What changed in this filing

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Item 1. Financial Statements

2022-08-09 compared with 2022-05-10 · 388 added, 255 removed, 318 unchanged (67% of the section changed)

1 unchanged sentence

ESAB CORPORATION

COMBINED CONDENSED STATEMENTS OF OPERATIONS

CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF OPERATIONS

Dollars in thousands, except per share amounts

Three Months Ended

April 1, 2022 April 2, 2021

Three Months Ended Six Months Ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

Net sales $ 661,177 $ 629,804 $ 1,309,088 $ 1,197,932

4 unchanged sentences

Operating income 85,878 82,200 169,492 154,501

Interest income and other, net 556 225

Pension settlement gain — ( 11,208 ) — ( 11,208 )

Interest expense (income) and other, net 7,907 ( 314 ) 7,351 ( 539 )

Income from continuing operations before income taxes 77,971 93,722 162,141 166,248

13 unchanged sentences

Net income per share - diluted $ 0.91 $ 1.29 $ 1.82 $ 2.25

See Notes to Combined Condensed Financial Statements.

See Notes to Consolidated and Combined Condensed Financial Statements.

ESAB CORPORATION

COMBINED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Dollars in thousands

Three Months Ended

April 1, 2022 April 2, 2021

Three Months Ended Six Months Ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

Net income $ 56,024 $ 78,112 $ 112,427 $ 136,646

Other comprehensive income (loss):

Other comprehensive (loss) income:

Foreign currency translation, net of tax expense of $ 360 , $ 0 , $ 698 and $ 1,491

2 unchanged sentences

Amortization of pension and other post-retirement net actuarial gain, net of tax expense of $ 234 , $ 0 , $ 475 and $ 0

Other comprehensive loss ( 44,403 ) ( 29,818 )

Comprehensive income 12,000 28,716

comprehensive income attributable to noncontrolling interest 458 564

Comprehensive income attributable to ESAB Corporation $ 11,542 $ 28,152

See Notes to Combined Condensed Financial Statements.

770 207 1,556 428

Other comprehensive (loss) income ( 101,118 ) 3,654 ( 145,521 ) ( 26,164 )

Comprehensive (loss) income ( 45,094 ) 81,766 ( 33,094 ) 110,482

comprehensive (loss) income attributable to noncontrolling interest ( 970 ) 95 ( 512 ) 659

Comprehensive (loss) income attributable to ESAB Corporation $ ( 44,124 ) $ 81,671 $ ( 32,582 ) $ 109,823

See Notes to Consolidated and Combined Condensed Financial Statements.

ESAB CORPORATION

COMBINED CONDENSED BALANCE SHEETS

Dollars in thousands

April 1, 2022 December 31, 2021

CONSOLIDATED AND COMBINED CONDENSED BALANCE SHEETS

Dollars in thousands, except share and per share amounts

July 1, 2022 December 31, 2021

CURRENT ASSETS:

17 unchanged sentences

Total current liabilities 642,082 596,589

Long-term debt 1,182,187 —

Other liabilities 568,032 362,945

Total liabilities 2,392,301 959,534

Parent’s Equity:

Net Parent investment 3,040,898 2,921,623

Common stock - $ 0.001 par value - Authorized 600,000,000 , 60,043,543 and 100 shares outstanding as of July 1, 2022 and December 31, 2021, respectively

Additional paid-in capital 1,852,998 —

Retained earnings 52,224 —

Former Parent’s investment — 2,921,623

Accumulated other comprehensive loss ( 663,419 ) ( 460,888 )

Total Parent’s equity 2,476,852 2,460,735

Total ESAB Corporation equity 1,241,863 2,460,735

Noncontrolling interest 39,540 40,993

1 unchanged sentence

Total liabilities and equity $ 3,673,704 $ 3,461,262

See Notes to Combined Condensed Financial Statements.

See Notes to Consolidated and Combined Condensed Financial Statements.

ESAB CORPORATION

COMBINED CONDENSED STATEMENTS OF EQUITY

Dollars in thousands

Net Parent Investment Accumulated Other Comprehensive Loss Noncontrolling Interest Total

CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF EQUITY

Dollars in thousands, except share and per share amounts

Common Stock Additional Paid in Capital Retained Earnings Former Parent’s Investment Accumulated Other Comprehensive Loss Noncontrolling Interest Total

Shares Amount

Balance at December 31, 2021 — $ — $ — $ — $ 2,921,623 $ ( 460,888 ) $ 40,993 $ 2,501,728

1 unchanged sentence

Distributions to noncontrolling owners — — — — — — ( 941 ) ( 941 )

Other comprehensive income, net of tax expense of $ 579

Other comprehensive loss, net of tax expense of $ 579

— — — — — ( 43,895 ) ( 508 ) ( 44,403 )

Common stock-based award activity 1,728 — — 1,728

Transfers from Parent, net 62,110 ( 59,263 ) — 2,847

Former Parent common stock-based award activity — — — — 1,728 — — 1,728

Transfers from (to) Former Parent, net — — — — 62,110 ( 59,263 ) — 2,847

Balance at April 1, 2022

— $ — $ — $ — $ 3,040,898 $ ( 564,046 ) $ 40,510 $ 2,517,362

Net Parent Investment Accumulated Other Comprehensive Loss Noncontrolling Interest Total

Net income — — — 55,249 — — 775 56,024

Dividends on common stock ($ 0.05 per share)

— — — ( 3,025 ) — — — ( 3,025 )

Other comprehensive loss, net of tax expense of $ 594

— — — — — ( 99,373 ) ( 1,745 ) ( 101,118 )

Net transfers from Former Parent, including Separation Adjustments — — — — 8,533 — — 8,533

Net consideration paid to Former Parent in connection with the Separation — — — — ( 1,200,000 ) — — ( 1,200,000 )

Issuance of common stock in connection with the Separation and reclassification of Net Investment from Former Parent 60,034,311 60 1,849,371 — ( 1,849,431 ) — — —

Common stock-based award activity 9,232 — 3,627 — — — — 3,627

Balance at July 1, 2022

60,043,543 $ 60 $ 1,852,998 $ 52,224 $ — $ ( 663,419 ) $ 39,540 $ 1,281,403

See Notes to Consolidated and Combined Condensed Financial Statements.

ESAB CORPORATION

CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF EQUITY

Dollars in thousands

Common Stock Additional Paid in Capital Retained Earnings Former Parent’s Investment Accumulated Other Comprehensive Loss Noncontrolling Interest Total

Shares Amount

Balance at December 31, 2020 — $ — $ — $ — $ 2,898,831 $ ( 396,203 ) $ 42,139 $ 2,544,767

3 unchanged sentences

— — — — — ( 29,506 ) ( 312 ) ( 29,818 )

Common stock-based award activity 1,586 — — 1,586

Transfers to Parent, net ( 55,069 ) — — ( 55,069 )

Former Parent common stock-based award activity — — — — 1,586 — — 1,586

Transfers to Former Parent, net — — — — ( 55,069 ) — — ( 55,069 )

Balance at April 2, 2021

— $ — $ — $ — $ 2,903,006 $ ( 425,709 ) $ 41,649 $ 2,518,946

See Notes to Combined Condensed Financial Statements.

Net income — — — — 77,407 — 705 78,112

Other comprehensive income (loss), net of tax expense of $ 0

— — — — — 4,264 ( 610 ) 3,654

Former Parent common stock-based award activity — — — — 1,663 — — 1,663

Transfers to Former Parent, net — — — — ( 56,038 ) — — ( 56,038 )

Balance at July 2, 2021

— $ — $ — $ — $ 2,926,038 $ ( 421,445 ) $ 41,744 $ 2,546,337

See Notes to Consolidated and Combined Condensed Financial Statements.

ESAB CORPORATION

COMBINED CONDENSED STATEMENTS OF CASH FLOWS

CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF CASH FLOWS

Dollars in thousands

Three Months Ended

April 1, 2022 April 2, 2021

Six Months Ended

July 1, 2022 July 2, 2021

Cash flows from operating activities:

3 unchanged sentences

Stock-based compensation expense 5,355 3,249

Deferred income tax expense (benefit) 3,509 ( 974 )

Non-cash interest expense 597 —

Deferred income tax ( 7,346 ) ( 997 )

Pension settlement gain — ( 11,208 )

Changes in operating assets and liabilities:

10 unchanged sentences

Cash flows from financing activities:

Repayments of short-term borrowings ( 511 ) ( 3 )

Proceeds from borrowings on term credit facility 1,000,000 274

Proceeds from borrowings on revolving credit facility 265,000 —

Repayments of borrowings on revolving credit facility and other ( 79,639 ) —

Payment of deferred financing fees ( 5,641 ) —

Payment of deferred consideration ( 1,500 ) —

Distributions to noncontrolling interest holders ( 941 ) ( 1,054 )

Transfers from (to) Parent, net 2,847 ( 55,069 )

Consideration to Former Parent in connection with the Separation ( 1,200,000 ) —

Transfers from (to) Former Parent, net 2,847 ( 111,107 )

Net cash used in financing activities ( 19,874 ) ( 111,887 )

3 unchanged sentences

Cash and cash equivalents, end of period $ 53,475 $ 44,529

See Notes to Combined Condensed Financial Statements.

See Notes to Consolidated and Combined Condensed Financial Statements.

ESAB CORPORATION

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS

Organization and Basis of Presentation

3 unchanged sentences

These segments consist of the “Americas” which includes operations in North America and South America, and “EMEA & APAC,” which includes Europe, Middle East, India, Africa and Asia Pacific.

Historically, these businesses had operated as part of Enovis Corporation’s (“Former Parent”, “Enovis”) Fabrication Technologies reportable segment.

The Company’s fiscal year ends December 31.

The Company’s first three quarters end on the last business day of the 13 th week after the end of the prior quarter.

As used herein, the first quarter results for 2022 and 2021 refer to the 13-week periods ended April 1, 2022 and April 2, 2021, respectively.

On April 4, 2022, Colfax Corporation (“Colfax” or the “Parent”) completed the spin-off of Colfax’s Fabrication Technology business and certain other corporate entities as described below, through a tax-free, pro rata distribution (the “Distribution”) of 90 % of the outstanding common stock of ESAB to Colfax stockholders (the “Separation”).

Upon completion of the Distribution, Colfax changed its name to Enovis Corporation (“Enovis”) and continued to hold 10 % of the outstanding common stock of ESAB.

Refer to “Note 14.

Subsequent Events” for additional information regarding the Separation.

ESAB Corporation, which was incorporated on May 19, 2021, became the new ultimate parent company for Parent’s Fabrication Technology business during the three months ended April 1, 2022.

The Company has historically operated as part of the Parent and not as a stand-alone company.

The financial statements have been derived from the Parent’s historical accounting records and are presented on a carve-out basis for all historical periods included.

All revenues and costs as well as assets and liabilities directly associated with the business activity of the Company are included as a component of the financial statements.

The financial statements also include allocations of certain general and administrative expenses from the Parent’s corporate office.

The allocations have been determined on a reasonable basis;

however, the amounts are not necessarily representative of the amounts that would have been reflected in the financial statements had the Company been an entity that operated independently of the Parent during the applicable period.

Related party cost allocations are discussed further in Note 13, “Related Party Transactions.”

In addition, on March 23, 2022, the 1,000 shares of ESAB common stock then held by Colfax, representing all outstanding shares of ESAB common stock as of that date, were recapitalized into 60,034,311 shares of ESAB common stock held by Colfax.

All per share amounts in the Combined Condensed Statement of Operations have been retroactively adjusted to give effect to this recapitalization.

On January 31, 2022, and in anticipation of the Separation, all remaining legal entities which were part of the Fabrication Technology segment of Colfax along with certain entities that were part of the Corporate segment of Colfax became subsidiaries of ESAB through a legal entity restructuring.

As used herein, the second quarter results for 2022 and 2021 refer to the 13-week periods ended July 1, 2022 and July 2, 2021, respectively.

Separation from Enovis

On January 31, 2022, all remaining legal entities which were part of the Fabrication Technology segment of the Former Parent along with certain entities that were part of the Corporate segment of the Former Parent became subsidiaries of ESAB through a legal entity restructuring.

This reorganization resulted in the inclusion of the following items in ESAB for the period ending April 1, 2022:

• Certain operating entities that form the historical Fabrication Technology business.

• Certain entities which historically have been a part of Colfax's Corporate reportable segment, including components of the Colfax tax, treasury, legal, human resources and other finance functions that served the entirety of Colfax.

• Certain entities relating to the Parent’s previously divested Fluid Handling and Air and Gas Handling businesses which hold certain asbestos assets, liabilities, costs and insurance recoveries related to the asbestos obligations of these legacy industrial businesses.

Refer to Note 2, “Discontinued Operations” and Note 11, “Commitments and Contingencies” for additional information on our accounting for these legacy industrial businesses.

• Certain entities which historically have been a part of the Former Parent’s Corporate reportable segment, including components of the Fo rmer Parent’s, leg al, human resources, tax and other finance functions that served the entirety of the Former Parent.

• Certain entities relating to the Former Parent’s previously divested Fluid Handling businesses which hold certain asbestos assets, liabilities, costs and insurance recoveries related to the asbestos obligations of these legacy industrial businesses.

Refer to Note 2, “Discontinued Operations” and Note 12, “Commitments and Contingencies” for additional information.

• Certain pension plan assets and liabilities due to transfer of sponsorship of two U.S.

defined benefit plans and a U.S.

other post-retirement benefit plan from the Parent to ESAB as of March 21, 2022.

other post-retirement benefit plan from the Former Parent to ESAB as of March 21, 2022.

Refer to Note 9, “Benefit Plans” for additional information on the benefit plans transferred to ESAB.

The above items, with the exception of the operating entities that form the Fabrication Technology business, were not previously included in the Company’s 2019 to 2021 historical carve-out financial statements.

These historical carve-out financial statements in ESAB’s Registration Statement on Form 10-12B/A filed with the SEC on March 17, 2022 (the “Form 10”), were presented on a combined basis.

Such basis of accountin g differences before and after the legal entity contributions may impact the comparability between periods in these Consolidated and Combined Condensed Financial Statements.

ESAB Corporation, which was incorporated on May 19, 2021, became the new ultimate parent company for the Former Parent’s Fabrication Technology business during the three months ended April 1, 2022.

On April 4, 2022 (the “Distribution Date”), Colfax Corporation (“Colfax” or the “Former Parent”) completed the spin-off of Colfax’s Fabrication Technology business and certain other corporate entities as described above, through a tax-free, pro rata distribution (the “Distribution”) of 90 % of the outstanding common stock of ESAB to Colfax stockholders (the “Separation”).

To effect the Separation, each Colfax stockholder of record as of close of business on March 23, 2022 received one share of ESAB common stock for every three shares of Colfax common stock held on the record date.

Upon completion of the Distribution, Colfax changed its name to Enovis Corporation and continued to hold 10 % of the outstanding common stock of ESAB.

Enovis is expected to divest the 10 % retained shares in ESAB within 12 months after the Distribution Date.

ESAB CORPORATION

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

The above items, with the exception of the operating entities that form the Fabrication Technology business, were not previously included in the Company’s 2021 historical carve-out financial statements.

The carve-out financial statements for the year ended December 31, 2021 in ESAB’s Registration Statement on Form 10-12B/A filed with the SEC on March 17, 2022 (the “Form 10”), were presented on a combined basis.

Such basis of accounting differences before and after the legal entity contributions in the three months ended April 1, 2022 may impact the comparability between periods in these Combined Condensed Financial Statements.

The Parent utilizes a centralized approach to cash management and financing of its operations.

Financing transactions relating to the Company are accounted for through the Parent investment account of the Company.

Accordingly, none of the Parent’s cash, cash equivalents or debt at the corporate level has been assigned to the Company in these financial statements.

Net Parent investment, which includes retained earnings, represents the Parent’s interest in the recorded net assets of the Company.

All significant transactions between the Company and the Parent have been included in the accompanying Financial Statements.

Transactions with the Parent are reflected in the accompanying Combined Condensed Statements of Equity as “Transfers from (to) Parent, net” and in the accompanying Combined Condensed Balance Sheets within “Net Parent investment.”

The Combined Condensed Financial Statements reflect, in the opinion of management, all adjustments, which consist solely of normal recurring adjustments, necessary to present fairly the Company’s financial position and results of operations as of and for the periods indicated.

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

In connection with the Separation, on April 4, 2022, ESAB and Enovis entered into a separation and distribution agreement as well as various other related agreements (collectively the “Agreements”) that govern the Separation and the relationships between the parties going forward, including a transition services agreement, an employee matters agreement, a tax matters agreement, an intellectual property matters agreement, and license agreement for the ESAB Business Excellence System ("EBX").

In conjunction with the Separation on April 4, 2022, the Company entered into a credit agreement (the “Credit Agreement”).

The Company drew down $ 1.2 billion under the Credit Agreement and used these proceeds to make payments to Enovis, of $ 1.2 billion, which was used as part of the consideration for the contribution of certain assets and liabilities to the Company by Enovis in connection with the Separation.

Refer to Note 10 “Debt” for additional information on the Credit Agreement.

On May 12, 2022, ESAB announced that the Board of Directors has declared a quarterly cash dividend of $ 0.05 per share of the Company’s common stock.

The dividend of $ 3.0 million is included in Accrued liabilities in the Consolidated and Combined Condensed Balance Sheet at July 1, 2022.

Russia and Ukraine Conflict

The invasion of Ukraine by Russia and the sanctions imposed in response to this crisis have increased the level of economic and political uncertainty.

On April 25, 2022, ESAB announced that the Company may be required to transition out of its business in Russia and are evaluating options and possible timing for this transition.

ESAB continues to fulfill current contractual obligations while addressing applicable laws and regulations.

For the three and six months ended July 1, 2022, Russia represented approximately 4 % and 5 % of the Company’s total revenue, and $ 4 million and $ 9 million in Net Income, respectively.

These amounts do not include any related corporate costs.

Russia also has approximately 6 % of the Company’s total net assets excluding any goodwill allocation as of July 1, 2022.

In case of disposition a portion of goodwill will need to be allocated and written off based on the relative fair value attributable to the Russia business.

Russia has a cumulative translation loss of approximately $ 30 million as of July 1, 2022, which could be realized upon a transition.

To cover credit risks related to Russian and Ukrainian operations, ESAB increased the allowance on receivables by approximately $ 4 million during the six months ended July 1, 2022.

The Company is closely monitoring the developments in Ukraine and Russia.

Changes in laws and regulations or other factors impacting the Company’s ability to fulfill contractual obligations could have an adverse effect on the results of operations.

Basis of Presentation

The accompanying Consolidated and Combined Condensed Financial Statements present the Company’s historical financial position, results of operations, changes in equity and cash flows in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

The combined condensed financial statements for periods prior to the Separation were derived from Enovis’s consolidated financial statements and accounting records and prepared in accordance with GAAP for the preparation of carved-out combined financial statements.

Through the date of the Separation, all revenues and costs as well as assets and liabilities directly associated with ESAB have been included in the combined financial statements.

Prior to the Separation, the combined condensed financial statements also included allocations of certain general, administrative, sales and marketing expenses from Enovis’s corporate office and from other Enovis businesses to the Company and allocations of related assets, liabilities, and the Former Parent’s investment, as applicable.

The allocations were determined on a reasonable basis, however, the amounts are not necessarily representative of the amounts that would have been reflected in the financial statements had the Company been an entity that operated independently of Enovis during the applicable periods.

Re lated party a llocations prior to the Separation, including the method for such allocation, are discussed further in Note 14, “Related Party Transactions.”

Following the Separation, the consolidated financial statements include ESAB and its wholly-owned subsidiaries and no longer include any allocations of expenses from Enovis.

• The Consolidated Balance Sheet as of July 1, 2022, consists of the consolidated balances of ESAB, while the Combined Condensed Balance Sheet as of December 31, 2021, consists of the combined balances of the former Fabrication Technology business of Enovis.

• The Consolidated and Combined Condensed Statement of Operations and Statement of Comprehensive Income for the six months ended July 1, 2022 consists of the consolidated results of ESAB for the three months ended July 1, 2022

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

and the combined results of the former Fabrication Technology business of Enovis and the certain entities discussed in the “Separation from Enovis” section above for the three months ended April 1, 2022.

The Combined Condensed Statement of Operations and Statement of Comprehensive Income for the six months ended July 2, 2021, consist of the combined results of the former Fabrication Technology business of Enovis.

• The Consolidated and Combined Condensed Statement of Changes in Equity for the six months ended July 1, 2022 consists of the consolidated activities of ESAB for the three months ended July 1, 2022 and the combined activity of the former Fabrication Technology business of Enovis and the certain entities discussed in the “Separation from Enovis” section above for the three months ended April 1, 2022.

The Combined Condensed Statements of Changes in Equity for the three and six months ended July 2, 2021 consist of the combined activity of the former Fabrication Technology business of Enovis.

• The Consolidated and Combined Condensed Statement of Cash Flows for the six months ended July 1, 2022 consists of the consolidated activities of ESAB for the three months ended July 1, 2022 and the combined activity of ESAB and the former Fabrication Technology business of Enovis and the certain entities discussed in the “Separation from Enovis” section above for the three months ended April 1, 2022.

The Combined Condensed Statement of Cash Flows for the three and six months ended July 2, 2021 consist of the combined activity of the former Fabrication Technology business of Enovis.

The Consolidated and Combined Condensed Financial Statements of ESAB for the three and six months ended July 2, 2021 and the three months ended April 1, 2022 may not be indicative of the Company's results had it been a separate stand-alone entity throughout the periods presented, nor are the results stated herein indicative of what the Company's financial position, results of operations and cash flows may be in the future.

Prior to the Separation, the Company was dependent on the Former Parent for all of its working capital and financing requirements under Enovis’s centralized approach to cash management and financing of its operations.

With the exception of cash, cash equivalents and borrowings clearly associated with ESAB and related to the Separation, financing transactions relating to the Company during the period prior to the separation were accounted for through the Former Parent’s investment account of the Company.

Accordingly, none of Enovis’s cash, cash equivalents or debt at the corporate level has been assigned to the Company in these financial statements.

Former Parent’s Investment, which included retained earnings, represented Enovis’s interest in the recorded net assets of the Company.

All significant transactions between the Company and the Former Parent prior to the Separation have been included in the accompanying Financial Statements.

Transactions with the Former Parent are reflected in the accompanying Consolidated and Combined Condensed Statements of Equity as “Transfers from Former Parent, net” and in the accompanying Consolidated and Combined Condensed Balance Sheets within “Former Parent’s investment”.

The Consolidated and Combined Condensed Financial Statements reflect, in the opinion of management, all adjustments, which consist solely of normal recurring adjustments, necessary to present fairly the Company’s financial position and results of operations as of and for the periods indicated.

Intercompany transactions and accounts are eliminated in consolidation.

The Company makes certain estimates and assumptions in preparing its Combined Condensed Financial Statements in accordance with U.S.

The Company makes certain estimates and assumptions in preparing its Consolidated and Combined Condensed Financial Statements in accordance with U.S.

generally accepted accounting principles, or “GAAP”.

These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the Combined Condensed Financial Statements and the reported amounts of revenues and expenses for the periods presented.

These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the Consolidated and Combined Condensed Financial Statements and the reported amounts of revenues and expenses for the periods presented.

Actual results may differ from those estimates.

In the normal course of business, the Company incurs research and development costs related to new product development which are expensed as incurred and included in Selling, general and administrative expenses on the Company’s Combined Condensed Statements of Operations.

Research and development costs were $ 9.5 million during the three months ended April 1, 2022, and $ 9.5 million during the three months ended April 2, 2021.

In addition to the factors discussed elsewhere in this Form 10-Q, the results of operations for the three month period ended April 1, 2022, are not necessarily indicative of the results of operations that may be achieved for the full year.

Quarterly results are affected by seasonal variations in the Company’s businesses, and European operations typically experience a slowdown during the July, August and December holiday seasons.

Research and development costs were $ 9.6 million and $ 19.1 million during the three and six months ended July 1, 2022, respectively, and $ 10.3 million and $ 19.8 million during the three and six months ended July 2, 2021, respectively.

In addition to the factors discussed elsewhere in this Form 10-Q, the results of operations for the three and six month period ended July 1, 2022, are not necessarily indicative of the results of operations that may be achieved for the full year.

Quarterly results are affected by seasonal variations in the Company’s businesses, and European operations typically experience

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

a slowdown during the July, August and December holiday seasons.

Since 2020, these historical seasonality trends have been impacted by the worldwide spread of a novel coronavirus disease (“COVID-19”).

These Combined Condensed Financial Statements included in this quarterly report have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) in conformity with GAAP, for the preparation of carved-out Combined Condensed Financial Statements and are unaudited.

These Consolidated and Combined Condensed Financial Statements included in this quarterly report have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) in conformity with GAAP, for the preparation of the Consolidated and Combined Condensed Financial Statements and are unaudited.

Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been omitted.

The accompanying interim Combined Condensed Financial Statements and the related notes should be read in conjunction with the Company’s Combined Financial Statements and related notes included in the Company’s Form 10.

The accompanying interim Consolidated and Combined Condensed Financial Statements and the related notes should be read in conjunction with the Company’s Combined Financial Statements and related notes included in the Company’s Form 10.

Discontinued Operations

The Company holds certain asbestos-related contingencies and insurance coverages from divested businesses for which it does not have an interest in the ongoing operations.

The entities which hold these assets and liabilities became subsidiaries of the Company during the three months ended April 1, 2022 in connection with the Separation.

The entities which hold these assets and liabilities became subsidiaries of the Company during the six months ended July 1, 2022 in connection with the Separation.

These assets and liabilities were not included in the Company’s historical Combined Financial Statements for 2021 as the Company did not have legal title to these assets, nor was the Company the legal obligor of these liabilities.

The 2022 amounts reflect income, expenses, assets and liabilities historically recorded within Parent corporate entities that were not part of Parent’s Fabrication Technology segment.

The 2022 amounts reflect income, expenses, assets and liabilities historically recorded within the Former Parent’s divested businesses that were not part of Former Parent’s Fabrication Technology segment.

Refer to “Note 1.

Organization and Basis of Presentation” for additional information.

ESAB CORPORATION

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

The Company has classified asbestos-related activity in its Combined Condensed Statements of Operations as part of Loss from discontinued operations, net of taxes.

The Company has classified asbestos-related activity in its Consolidated and Combined Condensed Statements of Operations as part of Loss from discontinued operations, net of taxes.

See Note 12, “Commitments and Contingencies” for further information.

Cash used in operating activities related to discontinued operations for the three months ended April 1, 2022 was $ 4.6 million.

Cash used in operating activities related to discontinued operations for the three months and six months ended July 1, 2022 was $ 9.1 million and $ 13.7 million, respectively .

The Company develops, manufactures and supplies consumable welding and cutting products and equipment, as well as gas control equipment.

2 unchanged sentences

The Company disaggregates its revenue into the following product groups:

Three Months Ended

April 1, 2022 April 2, 2021

Three Months Ended Six Months Ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

(In thousands)

4 unchanged sentences

The consumables product grouping generally has less production complexity and shorter production cycles than equipment products.

Given the nature of the business, the total amount of unsatisfied performance obligations with an original contract duration of greater than one year as of April 1, 2022 is immaterial.

Given the nature of the business, the total amount of unsatisfied performance obligations with an original contract duration of greater than one year as of July 1, 2022 is immaterial.

In some circumstances, customers are billed in advance of revenue recognition, resulting in contract liabilities.

As of December 31, 2021 and December 31, 2020, total contract liabilities were $ 22.3 million and $ 21.6 million, respectively, and were included in Accrued liabilities on the Combined Condensed Balance Sheets.

During the three months ended April 1, 2022 and April 2, 2021, revenue recognized that was included in the contract liability balance at the beginning of the year was $ 9.1 million and $ 13.5 million, respectively.

As of April 1, 2022 and April 2, 2021 total contract liabilities were $ 25.9 million and $ 24.4 million, respectively, and were included in Accrued liabilities on the Company’s Combined Condensed Balance Sheets.

As of December 31, 2021 and December 31, 2020, total contract liabilities were $ 22.3 million and $ 21.6 million, respectively, and were included in Accrued liabilities on the Consolidated and Combined Condensed Balance Sheets.

During the three and six months ended July 1, 2022, revenue recognized that was included in the contract liability balance at the beginning of the year was $ 5.3 million and $ 14.4 million, respectively.

During the three and six months ended July 2, 2021, revenue recognized that was included in the contract liability balance at the beginning of the year was $ 2.8 million and $ 16.3 million, respectively.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

of July 1, 2022 and July 2, 2021 total contract liabilities were $ 21.5 million and $ 19.9 million, respectively, and were included in Accrued liabilities on the Company’s Consolidated and Combined Condensed Balance Sheets.

Allowance for Credit Losses

A summary of the activity in the Company’s allowance for credit losses included within Trade receivables in the Combined Condensed Balance Sheets is as follows:

Three Months Ended April 1, 2022

A summary of the activity in the Company’s allowance for credit losses included within Trade receivables in the Consolidated and Combined Condensed Balance Sheets is as follows:

Six months ended July 1, 2022

of Period Charged to Expense, net Write-Offs and Deductions Foreign

2 unchanged sentences

Allowance for credit losses $ 23,912 $ 4,751 $ ( 965 ) $ 606 $ 28,304

ESAB CORPORATION

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

Earnings per Share from Continuing Operations

Earnings per share from continuing operations was computed as follows:

Three Months Ended

April 1, 2022 April 2, 2021

The Company has unvested share-based payment awards with a right to receive nonforfeitable dividends which are considered participating securities.

The Company allocates earnings to participating securities and computed earnings per share using the two-class method as follows:

Three Months Ended Six Months Ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

(In thousands, except share and per share data)

Computation of earnings (loss) per share from continuing operations - basic and diluted:

Computation of earnings per share from continuing operations - basic:

Income from continuing operations attributable to ESAB Corporation (1)

$ 57,149 $ 77,407 $ 114,607 $ 135,065

Weighted-average shares of common stock outstanding – basic and diluted (2)

distributed and undistributed earnings allocated to nonvested shares ( 372 ) — ( 742 ) —

Income from continuing operations attributable to common stockholders $ 56,777 $ 77,407 $ 113,865 $ 135,065

Weighted-average shares of Common stock outstanding – basic

60,038,053 60,034,311 60,036,182 60,034,311

Income per share from continuing operations – basic and diluted

Income per share from continuing operations – basic

$ 0.95 $ 1.29 $ 1.90 $ 2.25

(1) Net income from continuing operations attributable to ESAB Corporation for the respective periods is calculated using Net income from continuing operations, less Income attributable to noncontrolling interest, net of taxes, of $ 1.0 million for the three months ended April 1, 2022, and $ 0.9 million for the three months ended April 2, 2021.

(2) The total number of shares outstanding at April 1, 2022, or 60,034,311 , is being utilized for calculation of both basic and diluted earnings per share for the three months ended April 2, 2021 and April 1, 2022.

The Company was incorporated on May 19, 2021, and there were no shares outstanding as of April 2, 2021.

During the three months ended April 1, 2022, Income from continuing operations before income taxes was $ 84.2 million, while Income tax expense was $ 25.7 million.

The effective tax rate w as 30.6 % fo r the three months ended April 1, 2022.

The effective tax rate for the three months ended April 1, 2022 differed from the 2022 U.S.

federal statutory rate of 21% primarily due to the impact of withholding taxes, taxable foreign exchange gains, and other non-deductible expenses, partially offset by lower rates on earnings in foreign jurisdictions.

During the three months ended April 2, 2021, Income from continuing operations before income taxes was $ 72.5 million, while Income tax expense was $ 14.0 million.

The effective tax rate was 19.3 % for the three months ended April 2, 2021.

The effective tax rate for the three months ended April 2, 2021 differed from the 2021 U.S.

federal statutory rate of 21% primarily due to the recognition of discrete tax benefits as a result of audit settlements that occurred in first three months of 2021.

Additionally, the Company’s foreign earnings in the first three months of 2021 were taxed at lower rates than the U.S federal statutory rate.

Computation of earnings (loss) per share from continuing operations - diluted:

Income from continuing operations attributable to common stockholders $ 56,777 $ 77,407 $ 113,865 $ 135,065

Weighted-average shares of Common stock outstanding – diluted

60,038,053 60,034,311 60,036,182 60,034,311

Net effect of potentially dilutive securities 147,467 — 73,734 —

Weighted-average shares of Common stock outstanding – dilution

60,185,520 60,034,311 60,109,916 60,034,311

Net income per share from continuing operations – diluted

$ 0.94 $ 1.29 $ 1.89 $ 2.25

(1) Net income from continuing operations attributable to ESAB Corporation for the respective periods is calculated using Net income from continuing operations, less Income attributable to noncontrolling interest, net of taxes, of $ 0.8 million and $ 1.7 million for the three and six months ended July 1, 2022, respectively, and $ 0.7 million and $ 1.6 million for the three and six months ended July 2, 2021, respectively.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

During the three and six months ended July 1, 2022, Income from continuing operations before income taxes was $ 78.0 million and $ 162.1 million, respectively, while Income tax expense was $ 20.0 million and $ 45.8 million, respectively.

The effective tax rate w as 25.7 % and 28.2 % for the three and six months ended July 1, 2022, respectively.

The effective tax rates differed from the 2022 U.S.

federal statutory rate of 21% primarily due to the impact of withholding taxes and non-deductible expenses.

During the three and six months ended July 2, 2021, Income from continuing operations before income taxes was $ 93.7 million and $ 166.2 million, respectively, while Income tax expense was $ 15.6 million and $ 29.6 million, respectively.

The effective tax rate was 16.7 % and 17.8 % for the three and six months ended July 2, 2021, respectively.

The effective tax rates differed from the 2021 U.S.

federal statutory rate of 21% primarily due to the recognition of discrete tax benefits as a result of audit settlements that occurred in first six months of 2021.

Additionally, the Company’s foreign earnings in the first six months of 2021 were taxed at lower rates than the U.S federal statutory rate.

Inventories, Net

Inventories, net consisted of the following:

April 1, 2022 December 31, 2021

July 1, 2022 December 31, 2021

(In thousands)

6 unchanged sentences

$ 473,799 $ 420,062

The valuation of LIFO inventories is made at the end of the year based on inventory levels and costs at that time.

At April 1, 2022 and December 31, 2021, 32 % and 34 % of total inventories, respectively, were valued using the LIFO method.

At July 1, 2022 and December 31, 2021, 32 % and 34 % of total inventories, respectively, were valued using the LIFO method.

ESAB CORPORATION

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

Accumulated Other Comprehensive Loss

The following tables present the changes in the balances of each component of Accumulated other comprehensive loss including reclassifications out of Accumulated other comprehensive loss for the three months ended April 1, 2022 and April 2, 2021.

All amounts are net of tax and noncontrolling interest, if any.

7 unchanged sentences

Other comprehensive income (loss) before reclassifications 490 ( 45,171 ) ( 44,681 )

490 ( 45,171 ) ( 44,681 )

Amounts reclassified from Accumulated other comprehensive loss (1)

Amounts contributed from Parent (2)

Amounts contributed by Former Parent (2)

( 50,504 ) ( 8,759 ) ( 59,263 )

1 unchanged sentence

Balance at April 1, 2022 $ ( 70,424 ) $ ( 493,622 ) $ ( 564,046 )

Other comprehensive income (loss) before reclassifications:

Foreign currency translation adjustment ( 1,354 ) ( 98,789 ) ( 100,143 )

Other comprehensive income (loss) before reclassifications ( 1,354 ) ( 98,789 ) ( 100,143 )

Amounts reclassified from Accumulated other comprehensive loss (1)

Net current period Other comprehensive loss ( 584 ) ( 98,789 ) ( 99,373 )

Balance at July 1, 2022

$ ( 71,008 ) $ ( 592,411 ) $ ( 663,419 )

1 unchanged sentence

See Note 9, “Benefit Plans” for additional details.

(2) Includes unrecognized pension and other post-retirement costs and accumulated currency translation adjustments of certain entities which were part of the Corporate segment of Colfax and were transferred to ESAB Corporation in anticipation of the Separation.

Please see Note 1, “Organization and Basis of Presentation” for more information on the entities contributed from Colfax.

(2) Includes unrecognized pension and other post-retirement costs and accumulated currency translation adjustments of certain entities which were part of the Corporate segment of the Former Parent and were transferred to ESAB Corporation in anticipation of the Separation.

Please see Note 1, “Organization and Basis of Presentation” for more information on the entities contributed from the Former Parent.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

Accumulated Other Comprehensive Loss Components

5 unchanged sentences

Other comprehensive income (loss) before reclassifications 712 ( 30,438 ) ( 29,726 )

712 ( 30,438 ) ( 29,726 )

Amounts reclassified from Accumulated other comprehensive loss (1)

2 unchanged sentences

$ ( 28,446 ) $ ( 397,263 ) $ ( 425,709 )

Other comprehensive income (loss) before reclassifications:

Foreign currency translation adjustment ( 126 ) 4,182 4,056

Other comprehensive income (loss) before reclassifications ( 126 ) 4,182 4,056

Amounts reclassified from Accumulated other comprehensive loss (1)

Net current period Other comprehensive income (loss) 82 4,182 4,264

Balance at July 2, 2021

$ ( 28,364 ) $ ( 393,081 ) $ ( 421,445 )

(1) Included in the computation of net periodic benefit cost.

See Note 9, “Benefit Plans” for additional details.

Share-Based Payments

Prior to the Separation, certain employees of the Company participated in the Former Parent’s stock-based compensation plans.

In connection with the Separation, the Company adopted the 2022 Omnibus Incentive Plan (the “Stock Plan”) and outstanding equity awards of the Former Parent held by ESAB employees were converted into or replaced with awards of ESAB common stock under the Stock Plan based on the “concentration method,” and as adjusted to maintain the economic value before and after the Distribution Date using the relative fair market value of the Former Parent and ESAB common stock.

For each equity award holder, the intent is to maintain the economic value of the equity awards immediately before and after the Distribution.

The terms of the equity awards, such as the award period, exercisability and vesting schedule, as applicable, generally continued unchanged.

Other than converted or replacement equity awards of ESAB issued in replacement of the Former Parent’s restricted stock units (“RSUs”) and stock options, the terms of the converted or replacement equity awards of ESAB (e.g., vesting date and expiration date) continued unchanged.

Incremental stock-based compensation expense to be recorded as a result of this equity award conversion will be $ 2.6 million and will be recognized over the remaining service period.

Stock-based compensation expenses incurred by the Company were $ 3.6 million and $ 5.4 million during the three and six months ended July 1, 2022, respectively, and $ 1.7 million and $ 3.2 million during the three and six months ended July 2, 2021, respectively.

ESAB CORPORATION

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

Accrued and Other Liabilities

Accrued and Other liabilities in the Combined Condensed Balance Sheets consisted of the following:

Accrued and Other liabilities in the Consolidated and Combined Condensed Balance Sheets consisted of the following:

Current Noncurrent Current Noncurrent

April 1, 2022 December 31, 2021

July 1, 2022 December 31, 2021

(In thousands)

10 unchanged sentences

Accrued Warranty Liability

A summary of the activity in the Company’s warranty liability included in Accrued liabilities in the Company’s Combined Condensed Balance Sheets is as follows:

Three Months Ended

April 1, 2022 April 2, 2021

A summary of the activity in the Company’s warranty liability included in Accrued liabilities in the Company’s Consolidated and Combined Condensed Balance Sheets is as follows:

Six Months Ended

July 1, 2022 July 2, 2021

(In thousands)

6 unchanged sentences

ESAB CORPORATION

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

Accrued Restructuring Liability

The Company’s restructuring programs include a series of actions to reduce the structural costs of the Company.

A summary of the activity in the Company’s restructuring liability included in Accrued liabilities and Other liabilities in the Combined Condensed Balance Sheets is as follows:

Three Months Ended April 1, 2022

Balance at Beginning of Period Provisions Payments Foreign Currency Translation Balance at End of Period

A summary of the activity in the Company’s restructuring liability included in Accrued liabilities and Other liabilities in the Consolidated and Combined Condensed Balance Sheets is as follows:

Six Months Ended July 1, 2022

Balance at Beginning of Period Charges Payments Foreign Currency Translation Balance at End of Period

(In thousands)

19 unchanged sentences

(2) Includes the cost of relocating associates, relocating equipment, lease termination expense and other costs in connection with the closure and optimization of facilities and product lines.

ESAB CORPORATION

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

Benefit Plans

1 unchanged sentence

As part of the Separation, certain U.S.

defined benefit and other post-retirement plans, formerly sponsored by the Parent, were transferred to the Company as of March 21, 2022.

As a result of the transfer, the related net plan obligations of approximately $ 9.6 million are included within the Company’s Combined Condensed Balance Sheet at April 1, 2022.

The transferred plans include a defined benefit pension plan with assets of $ 201.2 million and projected benefit liabilities of $ 200.6 million and two unfunded defined benefit and other post-retirement benefit plans with liabilities of $ 11.7 million, all of which were recorded in the financial statements of the Parent at December 31, 2021.

The pretax net unrecognized pension and other post-retirement benefit cost included in Accumulated other comprehensive loss for the transferred plans is approximately $ 50.0 million.

defined benefit and other post-retirement plans, formerly sponsored by the Former Parent, were transferred to the Company as of March 21, 2022.

As a result of the transfer, the related net plan obligations of approximate ly $ 7.2 million are included within the Company’s Consolidated and Combined Condensed Balance Sheet at July 1, 2022.

The pretax net unrecognized pension and other post-retirement benefit cost included in Accumulated other comprehensive loss at April 1, 2022 for the transferred plans was approximately $ 50 million.

The net plan assets and obligations are presented within Compensation and related benefits in Note 8.

“Accrued and Other Liabilities”.

The Parent offers both funded and unfunded noncontributory defined benefit pension plans in the U.S.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

The Former Parent offered both funded and unfunded noncontributory defined benefit pension plans in the U.S.

that are shared amongst its businesses, including the Company prior to becoming plan sponsor.

The participation of the Company’s employees and retirees in these plans is reflected in the Company’s historical Combined Financial Statements as though it participated in a multiemployer plan with the Parent.

As a result, a proportionate share of the cost associated with these defined benefit plans is reflected in the Company’s historical Combined Financial Statements, while any assets and liabilities associated with these defined benefit plans were retained by the Parent and were not recorded on the Company’s historical Combined Financial Statements.

Prior to the Separation, certain current and former employees of the Company participated in a benefit plan previously sponsored by the Parent.

Net periodic pension benefit income, related to this Parent-sponsored plan was allocated to the Company based on the Company’s share of total Parent headcount and is reflected within Interest income and other, net, in the Combined Statements of Operations for both the three months ended April 1, 2022, and April 2, 2021.

Net periodic benefit cost of the Company’s defined benefit pension plan for the three months ended April 1, 2022 and April 2, 2021 was $ 0.4 million and $ 0.3 million, respectively, and is reflected within Interest income and other, net, in the Combined Statements of Operations for both the three months ended April 1, 2022, and April 2, 2021.

The Company expects to contribute approximately $ 0.7 million to its U.S.

pension plans and $ 3.6 million to its foreign pension plans in the remaining nine months of 2022.

In the three months ended April 1, 2022, contributions of $ 0.2 million to U.S.

The participation of the Company’s employees and retirees in this plan is reflected in the Company’s historical Combined Financial Statements as though it participated in a multiemployer plan with the Former Parent.

As a result, a proportionate share of the cost associated with this defined benefit plan is reflected in the Company’s historical Combined Financial Statements, while any assets and liabilities associated with this defined benefit plan were retained by the Former Parent and were not recorded on the Company’s historical Combined Financial Statements.

Net periodic pension benefit income related to this Former Parent-sponsored plan was allocated to the Company based on the Company’s share of total Former Parent headcount and is reflected within Interest expense (income) and other, net, in the Consolidated and Combined Condensed Statements of Operations for the three months ended April 1, 2022 and six months ended July 2, 2021.

Net periodic benefit cost of the Company’s defined benefit pension plan wa s $ 0.1 million and $ 0.5 million for the three and six months ended July 1, 2022, respectively, and was $ 0.4 million and $ 0.7 million for the three and six months ended July 2, 2021, respectively, and is reflected within Interest expense (income) and other, net, in the Consolidated and Combined Condensed Statements of Operations for both the three and six months ended July 1, 2022, and July 2, 2021.

In the six months ended July 1, 2022, contributions of $ 0.5 million to U.S.

pension plans and $ 2.4 million to foreign pension plans have been made.

During the three months ended July 2, 2021, the Company recognized a pension settlement gain of $ 11.2 million when the independent trustees of a Company pension plan agreed to merge that plan with another Company pension plan and contribute its surplus assets.

This amount is reflected in Pension settlement gain in the Consolidated and Combined Condensed Statements of Operations.

Long-term debt consisted of the following:

(In thousands)

Term loans $ 997,187

Revolving credit facilities 185,000

Long-term debt $ 1,182,187

Term Loans and Revolving Credit Facility

On April 4, 2022, the Company entered into a credit agreement (as amended and restated from time-to-time, the “Credit Agreement”) in connection with the Separation.

The Credit Agreement initially consisted of the following facilities;

• A $ 750 million revolving credit facility (the “Revolving Facility”) with a maturity date of April 4, 2027

• A Term A-1 loan with an initial aggregate principal amount of $ 400 million (the “Term Loan A-1 Facility”), with a maturity date of April 4, 2027;

• A $ 600 million 364 -day senior term loan facility (the “Term Loan A-2 Facility”) with a maturity date of April 3, 2023.

The Revolving Facility contains a $ 300 million letter of credit foreign currency sublimit and a $ 50 million swing line loan sub-facility.

On April 4, 2022, the Company drew down $ 1.2 billion available under the credit facilities made up of (i) $ 200 million under the Revolving Facility, (ii) $ 400 million under the Term Loan A-1 Facility and (iii) $ 600 million under the Term Loan A-2 Facility.

The Company used these proceeds to make payments to Enovis of $ 1.2 billion, which was used as part of the consideration for the contribution of certain assets and liabilities to the Company by Enovis in connection with the Separation.

ESAB CORPORATION

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

On June 28, 2022, the Company amended and restated the Credit Agreement by entering into Amendment No.

2 to Credit Agreement (“Credit Agreement Amendment”).

The Credit Agreement Amendment provides for a $ 600 million term loan facility (the “Term Loan A-3 Facility” and, together with the Term Loan A-1 Facility, the “Term Facilities”, and together with the Revolving Facility, the “Facilities”) with a maturity date of April 3, 2025 to refinance the Company’s existing Term Loan A-2 Facility.

Also on June 28, 2022, the Company borrowed the entire $ 600 million under Term Loan A-3 Facility to fund the repayment of the Term Loan A-2 Facility.

The Company’s total borrowing capacity under the Credit Agreement remains unchanged.

The draw-down and repayment related to these term facilities are presented net within the Consolidated and Combined Condensed Statements of Cash Flows.

The Credit Agreement contains customary covenants limiting the ability of the Company and its subsidiaries to, among other things, incur debt or liens, merge or consolidate with others, dispose of assets, make investments or pay dividends.

In addition, the Credit Agreement contains financial covenants requiring the Company to maintain (i) a maximum total leverage ratio of not more than 4.00 :1.00, with step-downs to, commencing with the fiscal quarter ending June 30, 2023, 3.75 :1.00, and commencing with the fiscal quarter ending June 30, 2024, 3.50 :1.00, and (ii) a minimum interest coverage ratio of 3.00 :1:00.

The Credit Agreement contains various events of default (including failure to comply with the covenants under the Credit Agreement and related agreements) and upon an event of default the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding under the Term Facilities and the Revolving Facility.

subsidiaries of the Company have agreed to guarantee the obligations of the Company under the Credit Agreement.

Loans made under the Term Facilities will bear interest, at the election of the Company, at either the base rate (as defined in the Credit Agreement) or at the term Secured Overnight Financing Rate (“SOFR”) rate plus an adjustment (as defined in the Credit Agreement), in each case, plus the applicable interest rate margin.

Loans made under the Revolving Facility will bear interest, at the election of the Company, at either the base rate or, (i) in the case of loans denominated in dollars, the term SOFR rate plus an adjustment or the daily simple SOFR plus an adjustment, (ii) in the case of loans denominated in euros, the adjusted Euro Interbank Offered Rate (“EURIBOR”) rate and, (iii) in the case of loans denominated in sterling, Sterling Overnight Index Average (“SONIA”) plus an adjustment (as all such rates are defined in the Second Credit Agreement), in each case, plus the applicable interest rate margin.

Initially, the applicable interest rate margin will be 1.5 % or, in the case of base rate loans, 0.5 %, and in future quarters it may change based upon the Company’s total leverage ratio (ranging from 1.125 % to 1.750 % or in the case of the base rate margin, 0.125 % to 0.750 %).

Each swing line loan denominated in dollars will bear interest at the base rate plus the applicable interest rate margin.

As of July 1, 2022, the weighted-average interest rate of borrowings under the Credit Agreement was 2.39 %, excluding accretion of deferred financing fees, and there wa s $ 565 million available on the Revolving Facility.

On July 14, 2022, ESAB entered into two interest rate swaps with an aggregate notional amount of $ 600 million.

The interest rate swaps will convert the term SOFR interest rate on a portion of the Company’s borrowings to a fixed interest rate of 3.293 %, plus a spread, through the date of termination.

The applicable spread may vary between 1.125 % and 1.750 %, depending on the total leverage ratio of the Company.

Additionally, on July 22, 2022, ESAB entered into two fixed-to-fixed cross-currency swaps with an aggregate notional Euro amount of approximately € 270 million and an aggregate U.S.

dollar notional amount of $ 275 million.

See additional discussion within Note 15.

Subsequent Events.

Other Indebtedness

In addition to the debt agreements discussed above, the Company also has the ability to incur $ 50 million of indebtedness pursuant to certain uncommitted credit lines, consisting of an uncommitted credit line that the Company currently has in place which the Company has used from time to time in the past for short-term working capital needs.

The Company is party to letter of credit facilities with an aggregate capacity o f $ 108.2 million.

Total letters of credit of $ 32.9 million were outstanding as of July 1, 2022.

Deferred Financing Fees

In total, the Company had deferred financing fees of $ 4.1 million included in its Consolidated and Combined Condensed Balance Sheet as of July 1, 2022, which will be charged to Interest expense (income) and other, net, using the straight-line method, over the life of the Credit Agreement for the costs associated with entering into the Revolving Facility.

The costs associated with the Term Facilities will be amortized over the contractual term of the Term Facilities.

Of the $ 4.1 million, $ 1.3 million of deferred financing fees relating to the Revolving Facility are included in Other assets and $ 2.8 million of deferred financing fees relating to the Term Facilities are recorded as a contra-liability within Long-term debt.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

Financial Instruments and Fair Value Measurements

2 unchanged sentences

A summary of the Company’s assets and liabilities that are measured at fair value for each fair value hierarchy level for the periods presented is as follows:

April 1, 2022

(In thousands)

12 unchanged sentences

Foreign currency contracts - not designated as hedges $ — $ 2,309 $ — $ 2,309

There were no transfers in or out of Level One, Two or Three during the three months ended April 1, 2022.

ESAB CORPORATION

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

There were no transfers in or out of Level One, Two or Three during the six months ended July 1, 2022.

Foreign Currency Contracts

As of April 1, 2022 and December 31, 2021, the Company had foreign currency contracts related to purchases and sales with notional values of $ 196.6 million and $ 180.8 million, respectively.

The Company recognized the following in its Combined Condensed Financial Statements related to its derivative instruments:

Three Months Ended

April 1, 2022 April 2, 2021

As of July 1, 2022 and December 31, 2021, the Company had foreign currency contracts related to purchases and sales with notional values of $ 167.2 million and $ 180.8 million, respectively.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

The Company recognized the following in its Consolidated and Combined Condensed Financial Statements related to its derivative instruments:

Three Months Ended Six Months Ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

(In thousands)

4 unchanged sentences

( 2,016 ) 191 ( 16,495 ) ( 63 )

(1) Includes realized losses relating to certain corporate entities contributed to ESAB Corporation which are reflected within Interest income and other, net, in the Combined Statements of Operations during the three months ended April 1, 2022.

(1) The six months ended July 1, 2022 includes realized losses relating to certain corporate entities contributed to ESAB Corporation which are reflected within Interest expense (income) and other, net, in the Consolidated and Combined Condensed Statements of Operations during the three months ended April 1, 2022.

See Note 1, “Organization and Basis of Presentation” for additional details.

These realized losses are offset by unrealized gains which are also reflected within Interest income and other, net, in the Combined Statements of Operations during the three months ended April 1, 2022

These realized losses are offset by unrealized gains which are also reflected within Interest expense (income) and other, net, in the Consolidated and Combined Condensed Statements of Operations during the three months ended April 1, 2022.

Commitments and Contingencies

Asbestos Contingencies

Certain entities that became subsidiaries of ESAB Corporation during the three months ended April 1, 2022 are the legal obligor for certain asbestos obligations including long-term asbestos insurance assets, long-term asbestos insurance receivables, accrued asbestos liabilities, long-term asbestos liabilities, asbestos indemnity expenses, asbestos-related defense costs and asbestos insurance recoveries related to the asbestos obligations from the Parent’s other legacy industrial businesses.

Certain entities that became subsidiaries of ESAB Corporation in connection with the Separation are the legal obligor for certain asbestos obligations including long-term asbestos insurance assets, long-term asbestos insurance receivables, accrued asbestos liabilities, long-term asbestos liabilities, asbestos indemnity expenses, asbestos-related defense costs and asbestos insurance recoveries related to the asbestos obligations from the Former Parent’s other legacy industrial businesses.

As a result, the Company holds certain asbestos-related contingencies and insurance coverages.

These subsidiaries are each one of many defendants in a large number of lawsuits that claim personal injury as a result of exposure to asbestos from products manufactured or used with components that are alleged to have contained asbestos.

Such components were acquired from third-party suppliers, and were not manufactured by any of the Company’s, or Parent’s, subsidiaries nor were the subsidiaries producers or direct suppliers of asbestos.

Such components were acquired from third-party suppliers, and were not manufactured by any of the Company’s, or Former Parent’s, subsidiaries nor were the subsidiaries, producers or direct suppliers of asbestos.

The manufactured products that are alleged to have contained or used asbestos generally were provided to meet the specifications of the subsidiaries’ customers, including the U.S.

The subsidiaries settle asbestos claims for amounts the Company considers reasonable given the facts and circumstances of each claim.

The annual average settlement payment per asbestos claimant has fluctuated during the past several years.

The annual average settlement payment per asbestos claimant has fluctuated during the past several years while the number of cases has steadily declined.

The Company expects such fluctuations to continue in the future based upon, among other things, the number and type of claims settled in a particular period and the jurisdictions in which such claims arise.

To date, the majority of settled claims have been dismissed for no payment.

The Company has classified asbestos-related activity in Loss from discontinued operations in the Combined Condensed Statements of Operations.

This is consistent with the Parent’s classification on the basis that, pursuant to the purchase agreement from the Parent’s Fluid Handling business divestiture, the Parent retained its asbestos-related contingencies and insurance coverages.

However, as the Parent did not retain an interest in the ongoing operations of the business subject to the contingencies, asbestos-related activity was classified as part of Loss from discontinued operations, net of taxes in the Consolidated Condensed Statements of Operations of the Parent.

The Company has classified asbestos-related activity in Loss from discontinued operations in the Consolidated and Combined Condensed Statements of Operations.

This is consistent with the Former Parent’s classification on the basis that, pursuant to the purchase agreement from the Former Parent’s Fluid Handling business divestiture, the Former Parent retained its asbestos-related contingencies and insurance coverages.

However, as the Former Parent did not retain an interest in the ongoing operations of the business subject to the contingencies, asbestos-related activity was classified as part of Loss from discontinued operations, net of taxes in the Condensed Consolidated Statements of Operations of the Former Parent.

The Company has projected each subsidiary’s future asbestos-related liability costs with regard to pending and future unasserted claims based upon the Nicholson methodology.

The Nicholson methodology is a standard approach used by experts and has been accepted by numerous courts.

Consistent with the Parent, it is ESAB’s policy to record a liability for asbestos-related liability costs for the longest period of time that ESAB management can reasonably estimate.

ESAB CORPORATION

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

Consistent with the Former Parent, it is ESAB’s policy to record a liability for asbestos-related liability costs for the longest period of time that ESAB management can reasonably estimate.

The Company believes that it can reasonably estimate the asbestos-related liability for pending and future claims that will be resolved in the next 15 years and has recorded that liability as its best estimate.

2 unchanged sentences

Defense costs associated with asbestos-related liabilities as well as costs incurred related to efforts to recover insurance from the subsidiaries’ insurers are expensed as incurred.

Each subsidiary has separate insurance coverage acquired prior to Company ownership of each independent entity.

The Company has evaluated the insurance assets for each subsidiary based upon the applicable policy language and allocation methodologies, and law pertaining to the affected subsidiary’s insurance policies.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

Each subsidiary has separate insurance coverage acquired prior to Company ownership.

The Company estimates the insurance assets for each subsidiary based upon the applicable policy language, expected recoveries and allocation methodologies, and law pertaining to the affected subsidiary’s insurance policies.

Asbestos-related claims activity since December 31, 2021 is as follows:

Three Months Ended

April 1, 2022

Six Months Ended

(Number of claims)

6 unchanged sentences

upon agreements or understandings in place with counsel for the claimants.

The Company’s Combined Condensed Balance Sheet included the following amounts related to asbestos-related litigation:

April 1, 2022

The Company’s Consolidated and Combined Condensed Balance Sheet included the following amounts related to asbestos-related litigation:

(In thousands)

3 unchanged sentences

Long-term asbestos liability (3)

(1) Included in Other assets in the Combined Condensed Balance Sheet.

(2) Represents current accruals for probable and reasonably estimable asbestos-related liability costs that the Company believes the subsidiaries will pay, and unpaid legal costs related to defending themselves against asbestos-related liability claims and legal action against the Company’s insurers, which is included in Accrued liabilities in the Combined Condensed Balance Sheet.

(3) Included in Other liabilities in the Combined Condensed Balance Sheet.

(1) Included in Other assets in the Consolidated and Combined Condensed Balance Sheet.

(3) Included in Other liabilities in the Consolidated and Combined Condensed Balance Sheet.

Management’s analyses are based on currently known facts and assumptions.

3 unchanged sentences

None of these legal proceedings is expected to have a material adverse effect on the financial condition, results of operations or cash flow of the Company.

With respect to these proceedings, and the litigation and claims described in the preceding paragraphs, management of the Company believes that it will either prevail, has adequate insurance coverage or has

ESAB CORPORATION

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

established appropriate accruals to cover potential liabilities.

Legal costs related to proceedings or claims are recorded when incurred.

1 unchanged sentence

There can be no assurance, however, as to the ultimate outcome of any of these matters, and if all or substantially all of these legal proceedings were to be determined adverse to the Company, there could be a material adverse effect on the financial condition, results of operations or cash flow of the Company.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

Segment Information

1 unchanged sentence

The Company’s products are utilized to solve challenges in a wide range of industries, including cutting, joining and automated welding.

The Company’s management evaluates the operating results of each of its reportable segments based upon Net sales and segment operating income, which represents Operating income before restructuring and certain other charges.

The Company’s management evaluates the operating results of each of its reportable segments based upon Net sales and segment Adjusted EBITA, which represents operating income excluding the impact of Restructuring and other related charges, acquisition-related intangible asset amortization, and separation costs.

The Company’s segment results were as follows:

Three Months Ended

April 1, 2022 April 2, 2021

Three Months Ended Six Months Ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

(In thousands)

2 unchanged sentences

$ 661,177 $ 629,804 $ 1,309,088 $ 1,197,932

Segment operating income (1) :

Adjusted EBITA (1) :

Americas $ 45,168 $ 34,273 $ 85,660 $ 64,038

1 unchanged sentence

$ 101,614 $ 95,081 $ 201,909 $ 179,730

(1) The following is a reconciliation of Income from continuing operations before income taxes to segment operating income:

Three Months Ended

April 1, 2022 April 2, 2021

(1) The following is a reconciliation of Operating income to Adjusted EBITA:

Three Months Ended Six Months Ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

(In thousands)

Income from continuing operations before income taxes $ 84,170 $ 72,526

Interest income and other, net ( 556 ) ( 225 )

Operating Income $ 85,878 $ 82,200 $ 169,492 $ 154,501

Restructuring and other related charges 4,649 3,489 9,953 6,564

Segment operating income $ 88,918 $ 75,376

Separation costs (1)

3,460 106 7,089 106

Amortization of acquired intangibles (2)

7,627 9,104 15,307 18,196

Adjusted EBITA $ 101,614 $ 95,081 $ 201,909 $ 179,730

(1) Includes non-recurring professional fees incurred in the planning and execution of the separation from Enovis within the Selling, general and administrative expense line within the Consolidated and Combined Condensed Statements of Operations.

(2) Included within the Selling, general and administrative expense line withing the Consolidated and Combined Condensed Statements of Operations.

(3) Relates to certain items included within the Interest expense (income) and other, net line within the Consolidated and Combined Condensed Statements of Operations.

Related Party Transactions

Related Party Agreements

On April 4, 2022, in connection with the Separation, the Company entered into several agreements with Enovis that govern the Separation and provide a framework for the relationship between the parties going forward including a separation and distribution agreement, a transition services agreement, tax matters agreement, employee matters agreements, a stockholder’s and registration rights agreement, an intellectual property matters agreement and an Enovis Growth Excellence Business System (“EBS”) license agreement.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

The Separation and Distribution Agreement

The Company entered into a separation and distribution agreement (the “Separation Agreement”) with Enovis immediately prior to the distribution of the Company’s common stock to Enovis stockholders.

The Separation Agreement sets forth the Company’s agreements with Enovis regarding the principal actions to be taken in connection with the Separation.

The Separation Agreement contains provisions that, among other things, relate to (i) assets, liabilities and contracts to be transferred, assumed and assigned to each of ESAB and Enovis as part of the Separation (ii) cash distribution made to Enovis in partial consideration of the transfer of ESAB Assets to the Company in connection with the Separation, and (iii) cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of ESAB’s business with ESAB and financial responsibility for the obligations and liabilities of Enovis’s remaining business with Enovis.

Transition Services Agreement

The transition services agreement ("TSA") sets forth the terms and conditions pursuant to which the Company and its subsidiaries and Enovis and its subsidiaries will provide to each other various services.

The services to be provided include human resources, payroll, certain information technology services, treasury services and financial reporting services.

The charges for the transition services generally are expected to allow the providing company to fully recover all internal and external costs and expenses it actually incurs in connection with providing the service (including a reasonable allocation of overhead) provided in the manner and at a level substantially consistent with that provided by the respective providing company immediately preceding the Distribution Date.

Tax Matters Agreement

The tax matters agreement governs the Company’s and Enovis’s respective rights, responsibilities and obligations after the Separation with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and certain other matters regarding taxes.

Employee Matters Agreement

The employee matters agreement sets forth, among other things, the allocation of assets, liabilities and responsibilities relating to employee compensation and benefit plans and programs and other related matters in connection with the Separation, including the treatment of outstanding equity and other incentive awards and certain retirement and welfare benefit obligations.

Stockholders and Registration Rights Agreement

The stockholders and registration rights agreement sets forth the right of the stockholders with regards requiring the Company to facilitate the resale of shares.

Intellectual Property Matters Agreement

The intellectual property matters agreement sets forth the terms and conditions pursuant to which Enovis and the Company have mutually granted certain personal, generally irrevocable, non-exclusive, worldwide, and royalty-free rights to use certain intellectual property.

The Company and Enovis are able to sublicense their rights in connection with activities relating to their businesses, but not for independent use by third parties.

EBS License Agreement

The EBS License Agreement sets forth the terms and conditions pursuant to which Enovis has granted a royalty-free, non-exclusive, worldwide, and nontransferable license to the Company to use EBS, solely in support of its businesses.

The Company will be able to sublicense such license solely to direct and indirect wholly-owned subsidiaries.

In addition, each of Enovis and the Company each license to each other, improvements made by such party to EBS during the first two years of the term period of the EBS license agreement.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

Allocated Expenses

The Company has historically operated as part of the Parent and not as a stand-alone company.

Accordingly, the Parent has allocated certain shared costs to the Company that are reflected as expenses in these financial statements.

These amounts include, but are not limited to, items such as general management and executive oversight, compliance, human resources, procurement, and legal functions and financial management, including public company reporting, consolidated tax filings and tax planning.

Management considers the allocation methodologies used by the Parent to be reasonable and to appropriately reflect the related expenses attributable to the Company for purposes of the carve-out financial statements;

The Company had historically operated as part of the Former Parent and not as a stand-alone company.

Accordingly, the Former Parent allocated certain shared costs to the Company that are reflected as expenses in these financial statements.

These amounts included, but were not limited to, items such as general management and executive oversight, compliance, human resources, procurement, and legal functions and financial management, including public company reporting, consolidated tax filings and tax planning.

Management considered the allocation methodologies used by the Former Parent to be reasonable and to appropriately reflect the related expenses attributable to the Company for purposes of the carve-out financial statements;

however, the expenses reflected in these financial statements may not be indicative of the actual expenses that would have been incurred during the periods presented if the Company had operated as a separate stand-alone entity.

In addition, the expenses reflected in

ESAB CORPORATION

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

the financial statements may not be indicative of expenses the Company will incur in the future.

Allocation methodologies utilized include the Company’s relative share of total Parent revenues and headcount.

All of the Company’s transactions with the Parent are considered to be financing transactions, which are presented as Transfers from (to) Parent, net in the accompanying Combined Condensed Statements of Cash Flows.

The Company had no stock-based compensation plans prior to March 31, 2022;

however certain employees of the Company participated in Colfax's stock-based compensation plans, which provide for the grants of stock options and restricted stock units (“RSUs”) among other types of awards.

The expense associated with the Company's employees who participated in the Colfax plans is allocated to the Company in the accompanying Combined Condensed Statements of Operations.

The Company’s allocated expenses from the Parent are $ 6.0 million and $ 6.5 million for the three months ended April 1, 2022 and April 2, 2021, respectively.

Refer to Note 9, “Benefit Plans,” for allocations of net periodic benefit associated with a Parent sponsored benefit plan.

In addition, the expenses reflected in the financial statements may not be indicative of expenses the Company will incur in the future.

Allocation methodologies utilized include the Company’s relative share of total Former Parent revenues and headcount.

All of the Company’s transactions with the Former Parent were considered to be financing transactions, which are presented as Transfers from (to) Former Parent, net in the accompanying Consolidated and Combined Condensed Statements of Cash Flows.

The Company had no stock-based compensation plans prior to the Separation;

however certain employees of the Company participated in the Former Parent’s stock-based compensation plans, which provided for the grants of stock options an d RSUs among other types of awards.

The expense associated with the Company's employees who participated in the plans of the Former Parent was allocated to the Company in the accompanying Consolidated and Combined Condensed Statements of Operations through the date of Separation.

The Company’s allocated expenses from the Former Parent were $ 6.0 million for the three months ended April 1, 2022 and $ 8.1 million and $ 14.6 million for the three and six months ended July 2, 2021, respectively.

Following the Separation, the company independently incurs expenses as a stand-alone company and corporate expenses from Enovis were no longer allocated to the Company;

therefore, no related amounts were reflected on the Company’s financial statements for the three months ended July 1, 2022.

Refer to Note 9, “Benefit Plans,” for allocations of net periodic benefit associated with a Former Parent sponsored benefit plan for the three months ended April 1, 2022 and six months ended July 2, 2021.

Subsequent Events

On April 4, 2022, Colfax completed the spin-off of Colfax’s Fabrication Technology business, through a pro rata distribution of 90 % of the outstanding common stock of ESAB to Colfax stockholders.

To effect the Separation, Colfax distributed to its stockholders one share of ESAB common stock for every three shares of Colfax common stock held on March 22, 2022, the record date for the Distribution.

Upon completion of the Distribution, Colfax changed its name to Enovis Corporation.

Enovis currently plans to divest its 10 % retained share of ESAB in a tax-efficient manner no later than twelve months after the Distribution date.

On April 5, 2022, ESAB began trading as an independent, publicly traded company under the stock symbol “ESAB” on the New York Stock Exchange.

As of the date of Separation, the primary source of the cash on hand was cash generated from operations.

As a result of the Separation, the Company no longer participates in the Parent’s cash management and financing operations.

Management assesses our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities.

We generate substantial cash from operating activities and expect that our operating cash flow and other sources of liquidity, including our credit facilities, will be sufficient following the Distribution date to allow us to manage our capital structure over the next twelve months and continue to invest in existing businesses and consummate strategic acquisitions.

In April 2022, the Company entered into a credit agreement (“Credit Agreement”) and completed the following financing transactions;

• A senior revolving facility in an initial aggregate principal amount of up to $ 750 million (the “Revolving Facility”)

• A senior term loan A-1 facility in an initial aggregate principal amount of up to $ 400 million (the “Term Loan A-1 Facility”)

• A 364 -day senior term loan A-2 facility in an initial aggregate principal amount of up to $ 600 million (the “Term Loan A-2 Facility” and, together with the Term Loan A-1 Facility, and the Revolving Facility, the “Facilities”).

The initial credit extensions under the Facilities became available to ESAB, subject to certain conditions precedent, at the time of the closing of the Distribution.

The Company used the proceeds of the Facilities, in part, to fund the cash distribution to the Parent as partial consideration for the transfer of the Parent’s Fabrication Technology business to the Company and to pay fees and expenses in connection with the Separation and Distribution.

The Revolving Facility will also be used to provide funds for ESAB’s ongoing working capital requirements after the Separation and for general corporate purposes.

At the closing of the Distribution, ESAB incurred $ 1.2 billion of indebtedness under the Facilities and paid a dividend of $ 1.2 billion to the Parent.

The indebtedness is comprised of:

$ 600 million under the Term Loan A-2 Facility, $ 400 million under the Term Loan A-1 Facility and $ 200 million under the Revolving Facility.

There are no required principal payments due on the Term Loan A-1 Facility or the Revolving Facility within 12 months of April 4, 2022, the effective date of the Facilities (the “Effective Date”).

The Revolving Facility and the Term Loan A-1 Facility are expected to mature and be paid in full five

ESAB CORPORATION

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS — (Continued)

years after the Effective Date.

The Term Loan A-2 Facility is expected to mature and be paid in full 364 days after the Effective Date, or will be reduced dollar-for-dollar by the first $ 600 million of net proceeds from the incurrence or issuance of any additional permanent financing, including any issuance of senior unsecured notes.

Interest rates on borrowings under the Facilities are based on prevailing market interest rates for borrowers of a similar size and credit as the Company.

Interest on the Term Loan A-1 Facility and the Term Loan A-2 Facility will be payable quarterly in arrears on the last business day of March, June, September, and December of each year.

Following payment of the $ 1.2 billion of outstanding financing, ESAB will have the capacity for additional indebtedness, up to $ 550 million.

At time of Separation, the total rate for the Revolving Facility and Term Loan A-1 Facility is based on the one month term SOFR plus 1.5 % and the total rate for Term Loan A-2 Facility is based on the one month term SOFR plus 1.375 %.

Based on market conditions, the Company continues to evaluate options to reduce floating rate debt exposure and replace it with fixed rate debt.

The Facilities contain customary affirmative and negative covenants that, among other things, limit or restrict ESAB’s and/or our subsidiaries’ ability, subject to certain exceptions, to incur liens or indebtedness, to merge or engage in other fundamental changes or sell or otherwise dispose of assets, or to make dividends or distributions.

The Company is required to maintain compliance with a leverage ratio and an interest coverage ratio.

The Facilities contain customary events of default.

subsidiaries of ESAB will guarantee the obligations of the Company under the Facilities.

In connection with the Separation, ESAB and the Parent entered into various agreements to effect the Separation and provide a framework for ESAB’s relationship with the Parent after the Separation, including a stockholders’ and registration rights agreement, the employee matters agreement, the tax matters agreement, the transition services agreement, the EBS (“Enovis Growth Excellence Business System”) license agreement, the intellectual property matters agreement and certain transfer documents, including the separation and distribution agreement.

These agreements govern the Separation between ESAB and the Parent of the assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax related assets and liabilities) of the Parent and its subsidiaries attributable to periods prior to, at and after ESAB’s Separation and will govern certain relationships between ESAB and Enovis after the Separation.

As a result of the Separation, accounts held by ESAB employees in the Parent’s deferred compensation programs referencing valuation of the Parent common stock were converted into accounts in ESAB deferred compensation programs referencing valuation of ESAB common stock, and with such accounts adjusted to maintain the economic value before and after the Separation date using the relative fair market value of the Parent and ESAB common stock.

In connection with the Separation, the Company adopted the 2022 Omnibus Incentive Plan (the “Stock Plan”) and outstanding equity awards of the Parent held by ESAB employees were converted into or replaced with awards of ESAB common stock under the Stock Plan based on the “concentration method,” and as adjusted to maintain the economic value before and after the distribution date using the relative fair market value of the Parent and ESAB common stock.

For each equity award holder, the intent is to maintain the economic value of the equity awards before and after the Distribution.

The terms of the equity awards, such as the award period, exercisability and vesting schedule, as applicable, will generally continue unchanged.

Other than converted or replacement equity awards of ESAB issued in replacement of the Parent’s RSUs and stock options, the terms of the converted or replacement equity awards of ESAB (e.g., vesting date and expiration date) continued unchanged.

The invasion of Ukraine by Russia and the sanctions imposed in response to this crisis have increased the level of economic and political uncertainty in Russia.

On April 25, 2022, based upon continued developments within the month, ESAB announced that the Company has decided it may be required to transition out of business in Russia and are evaluating options and possible timing for this transition.

ESAB continues to fulfill current contractual obligations while addressing applicable laws and regulations.

In the first quarter of 2022, Russia represented approximately 6 % of the Company’s total revenue, and $ 5 million in Net income.

Russia also had approximately 2 % of the Company’s total net assets as of April 1, 2022.

Russia has a cumulative translation loss of approximately $ 100 million, which could be realized upon a transition.

To cover credit risks related to Russian and Ukrainian operations, ESAB increased the allowance on receivables by approximately $ 4.0 million during the first quarter of 2022.

The Company is closely monitoring the developments in Ukraine and Russia.

Changes in laws and regulations or other factors impacting the Company’s ability to fulfill contractual obligations could have an adverse effect on the results of operations.

The dividend of $ 3.0 million included in Accrued liabilities in the Consolidated and Combined Condensed Balance Sheet as at July 1, 2022 was paid on July 18, 2022, to stockholders of record as of July 1, 2022.

On July 14, 2022, ESAB entered into two interest rate swaps with an aggregate notional amount of $ 600 million.

The risk management objective in using interest rate swaps is to add stability to interest expense and to manage the Company’s exposure to interest rate movements.

The swaps mature on April 3, 2025 and require periodic interest rate settlements.

Under these interest rate swaps, ESAB receives a floating rate based on the greater of the term SOFR interest rate or 0.00 %, and pays a fixed rate of 3.293 %, plus a spread, on the outstanding notional amount.

The applicable spread may vary between 1.125 % and 1.750 %, depending on the total leverage ratio of the Company.

The interest rate swaps have been designated as cash flow hedges.

On July 22, 2022, ESAB entered into two fixed-to-fixed cross-currency swaps to hedge its net investment in its Euro denominated subsidiaries.

The cross-currency swaps are designated as a net investment hedge.

Under the terms of the cross-currency swap agreement, ESAB will exchange monthly interest payments based on a weighted-average interest rate of 1.480 % and a Euro aggregate notional amount of approximately € 270 million for monthly fixed-rate interest payments based on an interest rate of 3.293 % and a U.S.

dollar aggregate notional amount of $ 275 million through the maturity date of April 3, 2025.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements