What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-01 compared with 2023-05-02 · 167 added, 126 removed, 528 unchanged (36% of the section changed)

3 unchanged sentences

Dollars in thousands, except per share amounts

Three Months Ended

March 31, 2023 April 1, 2022

Three Months Ended Six Months Ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Net sales $ 720,422 $ 661,177 $ 1,404,422 $ 1,309,088

4 unchanged sentences

Operating income 108,639 85,878 199,302 169,492

Interest expense (income) and other, net 19,510 ( 556 )

Interest expense and other, net 18,819 7,907 38,329 7,351

Income from continuing operations before income taxes 89,820 77,971 160,973 162,141

15 unchanged sentences

ESAB CORPORATION

CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Dollars in thousands

Three Months Ended

March 31, 2023 April 1, 2022

Three Months Ended Six Months Ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Net income $ 67,223 $ 56,024 $ 100,439 $ 112,427

Other comprehensive income (loss):

Foreign currency translation, net of tax expense of $ 45 and $ 338

Foreign currency translation, net of tax (benefit) expense of $( 483 ), $ 360 , $( 438 ) and $ 698

13,736 ( 101,888 ) 55,820 ( 147,077 )

Unrealized loss on derivatives designated and qualifying as cash flow hedges, net of tax benefit of $ 1,045

Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax expense of $ 1,611 and $ 566

5,531 — 1,950 —

Defined benefit pension and other post-retirement plan activity, net of tax expense of $ 65 , $ 234 , $ 131 and $ 475

887 770 1,164 1,556

Other comprehensive income (loss) 20,154 ( 101,118 ) 58,934 ( 145,521 )

Comprehensive income 71,996 12,000

comprehensive income attributable to noncontrolling interest 1,814 458

Comprehensive income attributable to ESAB Corporation $ 70,182 $ 11,542

Comprehensive income (loss) 87,377 ( 45,094 ) 159,373 ( 33,094 )

comprehensive income (loss) attributable to noncontrolling interest 1,710 ( 970 ) 3,524 ( 512 )

Comprehensive income (loss) attributable to ESAB Corporation $ 85,667 $ ( 44,124 ) $ 155,849 $ ( 32,582 )

See Notes to Consolidated and Combined Condensed Financial Statements.

2 unchanged sentences

Dollars in thousands, except share and per share amounts

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

CURRENT ASSETS:

20 unchanged sentences

Total liabilities 2,316,119 2,365,557

Common stock - $ 0.001 par value - Authorized 600,000,000 , 60,222,263 and 60,094,725 shares outstanding as of March 31, 2023 and December 31, 2022, respectively

Common stock - $ 0.001 par value - 600,000,000 shares authorized, 60,259,369 and 60,094,725 shares outstanding as of June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 1,872,834 1,865,904

9 unchanged sentences

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

Common Stock Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest Total

Shares Amount

10 unchanged sentences

60,222,263 $ 60 $ 1,868,133 $ 188,101 $ ( 636,709 ) $ 38,706 $ 1,458,291

Net income — — — 65,573 — 1,650 67,223

Dividends declared ($ 0.06 per share)

— — — ( 3,644 ) — — ( 3,644 )

Other comprehensive gain, net of tax expense of $ 1,193

— — — — 20,094 60 20,154

Common stock-based award activity 37,106 — 4,701 — — — 4,701

Balance at June 30, 2023

60,259,369 $ 60 $ 1,872,834 $ 250,030 $ ( 616,615 ) $ 40,416 $ 1,546,725

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

10 unchanged sentences

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

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

Dividends declared ($ 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.

2 unchanged sentences

Dollars in thousands

Three Months Ended

March 31, 2023 April 1, 2022

Six Months Ended

June 30, 2023 July 1, 2022

Cash flows from operating activities:

17 unchanged sentences

Cash flows from financing activities:

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

Proceeds from borrowings on revolving credit facility 280,000 265,000

Repayments of borrowings on revolving credit facility and other ( 340,537 ) ( 79,639 )

Payment of deferred financing fees and other — ( 5,641 )

Payment of deferred consideration — ( 1,500 )

Payment of dividends ( 6,061 ) —

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

Distributions to noncontrolling interest holders ( 1,274 ) ( 941 )

2 unchanged sentences

Effect of foreign exchange rates on Cash and cash equivalents 2,874 ( 937 )

Increase (decrease) in Cash and cash equivalents 10,040 15,422

Increase in Cash and cash equivalents 2,425 12,266

Cash and cash equivalents, beginning of period 72,024 41,209

7 unchanged sentences

The Company’s rich history of innovative products and workflow solutions and its business system ESAB Business Excellence (“EBX”) allows the Company to realize its purpose of Shaping the World We Imagine .

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

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

The Company conducts its operations through two reportable segments.

1 unchanged sentence

The Company’s fiscal year ends December 31.

The Company’s first quarter ends 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 2023 and 2022 refer to the 13-week periods ended March 31, 2023 and April 1, 2022, respectively.

The Company’s second quarter ends on the last business day of the 13 th week after the end of the prior quarter.

As used herein, the second quarter results for 2023 and 2022 refer to the 13-week periods ended June 30, 2023 and July 1, 2022, respectively.

Separation from Enovis

7 unchanged sentences

While ESAB continues to closely monitor the situation and evaluate options, the Company is meeting current contractual obligations while addressing applicable laws and regulations.

For the three months ended March 31, 2023, Russia represented approximate ly 5 % of the Company’s total revenue, and approximately $ 2 million of its Net income.

Russia also has approximately 4 % of the Company’s total net assets excluding any goodwill allocation as of March 31, 2023.

In case of the disposition of the Russia business, a portion of goodwill would need to be allocated and disposed of in the relative fair value attributable to the Russia business.

Russia has a cumulative translation loss of approximately $ 100 million as of March 31, 2023, which could be realized upon a transition out.

For the three and six months ended June 30, 2023, Russia represented approximate ly 6 % of the Company’s total revenue, and app roximately $ 4 million and $ 6 million of its N et income, respectively.

Russia also has approximately 4 % of the Company’s total net assets excluding any goodwill allocation as of June 30, 2023.

In case of the disposition of the Russia business, a portion of goodwill would need to be allocated and disposed of at the relative fair value attributable to the Russia business.

Russia has a cumulative translation loss of approximately $ 120 million as of June 30, 2023, which could be realized upon a transition out.

The Company is closely monitoring developments in Ukraine and Russia.

15 unchanged sentences

Transactions with the Former Parent are reflected in the accompanying Consolidated and Combined Condensed Statements of Equity as “Transfers to Former Parent, net.”

The Consolidated and Combined Condensed Financial Statements of ESAB for 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 subsequent periods.

The Consolidated and Combined Condensed Financial Statements of ESAB for the three months ended April 1, 2022 are not 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 are in subsequent periods.

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.

4 unchanged sentences

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 Consolidated and Combined Condensed Statements of Operations.

Research and development costs were $ 9.6 million and $ 9.5 million during the three months ended March 31, 2023 and April 1, 2022, respectively.

Research and development costs were $ 9.5 million and $ 19.1 million during the three and six months ended June 30, 2023, respectively, and $ 9.6 million and $ 19.1 million during the three and six months ended July 1, 2022, respectively.

T hese amounts do not include development and application engineering costs incurred in conjunction with fulfilling customer orders and executing customer projects, nor do they include costs related to securing third party product rights.

We expect to continue making significant expenditures for research and development to maintain and improve our competitive positions.

In addition to the factors discussed elsewhere in this Form 10-Q, the results of operations for the three months ended March 31, 2023, are not necessarily indicative of the results of operations that may be achieved for the full year.

In addition to the factors discussed elsewhere in this Form 10-Q, the results of operations for the three and six months ended June 30, 2023, 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.

1 unchanged sentence

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 Consolidated and Combined Condensed Financial Statements and the related notes should be read in conjunction with the Company’s Consolidated and Combined Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”), filed with the SEC on March 7, 2023.

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

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

The entities that hold these assets and liabilities became subsidiaries of the Company in connection with the Separation.

ESAB CORPORATION

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

Loss from discontinued operations, net of taxes consists of Selling, general and administrative expenses of $ 0.9 million and $ 2.6 million , net of an immaterial tax benefit for the three months ended March 31, 2023 and $ 0.6 million for the three months ended April 1, 2022, respectively.

See Note 13, “Commitments and Contingencies” for further information.

Cas h used in operating activities related to discontinued operations for the three months ended March 31, 2023 and April 1, 2022 was $ 5.4 million and $ 4.6 million, respectively.

On January 11, 2023, the Company completed the acquisition of Therapy Equipment Limited, a regional leader in oxygen regulators, for approximately $ 19 million, net of cash received.

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

Loss from discontinued operations, net of taxes consists of Selling, general and administrative expenses of $ 2.1 million and $ 3.0 million , and a tax benefit of $ 0.5 million and $ 0.5 million for the three and six months ended June 30, 2023, respectively, and $ 2.3 million and $ 4.9 million, and a tax benefit of $ 0.4 million and $ 1.0 million for the three and six months ended July 1, 2022, respectively .

S ee Note 13 “Commitments and Contingencies” for further information.

Cas h used in operating activities related to discontinued operations for the three and six months ended June 30, 2023 was $ 4.4 million and $ 9.7 million, respectively, and was $ 9.1 million and $ 13.7 million for the three and s ix months ended July 1, 2022 , respectively.

On January 11, 2023, the Company completed the acquisition of Therapy Equipment Limited, a regional leader in oxygen regulators, for $ 18.7 million, net of cash received.

The Company provides advanced equipment, consumables, gas control equipment, robotics and digital solutions.

3 unchanged sentences

Three Months Ended

March 31, 2023 April 1, 2022

Six Months Ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

(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 March 31, 2023 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 June 30, 2023 is immaterial.

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

As of December 31, 2022 and December 31, 2021, total contract liabilities were $ 25.9 million and $ 22.3 million, respectively, and were included in Accrued liabilities on the Consolidated and Combined Condensed Balance Sheets.

During the three months ended March 31, 2023 and April 1, 2022 revenue recognized that was included in the contract liability balance at the beginning of the year w as $ 11.1 million and $ 9.1 million, res pectively.

As of March 31, 2023 and April 1, 2022 total contract liabilities were $ 28.3 million and $ 25.9 million, respectively, and were included in Accrued liabilities on the Company’s Consolidated and Condensed Balance Sheets.

During the three and six months ended June 30, 2023, revenue recognized that was included in the contract liability balance at the beginning of the year w as $ 3.3 million and $ 14.4 million, res pectively.

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.

As of June 30, 2023 and July 1, 2022, total contract liabilities were $ 28.2 million and $ 21.5 million, respectively, and were included in Accrued liabilities on the Company’s Consolidated and Condensed Balance Sheets.

ESAB CORPORATION

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

Allowance for Credit Losses

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

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

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

2 unchanged sentences

Allowance for credit losses $ 23,471 $ 2,930 $ ( 948 ) $ 392 $ 25,845

ESAB CORPORATION

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

Earnings per Share from Continuing Operations

2 unchanged sentences

Three Months Ended

March 31, 2023 April 1, 2022

Six Months Ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

(In thousands, except share and per share data)

12 unchanged sentences

Net effect of potentially dilutive securities (2)

323,384 147,467 331,631 73,734

Weighted-average shares of Common stock outstanding – dilution 60,561,339 60,185,520 60,523,783 60,109,916

Net income per share from continuing operations – diluted $ 1.10 $ 0.94 $ 1.64 $ 1.89

(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 $ 1.3 million for the three months ended March 31, 2023, and $ 1.0 million for the three months ended April 1, 2022, respectively.

(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 $ 1.7 million and $ 3.0 million for the three and six months ended June 30, 2023, respectively, and $ 0.8 million and $ 1.7 million for the three and six months ended July 1, 2022, respectively.

(2) Potentially dilutive securities include stock options, performance-based restricted stock units, and non-performance-based restricted stock units.

1 unchanged sentence

Accordingly, the net income per share for the three months ended April 1, 2022 is calculated based on the 60.0 million shares distributed on the Separation Date.

During the three months ended March 31, 2023, Income from continuing operations before income taxes was $ 71.2 million , while Income tax expense was $ 37.0 million.

The effective tax rate was 52.0 % for the three months ended March 31, 2023.

During the three and six months ended June 30, 2023, Income from continuing operations before income taxes was $ 89.8 million and $ 161.0 million, respectively, while Income tax expense was $ 21.0 million and $ 58.0 million, respectively.

The effective tax rate was 23.4 % and 36.0 % for the three and six months ended June 30, 2023, respectively.

The effective tax rates differed from the 2023 U.S.

federal statutory rate of 21.0% primarily due to discrete tax expenses for dividend withholding taxes and an increase in the liability for unrecognized tax as described below.

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 was 30.6 % for the three months ended April 1, 2022.

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

federal statutory rate of 21.0% 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 March 31, 2023 , the Company changed its indefinite reinvestment assertion on certain undistributed earnings of the Company’s foreign subsidiaries, resulting in a total tax expense of $ 10.9 million as of March 31, 2023 on such earnings that have not been indefinitely reinvested.

The Company records a liability for certain unrecognized income tax benefits for which it is more likely than not that a tax position will not be sustained upon examination by the respective taxing authority (“uncertain tax positions”).

During the three months ended March 31, 2023, due to an adverse court ruling in a tax case in a foreign jurisdiction the Company increased the related liability for uncertain tax positions by $ 9.4 million partially offset by changes in other positions.

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 was 25.7 % and 28.2 % for the three and six months ended July 1, 2022 .

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

federal statutory rate of 21.0% primarily due to the impact of withholding taxes and non-deductible expenses.

During the six months ended June 30, 2023, the Company changed its indefinite reinvestment assertion on certain undistributed earnings of the Company’s foreign subsidiaries, resulting in a total tax expense of $ 10.9 million, which was recorded in the three months ended March 31, 2023, on such earnings that have not been indefinitely reinvested.

During the six months ended June 30, 2023, due to an adverse court ruling in a tax case in a foreign jurisdiction the Company increased the related liability for uncertain tax positions by $ 9.4 million partially offset by changes in other positions that occurred during the three months ended March 31, 2023.

Inventories, Net

Inventories, net consisted of the following:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(In thousands)

6 unchanged sentences

$ 447,321 $ 416,829

At March 31, 2023 and December 31, 2022 , 28.0 % a nd 31.5 % of total inventories, respectively, were valued using the LIFO method.

At June 30, 2023 and December 31, 2022 , 28.4 % a nd 31.5 % of total inventories, respectively, were valued using the LIFO method.

Accrued and Other Liabilities

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Current Noncurrent Current Noncurrent

10 unchanged sentences

$ 285,206 $ 538,647 $ 285,310 $ 545,339

ESAB CORPORATION

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

Accrued Warranty Liability

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

Three Months Ended

March 31, 2023 April 1, 2022

Six Months Ended

June 30, 2023 July 1, 2022

(In thousands)

3 unchanged sentences

Cost of warranty service work performed ( 5,832 ) ( 4,508 )

Acquisition-related liability 1,278 —

Foreign exchange translation effect 158 ( 530 )

Warranty liability, end of period $ 13,559 $ 14,079

ESAB CORPORATION

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

Accrued Restructuring Liability

1 unchanged sentence

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

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

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

7 unchanged sentences

Non-cash charges (3)

Segment Total 919

Termination benefits (1)

5,145 1,962 ( 1,315 ) 24 5,816

Facility closure costs and other (2)

2,789 1,489 ( 2,287 ) 35 2,026

Subtotal 7,934 3,451 ( 3,602 ) 59 7,842

Non-cash charges (3)

Segment Total 8,525

Total $ 14,613

Non-cash charges (3)

Total Provision $ 9,444

(1) Includes severance and other termination benefits, including outplacement services.

2 unchanged sentences

Long-term debt consisted of the following:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(In thousands)

4 unchanged sentences

Long-term debt $ 1,159,100 $ 1,218,643

ESAB CORPORATION

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

Term Loans and Revolving Credit Facility

1 unchanged sentence

The Credit Agreement initially consisted of the following facilities:

ESAB CORPORATION

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

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

20 unchanged sentences

Refer to Note 10 “Derivatives” for additional information.

As of June 30, 2023, the weighted-average interest rate of borrowings under the Credit Agreement wa s 5.27 %, in cluding the net impact from the interest rate and cross currency swaps and excluding accretion of deferred financing fees, and there was $ 589 million of borrowing capacity available under the Revolving Facility, subject to meeting financial covenants and other requirements.

ESAB CORPORATION

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

As of March 31, 2023, the weighted-average interest rate of borrowings under the Credit Agreement wa s 4.93 %, in cluding the net impact from the interest rate and cross currency swaps and excluding accretion of deferred financing fees, and there was $ 531 million of borrowing capacity available on the Revolving Facility.

Deferred Financing Fees

In total, the Company had deferred financing fees of $ 3.2 million included in its Consolidated Balance Sheet as of March 31, 2023, which will be charged to Interest expense (income) and other, net, using the straight-line method.

In total, the Company had deferred financing fees of $ 3.0 million i ncluded in its Consolidated Balance Sheet as of June 30, 2023, which will be charged to Interest expense and other, net, using the straight-line method.

The costs associated with the Term Facilities will be amortized over the contractual term of the Term Facilities and the costs associated with the Revolving Facility will be amortized over the life of the Credit Agreement.

Of the $ 3.2 million, $ 1.1 million of deferred financing fees relating to the Revolving Facility are included in Other assets and $ 2.1 million of deferred financing fees relating to the Term Facilities are recorded as a contra-liability within Long-term debt.

Of the $ 3.0 million, $ 1.1 million of deferred financing fees relating to the Revolving Facility are included in Other assets a nd $ 1.9 million of deferred financing fees relating to the Term Facilities are recorded as a contra-liability within Long-term debt.

Other Indebtedness

1 unchanged sentence

The Company is party to letter of credit facilities with an aggregate capacity of $ 111.1 million.

Total letters of credit of $ 26.2 million were outstanding as of March 31, 2023.

Total letters of credit of $ 28.2 million were outstanding as of June 30, 2023.

The Company uses derivative instruments to manage exposures to currency exchange rates and interest rates arising in connection with Long-term debt and the normal course of business.

3 unchanged sentences

Counterparties include a number of major banks and financial institutions.

None of the concentrations of risk with an individual counterparty was considered significant as of March 31, 2023.

None of the concentrations of risk with an individual counterparty was considered significant as of June 30, 2023.

The Company does not expect any counterparties to fail to meet their obligations.

5 unchanged sentences

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

The spread is 1.250 % as of March 31, 2023.

The spread is 1.250 % as of June 30, 2023.

These agreements involve the receipt of floating-rate amounts in exchange for fixed-rate interest payments over the life of the agreement without an exchange of the underlying principal amount.

1 unchanged sentence

If a derivative is deemed to be ineffective, the change in fair value of the derivative is recognized directly in earnings.

The Company did not have any ineffectiveness related to cash flow hedges during the three months ended March 31, 2023.

The Company did not have any ineffectiveness related to cash flow hedges during the six months ended June 30, 2023.

The cash inflows and outflows associated with the Company’s interest rate swap agreements designated as cash flow hedges are classified in cash flows from operating activities in the accompanying Consolidated and Combined Condensed Statements of Cash Flows.

The Company expects a gain of $ 9.6 million, net of tax, related to interest rate swap agreements to be reclassified from AOCI to earnings over the next 12 months as the hedged transactions are realized.

The expected gain to be reclassified is based on current forward rates in active markets as of March 31, 2023.

The expected gain to be reclassified is based on current forward rates in active markets as of June 30, 2023.

ESAB CORPORATION

2 unchanged sentences

Three Months Ended

Derivative type Loss recognized in the Consolidated and Combined Condensed Statements of Operations:

March 31, 2023

Six Months Ended

Derivative type Gain recognized in the Consolidated and Combined Condensed Statements of Operations:

June 30, 2023

(In thousands)

Interest rate swap agreements Interest expense (income) and other, net $ ( 1,977 )

Interest rate swap agreements Interest expense and other, net $ ( 2,717 ) $ ( 4,695 )

Net Investment Hedges

4 unchanged sentences

These contracts have a Euro aggregate notional amount of approximately € 270 million and a U.S.

Dollar aggregate notional amount of $ 275 million at March 31, 2023, and they mature in April 2025.

Dollar aggregate notional amount of $ 275 million at June 30, 2023, and they mature in April 2025.

The changes in the spot rate of these instruments are recorded in AOCI in equity, partially offsetting the foreign currency translation adjustment of the Company’s related net investment that is also recorded in AOCI.

The Company uses the spot method of assessing hedge effectiveness and as such, the initial value of the hedge components excluded from the assessment of effectiveness is recognized in the Interest expense (income) and other, net line item in the Consolidated and Combined Condensed Statement of Operations under a systematic and rational method over the life of the cross-currency swap agreements.

The Company uses the spot method of assessing hedge effectiveness and as such, the initial value of the hedge components excluded from the assessment of effectiveness is recognized in the Interest expense and other, net line item in the Consolidated and Combined Condensed Statement of Operations under a systematic and rational method over the life of the cross-currency swap agreements.

Any ineffective portions of net investment hedges are reclassified from AOCI into earnings during the period of change.

The Company did not have any ineffectiveness related to net investment hedges during the three months ended March 31, 2023.

The Company did not have any ineffectiveness related to net investment hedges during the six months ended June 30, 2023.

The cash inflows and outflows associated with the excluded components of the Company’s cross-currency swap agreements designated as net investment hedges are classified in operating activities in the accompanying Consolidated and Combined Condensed Statements of Cash Flows.

The effects of the excluded components of designated net investment hedges on the Company’s Consolidated and

Combined Statements of Operations consisted of the following:

Combined Condensed Statements of Operations consisted of the following:

Three Months Ended

Six Months Ended

Derivative type Gain recognized in the Consolidated and Combined Condensed Statements of Operations:

March 31, 2023

June 30, 2023

(In thousands)

Cross currency swap agreements Interest expense (income) and other, net $ ( 1,201 )

Cross currency swap agreements Interest expense and other, net $ ( 1,187 ) $ ( 2,388 )

The table below shows the fair value of the derivatives recognized in the Consolidated Balance Sheet:

March 31, 2023

June 30, 2023

December 31, 2022

7 unchanged sentences

The Company has certain foreign currency contracts that are not designated as hedges.

As of March 31, 2023 and December 31, 2022, the Company had foreign currency contracts related to purchases and sales with notional values of $ 271.2 million and $ 260.0 million, respectively.

As of June 30, 2023 and December 31, 2022, the Company had foreign currency contracts related to purchases and sales with notional values of $ 195.9 million and $ 260.0 million, respectively.

ESAB CORPORATION

1 unchanged sentence

The table below shows the fair value of derivative instruments not designated in a hedging relationship recognized in the Consolidated Balance Sheet:

March 31, 2023

June 30, 2023

December 31, 2022

2 unchanged sentences

Foreign currency contracts $ 1,058 $ 1,280 $ 2,166 $ 3,682

The amounts in the table above as of March 31, 2023 reflect the fair value of the Company’s foreign currency contracts on a net basis where allowable under master netting agreements.

The amounts in the table above as of June 30, 2023 reflect the fair value of the Company’s foreign currency contracts on a net basis where allowable under master netting agreements.

Had these amounts been recognized on a gross basis, the impact would have been a $ 1.8 million increase in Other current assets with a corresponding increase in Accrued liabilities.

1 unchanged sentence

Three Months Ended

Foreign currency contracts March 31, 2023

April 1, 2022

Six Months Ended

Foreign currency contracts June 30, 2023

June 30, 2023

(In thousands)

1 unchanged sentence

Realized gain (loss) 238 ( 2,016 ) 1,265 ( 16,495 )

1,027 ( 14,479 )

(1) The three months ended April 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.

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 expense (income) and other, net, in the Consolidated and Combined Condensed Statements of Operations during the three months ended April 1, 2022.

The above gains or losses on foreign currency contracts are usually offset by foreign exchange exposure on cash and intercompany positions, all of which are recognized in Interest expense and other, net, in the Consolidated and Combined Condensed Statements of Operations.

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:

March 31, 2023

June 30, 2023

(In thousands)

21 unchanged sentences

Additionally, the fair value of derivatives designated in hedging relationships includes a credit valuation adjustment to appropriately incorporate nonperformance risk for the Company and the respective counterparty.

For the three months ended March 31, 2023, the impact of the credit valuation adjustment on the Company’s derivatives is immaterial.

For the six months ended June 30, 2023, the impact of the credit valuation adjustment on the Company’s derivatives is immaterial.

Refer to Note 10 “Derivatives” for additional information.

There were no transfers in or out of Level One, Two or Three during the three months ended March 31, 2023.

There were no transfers in or out of Level One, Two or Three during the six months ended June 30, 2023.

Accumulated Other Comprehensive Loss

The following tables present the changes in the balances of each component of AOCI including reclassifications out of AOCI for the three months ended March 31, 2023 and April 1, 2022.

The following tables present the changes in the balances of each component of AOCI including reclassifications out of AOCI for the six months ended June 30, 2023 and July 1, 2022.

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

15 unchanged sentences

$ ( 63,678 ) $ ( 570,130 ) $ ( 10,422 ) $ 7,521 $ ( 636,709 )

Other comprehensive income (loss) before reclassifications:

Net actuarial loss ( 2 ) — — — ( 2 )

Foreign currency translation adjustment ( 49 ) ( 6,381 ) ( 3,036 ) — ( 9,466 )

Gain on long-term intra-entity foreign currency transactions — 23,142 — — 23,142

Unrealized gain on cash flow hedges — — — 7,640 7,640

Other comprehensive income (loss) before reclassifications ( 51 ) 16,761 ( 3,036 ) 7,640 21,314

Amounts reclassified from Accumulated other comprehensive loss (1)(2)

889 — — ( 2,109 ) ( 1,220 )

Net current period Other comprehensive (loss) income 838 16,761 ( 3,036 ) 5,531 20,094

Balance at June 30, 2023

$ ( 62,840 ) $ ( 553,369 ) $ ( 13,458 ) $ 13,052 $ ( 616,615 )

(1) The amounts on this line within the Net Unrecognized Pension And Other Post-Retirement Benefit Cost column are included in the computation of net periodic benefit cost.

(2) During the three months ended March 31, 2023, the amount on this line within the Loss on Cash Flow Hedges column, is a component of Interest expense (income) and other, net.

(2) During the three and six months ended June 30, 2023, the amount on this line within the Cash Flow Hedges column, is a component of Interest expense and other, net.

See Note 10 “Derivatives” for additional details.

13 unchanged sentences

$ ( 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 income (loss) ( 584 ) ( 98,789 ) ( 99,373 )

Balance at July 1, 2022

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

(1) The amounts on this line within the Net Unrecognized Pension And Other Post-Retirement Benefit Cost column are included in the computation of net periodic benefit cost.

(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.

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

Commitments and Contingencies

17 unchanged sentences

While it is reasonably possible that the subsidiaries will incur costs after this period, the Company does not believe the reasonably possible loss or a range of reasonably possible losses is estimable at the current time.

Accordingly, no accrual has been recorded for any costs which may be paid after the next 15 years.

Accordingly, no accrual has been recorded for any costs that may be paid after the next 15 years.

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.

2 unchanged sentences

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

Three Months Ended

March 31, 2023 April 1, 2022

Six Months Ended

June 30, 2023 July 1, 2022

(Number of claims)

4 unchanged sentences

Claims unresolved, end of period 14,764 14,938

(1) Claims filed include all asbestos claims for which notification has been received or a file has been opened.

(2) Claims resolved include all asbestos claims that have been settled, dismissed or that are in the process of being settled or dismissed based

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

(1) Claims filed include all asbestos claims for which notification have been received or a file has been opened.

(2) Claims resolved include all asbestos claims that have been settled, dismissed or that are in the process of being settled or dismissed based upon agreements or understandings in place with counsel for the claimants.

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(In thousands)

11 unchanged sentences

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

Projecting future events, such as new claims to be filed each year, the average cost of resolving each claim, coverage issues among layers of insurers, the method in which losses will be allocated to the various insurance policies, interpretation of the effect on coverage of various policy terms and limits and their interrelationships, the continuing solvency of various insurance companies, the amount of remaining insurance available, as well as the numerous uncertainties inherent in asbestos litigation could cause the actual liabilities and insurance recoveries to be higher or lower than those projected or recorded which could materially affect the Company’s financial condition, results of operations or cash flow.

Projecting future events, such as new claims to be filed each year, the average cost of resolving each claim, coverage issues among layers of insurers, the method in which losses will be allocated to the various insurance policies, interpretation of the effect on coverage of various policy terms and limits and their interrelationships, the continuing solvency of various insurance companies, the amount of remaining insurance available, as well as the numerous uncertainties inherent in asbestos litigation could cause the actual liabilities and insurance recoveries to be higher or lower than those projected or recorded that could materially affect the Company’s financial condition, results of operations or cash flow.

General Litigation

6 unchanged sentences

Segment Information

ESAB is a world leader in connected fabrication technology and gas control solutions, ESAB provides its partners with advanced equipment, consumables, gas control equipment, robotics, and digital solutions.

ESAB is a world leader in connected fabrication technology and gas control solutions.

ESAB provides its partners with advanced equipment, consumables, gas control equipment, robotics, and digital solutions.

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

1 unchanged sentence

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.

The Company’s management evaluates the operating results of each of its reportable segments based upon Net sales and Adjusted EBITDA, which represents Net income from continuing operations excluding the impact of Income tax expense, Interest expense (income) and other, net, Restructuring and other related charges, separation costs, acquisition - amortization and other related charges, and depreciation and other amortization .

The Company’s management evaluates the operating results of each of its reportable segments based upon Net sales and Adjusted EBITDA, which represents Net income from continuing operations excluding the impact of Income tax expense, Interest expense and other, net, Restructuring and other related charges, separation costs, acquisition - amortization and other related charges, and depreciation and other amortization .

The Com pany’s segment results were as follows:

Three Months Ended

March 31, 2023 April 1, 2022

Six Months Ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

(In thousands)

8 unchanged sentences

Three Months Ended

March 31, 2023 April 1, 2022

Six Months Ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

(In thousands)

1 unchanged sentence

Income tax expense 20,974 20,047 57,998 45,793

Interest expense (income) and other, net (1)

Interest expense and other, net (1)

18,819 7,907 38,329 7,419

1 unchanged sentence

Separation costs (2)

— 3,460 — 7,089

Acquisition - amortization and other related charges (3)

9,252 7,627 18,541 15,307

Depreciation and other amortization 9,013 8,893 17,606 17,865

Adjusted EBITDA $ 132,073 $ 110,507 $ 250,062 $ 219,774

(1) Relates to removal of interest expense, net included within the Interest expense (income) and other, net line within the Consolidated and Combined Condensed Statements of Operations.

(1) Relates to removal of interest expense, net included within the Interest expense and other, net line within the Consolidated and Combined Condensed Statements of Operations.

(2) Includes non-recurring charges and employee costs related to 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.

(3) Includes transaction expenses, amortization of intangibles, fair value charges on acquired inventories and integration expenses.

Related Party Transactions

R elated 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.

Such agreements are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 7, 2023 (the “Form 10-K”).

Such agreements are described in the Company’s 2022 Form 10-K.

Allocated Expenses

4 unchanged sentences

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

in the future.

In addition, the expenses reflected in the financial statements are not 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.

4 unchanged sentences

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 three months ended March 31, 2023.

therefore, no related amounts were reflected on the Company’s financial statements for the six months ended June 30, 2023.

Net Parent Investment

1 unchanged sentence

Subsequent Events

The dividend of $ 3.0 million included in Accrued liabilities in the Consolidated Balance Sheet at March 31, 2023 was paid on April 14, 2023 to stockholders of record as of March 31, 2023.

The dividend of $ 3.6 million included in Accrued liabilities in the Consolidated Balance Sheet at June 30, 2023 was paid on July 11, 2023 to stockholders of record as of June 30, 2023.

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