaps | Prepaid expenses and other assets
Derivatives, Fair Value
Derivative assets	2.2	4.2
Derivatives designated as hedging instruments: | —Currency swaps | Other non- current liabilities
Derivatives, Fair Value
Derivative liabilities	(14.8)	(19.3)
Derivatives designated as hedging instruments: | —Interest rate caps
Derivatives, Fair Value
Net	(5.1)	(7.0)
Derivatives designated as hedging instruments: | —Interest rate caps | Accrued expenses and other current liabilities
Derivatives, Fair Value
Derivative liabilities	(2.5)	(4.0)
Derivatives designated as hedging instruments: | —Interest rate caps | Other non- current liabilities
Derivatives, Fair Value
Derivative liabilities	(2.6)	(3.0)
Derivatives designated as hedging instruments: | —Interest rate swaps
Derivatives, Fair Value
Net	(50.3)	(34.3)
Derivatives designated as hedging instruments: | —Interest rate swaps | Accrued expenses and other current liabilities
Derivatives, Fair Value
Derivative liabilities	(11.8)	(5.3)
Derivatives designated as hedging instruments: | —Interest rate swaps | Other non- current liabilities
Derivatives, Fair Value
Derivative liabilities	(38.5)	(29.0)
Derivatives not designated as hedging instruments: | —Currency swaps
Derivatives, Fair Value
Net	(0.6)	(0.1)
Derivatives not designated as hedging instruments: | —Currency swaps | Prepaid expenses and other assets
Derivatives, Fair Value
Derivative assets	0.1
Derivatives not designated as hedging instruments: | —Currency swaps | Accrued expenses and other current liabilities
Derivatives, Fair Value
Derivative liabilities	(0.7)	(0.1)
Derivatives not designated as hedging instruments: | —Currency forward contracts
Derivatives, Fair Value
Net	0.3	1.0
Derivatives not designated as hedging instruments: | —Currency forward contracts | Prepaid expenses and other assets
Derivatives, Fair Value
Derivative assets	0.6	1.2
Derivatives not designated as hedging instruments: | —Currency forward contracts | Accrued expenses and other current liabilities
Derivatives, Fair Value
Derivative liabilities	$ (0.3)	$ (0.2)

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Inventories (Details) - USD ($) $ in Millions	Mar. 28, 2020	Dec. 28, 2019
Inventory Disclosure [Abstract]
Raw materials and supplies	$ 120.6	$ 118.9
Work in progress	36.9	33.6
Finished goods	326.9	322.6
Total inventories	$ 484.4	$ 475.1

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Fair value measurement - Schedule of assets and liabilities measured at fair value on a recurring basis (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Millions	Mar. 28, 2020	Dec. 28, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Equity investments	$ 1.0	$ 1.1
Derivative assets	2.9	5.4
Derivative liabilities	(71.2)	(60.9)
Quoted prices in active markets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Equity investments	1.0	1.1
Derivative assets	0.0	0.0
Derivative liabilities	0.0	0.0
Significant observable inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Equity investments	0.0	0.0
Derivative assets	2.9	5.4
Derivative liabilities	$ (71.2)	$ (60.9)

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Derivative financial instruments - OCI Movement (Details) - Interest Rate Contract - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Movement recognized in OCI in relation to:
—Fair value loss on cash flow hedges	$ (15.9)	$ (13.3)
—Deferred premium reclassified from OCI to net income	1.7	0.1
Total movement	$ (14.2)	$ (13.2)

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Debt - Unsecured Senior Notes Narratives (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Dec. 28, 2019
Debt Instrument
Principal amount of debt outstanding	$ 2,972.4	$ 2,985.0
Unsecured debt
Debt Instrument
Redemption price in the event of change in control (percent)	101.00%
Redemption price in the event of sale (percent)	100.00%
Unsecured debt | Prior to Jan 15, 2022
Debt Instrument
Percentage of total debt redeemable (percent)	40.00%
Redemption price (percent)	106.25%
Unsecured debt | —6.25% Dollar Senior Notes due 2026
Debt Instrument
Principal amount of debt outstanding	$ 568.0	$ 568.0
Stated interest rate on debt (percent)	6.25%

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Analysis of accumulated other comprehensive (loss) income (Tables)

3 Months Ended

Mar. 28, 2020

Equity [Abstract]

Schedule of accumulated other comprehensive income (loss)

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

(dollars in millions)	Post- retirement benefit		Cumulative translation adjustment		Cash flow hedges		Accumulated OCI attributable to shareholders		Non- controlling interests		Accumulated OCI
As of December 28, 2019	$	(9.3)	$	(812.3)	$	(36.8)	$	(858.4)	$	(46.0)	$	(904.4)
Foreign currency translation	1.2		(196.8)		—		(195.6)		(7.4)		(203.0)
Cash flow hedges movements	—		—		(11.7)		(11.7)		—		(11.7)
Post-retirement benefit movements	(0.1)		—		—		(0.1)		—		(0.1)
Other comprehensive income (loss)	1.1		(196.8)		(11.7)		(207.4)		(7.4)		(214.8)
As of March 28, 2020	$	(8.2)	$	(1009.1)	$	(48.5)	$	(1065.8)	$	(53.4)	$	(1119.2)

(dollars in millions)	Post- retirement benefit		Cumulative translation adjustment		Cash flow hedges		Accumulated OCI attributable to shareholders		Non- controlling interests		Accumulated OCI
As of December 29, 2018	$	7.6	$	(850.0)	$	(11.9)	$	(854.3)	$	(43.6)	$	(897.9)
Foreign currency translation	—		25.4		—		25.4		7.4		32.8
Cash flow hedges movements	—		—		(11.1)		(11.1)		—		(11.1)
Other comprehensive income (loss)	—		25.4		(11.1)		14.3		7.4		21.7
As of March 30, 2019	$	7.6	$	(824.6)	$	(23.0)	$	(840.0)	$	(36.2)	$	(876.2)

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Segment information - Net Sales by Geographic Regions and Markets (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Revenues from External Customers and Long-Lived Assets
Net sales	$ 710.1	$ 804.9
Developed
Revenues from External Customers and Long-Lived Assets
Net sales	475.8	543.7
Emerging
Revenues from External Customers and Long-Lived Assets
Net sales	234.3	261.2
Power Transmission
Revenues from External Customers and Long-Lived Assets
Net sales	441.2	499.5
Power Transmission | U.S.
Revenues from External Customers and Long-Lived Assets
Net sales	137.7	152.9
Power Transmission | North America, excluding U.S.
Revenues from External Customers and Long-Lived Assets
Net sales	40.3	42.0
Power Transmission | United Kingdom (“U.K.”)
Revenues from External Customers and Long-Lived Assets
Net sales	11.4	11.7
Power Transmission | EMEA, excluding U.K.
Revenues from External Customers and Long-Lived Assets
Net sales	129.2	133.3
Power Transmission | East Asia and India
Revenues from External Customers and Long-Lived Assets
Net sales	65.2	73.6
Power Transmission | Greater China
Revenues from External Customers and Long-Lived Assets
Net sales	44.3	68.9
Power Transmission | South America
Revenues from External Customers and Long-Lived Assets
Net sales	13.1	17.1
Fluid Power
Revenues from External Customers and Long-Lived Assets
Net sales	268.9	305.4
Fluid Power | U.S.
Revenues from External Customers and Long-Lived Assets
Net sales	139.7	157.1
Fluid Power | North America, excluding U.S.
Revenues from External Customers and Long-Lived Assets
Net sales	41.7	46.6
Fluid Power | United Kingdom (“U.K.”)
Revenues from External Customers and Long-Lived Assets
Net sales	6.9	10.8
Fluid Power | EMEA, excluding U.K.
Revenues from External Customers and Long-Lived Assets
Net sales	44.0	47.2
Fluid Power | East Asia and India
Revenues from External Customers and Long-Lived Assets
Net sales	17.4	20.5
Fluid Power | Greater China
Revenues from External Customers and Long-Lived Assets
Net sales	13.0	15.1
Fluid Power | South America
Revenues from External Customers and Long-Lived Assets
Net sales	$ 6.2	$ 8.1

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Commitments and contingencies

3 Months Ended

Mar. 28, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and contingencies

Commitments and contingencies

A. Performance bonds, letters of credit and bank guarantees

As of March 28, 2020, letters of credit totaling $45.9 million were outstanding against the asset-backed revolving facility, compared with $50.1 million as of December 28, 2019. Gates had additional outstanding performance bonds, letters of credit and bank guarantees amounting to $3.9 million, compared with $4.1 million as of December 28, 2019.

B. Contingencies

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

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

C. Warranties

The following summarizes the movements in the warranty liability for the three months ended March 28, 2020 and March 30, 2019, respectively:

	Three months ended
(dollars in millions)	March 28, 2020		March 30, 2019
Balance as of the beginning of the fiscal year	$	17.7	$	14.3
Charge for the period	4.2		2.6
Payments made	(2.6)		(2.2)
Released during the period	(0.8)		—
Foreign currency translation	(0.2)		0.1
Balance as of the end of the period	$	18.3	$	14.8

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Share-based compensation

3 Months Ended

Mar. 28, 2020

Share-based Payment Arrangement [Abstract]

Share-based compensation

Share-based compensation

The Company operates a share-based incentive plan over its shares to provide incentives to Gates’ senior executives and other eligible employees. During the three months ended March 28, 2020, we recognized a charge of $2.9 million, compared with $2.6 million during the three months ended March 30, 2019.

Share-based incentive awards issued under the 2014 Omaha Topco Ltd. Stock Incentive Plan

Gates has a number of awards issued under the 2014 Omaha Topco Ltd. Stock Incentive Plan, which was assumed by the Company and renamed the Gates Industrial Corporation plc Stock Incentive Plan in connection with our initial public offering in January 2018. No new awards have been granted under this plan since 2017. The options are split equally into four tiers, each with specific vesting conditions. Tier I options vest evenly over 5 years from the grant date, subject to the participant continuing to provide service to Gates on the vesting date. Tier II, III and IV options vest on achievement of specified investment returns by our majority owners, who are various investment funds managed by affiliates of The Blackstone Group Inc. (“Blackstone” or our “Sponsor”), at the time of a defined liquidity event, which is also subject to the participant’s continued provision of service to Gates on the vesting date. The performance conditions associated with Tiers II, III and IV must be achieved on or prior to July 3, 2022 in order for vesting to occur. All the options expire ten years after the date of grant.

Due to Chinese regulatory restrictions on foreign stock ownership, awards granted under this plan to Chinese employees have been issued as stock appreciation rights (“SARs”). The terms of these SARs are identical to those of the options described above with the exception that no share is issued on exercise; instead, cash equivalent to the increase in the value of the shares from the date of grant to the date of exercise is paid to the employee. These awards are therefore treated as liability awards under Topic 718 “Compensation - Stock Compensation” and are revalued to their fair value at each period end.

In addition to the above, in 2017, under the same plan, the Company issued 76,293 restricted stock units (“RSUs”). These RSUs vest evenly over three years from the date of grant, subject to the participant’s continued provision of service to Gates on the vesting date. The awards expire ten years after the date of grant, in December 2027.

Changes in the awards granted under this plan are summarized in the tables below.

Share-based incentive awards issued under the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan

In conjunction with the initial public offering in January 2018, Gates adopted a new equity-based compensation plan, which is a market-based long-term incentive program that allows for the issue of a variety of equity-based and cash-based awards, including stock options, SARs and RSUs.

The SARs and the majority of the share options issued under this plan vest evenly over either three years or four years from the grant date. The remainder of the options, the premium-priced options, vest evenly over a three year period, starting two years from the grant date. All options vest subject to the participant’s continued employment by Gates on the vesting date and expire ten years after the date of grant.

The RSUs issued under the plan consist of time-vesting RSUs and performance-based RSUs (“PRSUs”). The time-vesting RSUs vest evenly over either one or three years from the date of grant, subject to the participant’s continued provision of service to Gates on the vesting date. The PRSUs provide that 50% of the award will generally vest if Gates achieves a certain level of average annual adjusted return on invested capital as defined in the plan (“Adjusted ROIC”) and the remaining 50% of the PRSUs will generally vest if Gates achieves certain relative total shareholder return (“Relative TSR”) goals, in each case, measured over a three year performance period and subject to the participant’s continued employment through the end of the performance period. The total number of PRSUs that vest at the end of the performance period will range from 0% to 200% of the target based on actual performance against a pre-established scale.

New awards and movements in existing awards granted under this plan are summarized in the tables below.

Summary of movements in options outstanding

	Three months ended
	March 28, 2020
	Number of options	Weighted average exercise price $
Outstanding at the beginning of the period:
—Tier I	3,825,855	$	7.07
—Tier II	4,405,340	$	7.01
—Tier III	4,405,340	$	7.01
—Tier IV	4,405,340	$	10.52
—SARs	772,450	$	8.72
—Share options	1,610,485	$	16.69
—Premium-priced options	796,460	$	19.00
	20,221,270	$	9.09
Granted during the period:
—SARs	69,361	$	12.08
—Share options	1,193,114	$	12.55
	1,262,475	$	12.52
Forfeited during the period:
—Tier I	(86,581)	$	6.74
—Tier II	(404,446)	$	6.63
—Tier III	(404,446)	$	6.63
—Tier IV	(404,446)	$	9.94
—Share options	(89,803)	$	16.46
	(1,389,722)	$	8.24
Exercised during the period:
—Tier I	(318,607)	$	6.60
	(318,607)	$	6.60
Outstanding at the end of the period:
—Tier I	3,420,667	$	7.12
—Tier II	4,000,894	$	7.05
—Tier III	4,000,894	$	7.05
—Tier IV	4,000,894	$	10.58
—SARs	841,811	$	9.00
—Share options	2,713,796	$	14.88
—Premium-priced options	796,460	$	19.00
	19,775,416	$	9.42
Exercisable at the end of the period	3,080,858	$	8.79
Vested and expected to vest at the end of the period	7,714,079	$	11.24

As of March 28, 2020, the aggregate intrinsic value of options that were vested or expected to vest was $2.5 million and these options had a weighted average remaining contractual term of 7.3 years. As of March 28, 2020, the aggregate intrinsic value of options that were exercisable was $1.9 million and these options had a weighted average remaining contractual term of 6.0 years.

As of March 28, 2020, the unrecognized compensation charge relating to the nonvested options other than Tier II, Tier III and Tier IV options, was $12.7 million, which is expected to be recognized over a weighted-average period of 2.5 years. The unrecognized compensation charge relating to the nonvested Tier II, Tier III and Tier IV options was $26.3 million, which will be recognized on occurrence of a liquidity event as described above.

During the three months ended March 28, 2020, cash of $2.1 million was received in relation to the exercise of vested options, compared with $1.2 million during the three months ended March 30, 2019. The aggregate intrinsic value of options exercised during the three months ended March 28, 2020 was $2.0 million, compared with $1.7 million during the three months ended March 30, 2019.

Summary of movements in RSUs and PRSUs outstanding

	Three months ended
	March 28, 2020
	Number of awards	Weighted average grant date fair value $
Outstanding at the beginning of the period:
—RSUs	718,269	$	16.20
—PRSUs	248,550	20.07
	966,819	$	17.20
Granted during the period:
—RSUs	1,126,523	$	12.01
—PRSUs	365,258	14.41
	1,491,781	$	12.60
Forfeited during the period:
—RSUs	(35,135)	$	16.46
—PRSUs	(28,552)	20.07
	(63,687)	$	18.08
Vested during the period:
—RSUs	(218,556)	$	16.41
	(218,556)	$	16.41
Outstanding at the end of the period:
—RSUs	1,591,101	$	13.20
—PRSUs	585,256	16.53
	2,176,357	$	14.10

As of March 28, 2020, the unrecognized compensation charge relating to nonvested RSUs and PRSUs was $24.3 million, which is expected to be recognized over a weighted average period of 2.5 years, subject, where relevant, to the achievement of the performance conditions described above. The total fair value of RSUs and PRSUs vested during the three months ended March 28, 2020 was $2.7 million, compared with $0.2 million during the three months ended March 30, 2019.

Valuation of awards granted during the period

The grant date fair value of the options and SARs was measured using a Black-Scholes valuation model. RSUs are valued at the share price on the date of grant. The premium-priced options and PRSUs were valued using Monte Carlo simulations. As Gates only has volatility data for its shares for the period since its initial public offering, this volatility has been weighted with the debt-levered volatility of a peer group of public companies in order to determine the expected volatility over the expected option life. The expected option life represents the period of time for which the options are expected to be outstanding and is based on consideration of the contractual life of the option, option vesting period, and historical exercise patterns. The weighted average fair values and relevant assumptions were as follows:

	Three months ended
	March 28, 2020			March 30, 2019
Grant date fair value:
—SARs	$	4.59		$	5.88
—Share options	$	4.78		$	5.88
—Premium-priced options	n/a			$	5.65
—RSUs	$	12.01		$	16.46
—PRSUs	$	14.41		$	20.07
Inputs to the model:
—Expected volatility - SARs	37.7		%	31.9		%
—Expected volatility - share options	37.6		%	31.9		%
—Expected volatility - premium-priced options	n/a			31.9		%
—Expected volatility - PRSUs	40.4		%	32.8		%
—Expected option life for SARs	6.0			6.0
—Expected option life for share options	6.0			6.0
—Expected option life for premium-priced options	n/a			7.0
—Risk-free interest rate:
SARs	1.25		%	2.51		%
Share options	1.33		%	2.51		%
Premium-priced options	n/a			2.53		%
PRSUs	1.29		%	2.48		%

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Unaudited Condensed Consolidated Statements of Shareholders’ Equity - USD ($) $ in Millions	Total	Total shareholders’ equity	Share capital	Additional paid-in capital	Accumulated other comprehensive loss	Retained earnings	Non- controlling interests
Beginning Balance at Dec. 29, 2018	$ 2,333.7	$ 1,947.4	$ 2.9	$ 2,416.9	$ (854.3)	$ 381.9	$ 386.3
Increase (Decrease) in Stockholders' Equity
Net income	604.8	613.7				613.7	(8.9)
Other comprehensive income (loss)	21.7	14.3			14.3		7.4
Comprehensive (loss) income for the period	626.5	628.0			14.3	613.7	(1.5)
—Issuance of shares	1.2	1.2		1.2
—Share-based compensation	2.5	2.5		2.5
—Dividends paid to non-controlling interests	(1.8)						(1.8)
Ending Balance at Mar. 30, 2019	2,962.1	2,579.1	2.9	2,420.6	(840.0)	995.6	383.0
Beginning Balance at Dec. 28, 2019	3,010.7	2,651.0	2.9	2,434.5	(858.4)	1,072.0	359.7
Increase (Decrease) in Stockholders' Equity
Net income	39.9	35.6				35.6	4.3
Other comprehensive income (loss)	(214.8)	(207.4)			(207.4)		(7.4)
Comprehensive (loss) income for the period	(174.9)	(171.8)			(207.4)	35.6	(3.1)
—Issuance of shares	1.9	1.9		1.9		0.0
—Share-based compensation	3.7	3.7		3.7
Ending Balance at Mar. 28, 2020	$ 2,841.4	$ 2,484.8	$ 2.9	$ 2,440.1	$ (1,065.8)	$ 1,107.6	$ 356.6

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Document and Entity Information - shares	3 Months Ended
	Mar. 28, 2020	May 01, 2020
Document And Entity Information [Abstract]
Document Type	10-Q
Document Period End Date	Mar. 28, 2020
Entity Registrant Name	Gates Industrial Corporation plc
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		290,721,974
Entity Central Index Key	0001718512
Current Fiscal Year End Date	--01-02
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Unaudited Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Millions	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Foreign currency translation:
Net translation gain (loss) on foreign operations, tax	$ 0.0	$ (0.2)
Gain (loss) on net investment hedges, tax	0.0	0.0
Cash flow hedges (Interest rate derivatives):
Gain (loss) arising in the period, tax benefit	2.5	2.1
Reclassification tax benefit	0.0	0.0
Post-retirement benefits:
Reclassification of prior year actuarial movements, tax	$ 0.0	$ 0.1