What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-29 compared with 2023-03-07 · 386 added, 377 removed, 1192 unchanged (39% of the section changed)

1 unchanged sentence

INDEX TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm - Consolidated and Combined Financial Statements (Ernst & Young LLP, Baltimore, MD, Auditor Firm ID:

Report of Independent Registered Public Accounting Firm - Internal Controls Over Financial Reporting

(Ernst & Young LLP, Tysons, VA, Auditor Firm ID:

Report of Independent Registered Public Accounting Firm - Consolidated and Combined Financial Statements (Ernst & Young LLP, Tysons, VA, Auditor Firm ID:

Consolidated and Combined Statements of Operations 56

Consolidated and Combined Statements of Comprehensive (Loss) Income 58

Consolidated and Combined Balance Sheets 59

Consolidated and Combined Statements of Comprehensive Income (Loss) 57

Consolidated Balance Sheets 58

Consolidated and Combined Statements of Equity 59

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Report of Independent Registered Public Accounting Firm

Consolidated and Combined Financial Statements

To the Shareholders and the Board of Directors of ESAB Corporation

Opinion on Internal Control Over Financial Reporting

We have audited ESAB Corporation’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, ESAB Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated and combined statements of operations, comprehensive (loss) income, equity and cash flows for each of the three years in the period ended December 31, 2023 and the related notes and schedule and our report dated February 29, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Tysons, Virginia

February 29, 2024

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of ESAB Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated and combined balance sheets of ESAB Corporation (the Company) as of December 31, 2022 and 2021, the related consolidated and combined statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of ESAB Corporation (the Company) as of December 31, 2023 and 2022, the related consolidated and combined statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 29, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We have served as the Company’s auditor since 2021.

Baltimore, Maryland

March 7, 2023

Tysons, Virginia

February 29, 2024

ESAB CORPORATION

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ESAB CORPORATION

CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Dollars in thousands

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Net income $ 211,024 $ 228,013 $ 238,679

Other comprehensive (loss) income:

Foreign currency translation, net of tax (benefit) expense of $( 2,930 ), $ 740 and $( 1,598 )

Other comprehensive income (loss):

Foreign currency translation, net of tax expense (benefit) of $ 4,545 , $( 2,930 ) and $ 740

47,258 ( 175,719 ) ( 72,398 )

Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax expense of $ 3,240

Defined benefit pension and other post-retirement plan activity, net of tax benefit of $ 1,840 , $ 1,192 and $ 367

Unrealized (loss) gain on derivatives designated and qualifying as cash flow hedges, net of tax (benefit) expense of $( 1,087 ) and $ 3,240

( 3,732 ) 11,102 —

Other comprehensive (loss) income ( 158,425 ) ( 65,741 ) 27,178

Defined benefit pension and other post-retirement plan activity, net of tax expense (benefit) of $ 2,639 , ($ 1,840 ) and ($ 1,192 )

7,338 6,192 6,657

Other comprehensive income (loss) 50,864 ( 158,425 ) ( 65,741 )

Comprehensive income 261,888 69,588 172,938

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ESAB CORPORATION

CONSOLIDATED AND COMBINED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS

Dollars in thousands, except share and per share amounts

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Common stock - $ 0.001 par value - Authorized 600,000,000 ;

60,094,725 and 100 shares outstanding as of December 31, 2022 and December 31, 2021, respectively

60,295,634 and 60,094,725 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

Additional paid-in capital 1,881,054 1,865,904

Retained earnings 350,557 159,231

Former Parent's investment — 2,921,623

Accumulated other comprehensive loss ( 624,272 ) ( 674,988 )

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Balance at January 1, 2021

Cumulative effect of accounting change — — — — ( 3,716 ) — ( 18 ) ( 3,734 )

Net income — — — — 157,414 — 2,454 159,868

Distributions to noncontrolling owners — — — — — — ( 4,297 ) ( 4,297 )

Other comprehensive income (loss), net of tax benefit of $ 1,965

— $ — $ — $ — $ 2,898,831 $ ( 396,203 ) $ 42,139 $ 2,544,767

Former Parent Common stock-based award activity — — — — 6,436 — — 6,436

Transfers to Former Parent, net — — — — ( 319,969 ) — ( 1,918 ) ( 321,887 )

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

Net income — — — — 235,110 — 3,569 238,679

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Balance at December 31, 2021

— $ — $ — $ — $ 2,921,623 $ ( 460,888 ) $ 40,993 $ 2,501,728

Net income — — — 168,310 55,437 — 4,266 228,013

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Balance at December 31, 2022

60,094,725 $ 60 $ 1,865,904 $ 159,231 $ — $ ( 674,988 ) $ 38,251 $ 1,388,458

Net income — — — 205,285 — — 5,739 211,024

Dividends declared ($ 0.23 per share)

— — — ( 13,959 ) — — — ( 13,959 )

Distributions to noncontrolling owners — — — — — — ( 3,880 ) ( 3,880 )

Other comprehensive income, net of tax expense of $ 6,097

— — — — — 50,716 148 50,864

Common stock-based award activity 200,909 — 15,150 — — — — 15,150

Balance at December 31, 2023

60,295,634 $ 60 $ 1,881,054 $ 350,557 $ — $ ( 624,272 ) $ 40,258 $ 1,647,657

See Notes to Consolidated and Combined Financial Statements.

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Depreciation, amortization and other impairment charges 75,034 65,978 75,899

Loss (gain) on sale of property, plant and equipment 239 ( 447 ) ( 3,370 )

Pension settlement gain ( 9,136 ) ( 11,208 ) —

Stock-based compensation expense 16,122 12,964 6,267

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Non-cash interest expense 1,195 1,972 —

Pension settlement gain — ( 9,136 ) ( 11,208 )

Changes in operating assets and liabilities:

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

Repayments of borrowings on term credit facility ( 12,500 ) — —

Proceeds from borrowings on revolving credit facility and other 574,150 805,881 673

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Payment of dividends ( 13,342 ) ( 6,054 ) —

Distributions to noncontrolling interest holders ( 3,420 ) ( 3,713 ) ( 4,297 )

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

Distributions to noncontrolling interest holders ( 3,880 ) ( 3,420 ) ( 3,713 )

Transfers from (to) Former Parent, net — 2,847 ( 218,531 )

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Organization and Basis of Presentation

Founded in 1904, ESAB Corporation (“ESAB” or the “Company”) 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 rich history of innovative products and workflow solutions and its business system (EBX) allows the Company to realize its purpose of Shaping the world it imagines.

Founded in 1904, ESAB Corporation (“ESAB” or the “Company”) is a focused premier industrial compounder.

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

The Company’s rich history of innovative products, workflow solutions and its business system, ESAB Business Excellence System (“EBX”), enables the Company’s purpose of Shaping the world we imagine TM .

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

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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” or “Enovis”) Fabrication Technologies reportable segment.

The Company’s fiscal year ends December 31.

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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 entities and pension plans in ESAB for the three months ending April 1, 2022:

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

• Certain entities which historically have been a part of the Former Parent’s Corporate reportable segment, including components of the Former Parent’s legal 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 4, “Discontinued Operations” and Note 19, “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 Former Parent to ESAB as of March 21, 2022.

Refer to Note 14, “Benefit Plans” for additional information on the benefit plans transferred to ESAB.

With the exception of the operatin g entities that form the historical Fabrication Technology business, the other contributions from the Former Parent wer e 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 accounting differences before and after the legal entity contributions may impact the comparability between periods in these Consolidated and Combined 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 and certain other corporate entities 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”).

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

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After the secondary offering, Enovis no longer owned any of the Company’s outstanding common stock.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

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.

To manage pre-existing currency rate exposures and interest risks arising from these credit facilities, during the third quarter, the Company entered into interest rate swap agreements and cross currency swap agreements, ref er to Note 15, “De bt” and Note 16, “Derivatives” for additional information.

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 “Separation 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 EBX.

Russia and Ukraine Conflict

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

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

For the year ended December 31, 2022, Russia represented approximately 6 % of the Company’s total revenue, and approxim ately $ 20 million in Net Income, respectively.

Russia also has approximately 5 % of the Company’s total net assets excluding any goodwill allocation as of December 31, 2022.

In case of the disposition of the Russia business, a portion of goodw ill would nee d to be allocated and disposed of in the relative fair value attributable to the Russia busin ess.

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

For the year ended December 31, 2023, Russia represented approximately 6 % of the Company’s total revenue, and approximately $ 12 million of its Net income.

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

I n 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 $ 115 million as of December 31, 2023, which could be realized upon a transition out.

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Prior to the Separation, the combined 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.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

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 21, “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 December 31, 2022 con sists of the consolidated balances of ESAB, while the Combined Balance Sheet as of December 31, 2021 consists of t he combined balances of the former Fabrication Technology business of Enovis.

• The Consolidated and Combined Statement of Operations and Statement of Comprehensive (Loss) Income for the year ended December 31, 2022 consists of the consolidated results of ESAB for the nine months ended December 31, 2022 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 Statement of Operations and Statement of Comprehensive (Loss) Income for the years ended December 31, 2021 and 2020 consist of the combined results of the former Fabrication Technology business of Enovis.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

• The Consolidated and Combined Statement of Changes in Equity for the year December 31, 2022 consists of the consolidated activities of ESAB for the nine months ended December 31, 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 Statements of Changes in Equity for the year ended December 31, 2021 and 2020 consist of the combined activity of the former Fabrication Technology business of Enovis.

• The Consolidated and Combined Statement of Cash Flows for the year ended December 31, 2022 consists of the consolidated activities of ESAB for the nine months ended December 31, 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 Statement of Cash Flows for the years ended December 31, 2021 and 2020 consist of the combined activity of the former Fabrication Technology business of Enovis.

The Consolidated and Combined Financial Statements of ESAB for the years en ded December 31, 2020 and 2021 an d 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.

• The Consolidated Balance Sheets as of December 31, 2023 and December 31, 2022 con sist of the consolidated balances of ESAB.

• The Consolidated Statement of Operations, Statement of Comprehensive Income (Loss), Statement of Changes in Equity and Statement of Cash Flows for the year ended December 31, 2023 consist of the consolidated results of ESAB.

• The Consolidated and Combined Statement of Operations, Statement of Comprehensive Income (Loss), Statement of Changes in Equity and Statement of Cash Flows for the year ended December 31, 2022 consist of the activities of ESAB for the nine months ended December 31, 2022 and the combined activity of the former Fabrication Technology business of Enovis for the three months ended April 1, 2022.

• The Consolidated and Combined Statement of Operations, Statement of Comprehensive Income (Loss), Statement of Changes in Equity and Statement of Cash Flows for the year ended December 31, 2021 consist of the combined activity of the former Fabrication Technology business of Enovis.

Our Consolidated and Combined Financial Statements may not be indicative of the Company's results had it been a separate stand-alone entity throughout the periods pre-separation 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.

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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 Statements of Equity as “Transfers to Former Parent, net” and in the accompanying Consolidated and Combined Balance Sheets within “Former Parent’s investment”.

Transactions with the Former Parent are reflected in the accompanying Consolidated and Combined Statements of Equity as “Transfers to Former Parent, net” for the year ended December 31, 2021, and “ Net Transfers from Former Parent, including Separation Adjustments” for the year ended December 31, 2022.

The Consolidated and Combined 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 Consolidated and Combined Financial Statements in accordance with U.S.

generally accepted accounting principles, or “GAAP”.

The Company makes certain estimates and assumptions in preparing its Consolidated and Combined Financial Statements in accordance with 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 Consolidated and Combined Financial Statements and the reported amounts of revenues and expenses for the periods presented.

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These Consolidated and Combined Financial Statements included in this annual 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 Financial Statements.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

Summary of Significant Accounting Policies

Principles of Consolidation

The Company’s Consolidated and Combined Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) and include all majority-owned subsidiaries over which the Company exercises control and, when applicable, entities or joint ventures for which the Company has a controlling financial interest or is the primary beneficiary.

The Company’s Consolidated and Combined Financial Statements are prepared in accordance with GAAP and include all majority-owned subsidiaries over which the Company exercises control and, when applicable, entities or joint ventures for which the Company has a controlling financial interest or is the primary beneficiary.

When protective rights, substantive rights or other factors exist, further analysis is performed in order to determine whether or not there is a controlling financial interest.

The Consolidated and Combined Financial Statements reflect the assets, liabilities, revenues and expenses of consolidated subsidiaries and the noncontrolling parties’ ownership share is presented as a noncontrolling interest.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

All significant intercompany accounts and transactions have been eliminated.

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Therefore, we do not have material revenues in excess of customer billings or billings to customers in excess of recognized revenues.

Refer to Note 13, “Accrued and Other Liabilities” for additional information on the Company’s contract liability balances.

For service contracts, the Company recognizes revenue ratably over the period of performance as the customer simultaneously receives and consumes the benefits of the services provided.

The Company applies the available practical expedient involving the existence of a significant financing component.

As the Company generally does not receive payments greater than one year in advance or arrears of revenue recognition, the Company does not consider any arrangements to include financing components.

Refer to Note 6, “Revenue” and Note 13, “Accrued and Other Liabilities” for additional information on the Company’s contract liability balances and related information.

The period of benefit for the Company’s incremental costs of obtaining a contract generally have less than a one-year duration;

therefore, the Company applies the practical expedient available and expenses costs to obtain a contract when incurred.

Taxes Collected from Customers and Remitted to Governmental Authorities

The Company collects various taxes and fees as an agent in connection with the sale of products and remits these amounts to the respective taxing authorities.

These taxes and fees have been presented on a net basis within Net sales in the Consolidated and Combined Statements of Operations and are recorded as a component of Accrued liabilities in the Consolidated and Combined Balance Sheets until remitted to the respective taxing authority.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

Taxes Collected from Customers and Remitted to Governmental Authorities

The Company collects various taxes and fees as an agent in connection with the sale of products and remits these amounts to the respective taxing authorities.

These taxes and fees have been presented on a net basis within Net sales in the Consolidated and Combined Statements of Operations and are recorded as a component of Accrued liabilities in the Consolidated Balance Sheets until remitted to the respective taxing authority.

Research and Development Expense

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Fixed manufacturing overhead costs are allocated to inventory based on normal production capacity and abnormal manufacturing activities are recognized as period costs.

Cost for a substantial portion of U.S.

inventories is determined using the last-in, first-out method (“LIFO”).

Cost for a substantial portion of United States inventories is determined using the last-in, first-out (“LIFO”) method.

The value of inventory stated on a LIFO basis as of December 31, 2023 and 2022 was $ 107.8 million and $ 131.1 million, respecti vely.

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Property, Plant and Equipment

Property, plant and equipment, net is stated at historical cost, which includes the fair values of such assets acquired through acquisitions.

Property, plant and equipment, net is stated at historical cost, which includes the fair values of such assets acquired through acquisitions and depreciated by the straight-line method over the estimated useful lives of the related assets.

Repair and maintenance expenditures are expensed as incurred unless the repair extends the useful life of the asset.

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In the evaluation of goodwill for impairment, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting entity is less than its carrying value.

If the Company determines that it is more likely than not for a reporting unit’s fair value to be greater than its carrying value, a calculation of the fair value is not performed.

If the Company determines that it is more likely than not for a reporting unit’s fair value to be greater than its carrying value, a calculation of the fair value is not

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

If the Company determines that it is more likely than not for a reporting unit’s fair value to be less than its carrying value, a calculation of the reporting unit’s fair value is performed and compared to the carrying value of that reporting unit.

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If the carrying value of a reporting unit exceeds its fair value, goodwill of that reporting unit is impaired and an impairment loss is recorded equal to the excess of the reporting unit’s carrying value over its fair value.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

When a quantitative impairment test is needed, the Company measures fair value of reporting units based on a present value of future discounted cash flows.

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Significant estimates in the discounted cash flow models include the weighted-average cost of capital, net sales and profitability of our business.

For the year ended December 31, 2022 a qualitative Goodwill impairment assessment was performed for the three reporting units.

For the year ended December 31, 2023 and 2022, a qualitative Goodwill impairment assessment was performed for the three reporting units.

For the year ended December 31, 2021, a quantitative annual impairment test of Goodwill was performed for the GCE reporting unit while qualitative assessments were performed for the remaining two reporting units.

A quantitative annual impairment test of Goodwill for each of the Company’s three reporting units was performed for the year ended December 31, 2020.

All of the above tests indicated no impairment existed.

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If these projected cash flows are less than the carrying amounts, an impairment loss equal to the difference between the carrying amount of the asset and its fair value would be recognized, resulting in a write-down of the assets with a corresponding charge to earnings.

Assets held for sale are reported at the lower of the carrying amounts or fair value less cost to sell.

The Company determines fair value using the discounted cash flow method or other accepted valuation techniques.

The Company determined that no impairment indicators were evident during the years ended December 31, 2022, 2021 and 2020.

The Company determined that no significant impairment indicators were evident during the years ended December 31, 2023, 2022 and 2021.

The Company uses derivative instruments to manage exposures to interest rates and net investment exposures.

The Company does not enter into derivatives for trading or speculative purposes.

All derivatives are recognized at fair value on the Company’s Consolidated and Combined Balance Sheets.

All derivatives are recognized at fair value on the Company’s Consolidated Balance Sheets.

The accounting for gains and losses resulting from changes in fair value depends on the use of the derivative and whether it is designated and qualifies for hedge accounting.

2 unchanged sentences

If and when a derivative is determined not to be highly effective as a hedge, the underlying hedged transaction is no longer likely to occur, or the derivative is terminated, hedge accounting is discontinued.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

The Company is subject to the credit risk of the counterparties to derivative instruments.

1 unchanged sentence

The Company manages individual counterparty exposure by monitoring the credit rating of the counterparty and the size of financial commitments and exposures between the Company and the counterparty.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

Certain interest rate swap agreements are qualified and designated as cash flow hedges.

The effective portion of the fair value unrealized gain or loss on cash flow hedges are reported as a component of Accumulated other comprehensive income ("AOCI") with offsetting amounts recorded in the Company’s Consolidated and Combined Balance Sheet depending on the position and the duration of the contract.

The effective portion of the fair value unrealized gain or loss on cash flow hedges are reported as a component of Accumulated other comprehensive income ("AOCI") with offsetting amounts recorded in the Company’s Consolidated Balance Sheet depending on the position and the duration of the contract.

The gain or loss on the derivative instrument due to the change in fair value is reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

1 unchanged sentence

Certain cross-currency swap agreements are designated and qualify as a net investment hedge, the changes in the fair value 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.

Offsetting amounts are recorded in the Company’s Consolidated and Combined Balance Sheet depending on the position and the duration of the contract.

Offsetting amounts are recorded in the Company’s Consolidated Balance Sheet depending on the position and the duration of the contract.

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

4 unchanged sentences

Estimates are established using historical information as to the nature, frequency and average costs of warranty claims.

Prior to the Separ ation, the Company’s domestic and foreign operating results were included in the income tax returns of Enovis.

Prior to the Separation, the Company’s domestic and foreign operating results were included in the income tax returns of Enovis.

The Company accounted for income taxes under the separate return method.

Under this approach, the Company determined its deferred tax assets and liabilities and related tax expense as if it were filing separate tax returns.

The accompanying Combined Balance Sheets for the year ended December 31, 2021 did not contain current income tax payable or other long-term income tax payable liabilities, with the exception of certain unrecognized tax benefits for which ESAB could have reasonably be considered to be the primary obligor.

The amounts are deemed settled with Enovis when they were due and therefore were included in Parent’s equity.

The Company accounts for income taxes under ASC 740 , Income Taxes (“ASC 740”) which requires recognition of deferred income tax assets and liabilities reflecting the tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in the Consolidated and Combined Financial S tatements and their respective tax basis.

Prior to the Separation, all or a portion of the Company’s income tax payable or receivable computed under the separate return method was adjusted to equity as it did not represent a liability or asset with the relevant taxing authorities during this period, except for certain unrecognized tax benefits for which ESAB could have reasonably been considered to be the primary obligor.

The amounts were deemed settled with Enovis when they were due and therefore were included in Parent’s equity.

Deferred income tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Deferred income tax assets and liabilities are reported in Other assets and Other liabilities in the Consolidated and Combined Balance Sheets, respectively.

Deferred income tax assets and liabilities are reported in Other assets and Other liabilities in the Consolidated Balance Sheets, respectively.

The effect on deferred income tax assets and liabilities of a change in tax rates is generally recognized in Income tax expense in the period that includes the enactment date.

Global Intangible Low-Taxed Income (“GILTI”) is accounted for as a current tax expense in the year the tax is incurred.

Global Intangible Low-Taxed Income is accounted for as a current tax expense in the year the tax is incurred.

Valuation allowances are recorded if it is more likely than not that some portion of the deferred income tax assets will not be realized.

3 unchanged sentences

An income tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.

The Company establishes a liability for unrecognized income tax benefits for income tax positions for which it is more likely than not that a tax position will not be sustained upon examination by the respective taxing authority to the extent such tax positions reduce the Company’s income tax liability.

The Company recognizes interest and penalties related to unrecognized income tax benefits in Income tax expense in the Consolidated and Combined Statements of Operations.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

The Company recognizes interest and penalties related to unrecognized income tax benefits in Income tax expense in the Consolidated and Combined Statements of Operations.

Interest expense (income) and Other, Net

Interest expense (income) and other, net is comprised of interest-bearing deposits of certain foreign subsidiaries, interest costs for the Company’s debt, amortization of debt issuance costs and interest income or expense of derivatives designated in hedging relationships.

In addition, it is comprised of other non-operating income items, including certain pension-related activities, foreign exchange exposure on cash and intercompany positions and interest income or expense on foreign currency contracts not designated in hedging relationships.

See “Foreign Currency Exchange Gains and Losses” policy below for additional information.

In addition, it is comprised of:

• other non-operating expense (income) items, including certain pension-related activities,

• foreign exchange exposure on cash and intercompany positions and interest income or expense on foreign currency contracts not designated in hedging relationships, and

• Argentina highly inflationary accounting transaction foreign exchange loss on cash and cash equivalent remeasured into the Argentinian entity’s Brazilian real direct parent’s currency.

For the years ended December 31, 2023 and 2022, Argentina had a transaction exchange loss on cash and cash equivalent of $ 26.2 million , and $ 2.4 million, partially offset by interest income of $ 8.7 million and $ 0.7 million, respectively.

For the year ended December 31, 2021 , the impact was not material.

See “Foreign Currency Exchange Gains and Losses” and “Argentina Highly Inflationary Accounting” policies below for additional information.

Foreign Currency Exchange Gains and Losses

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Transactions in foreign currencies are translated at the exchange rate in effect at the date of each transaction.

Differences in exchange rates during the period between the date a transaction denominated in a foreign currency is consummated and the date on which it is either settled or translated for inclusion in the Consolidated and Combined Balance Sheets are recognized in Selling, general and administrative expense or Interest expense (income) and other, net in the Consolidated and Combined Statements of Operations for that period.

Differences in exchange rates during the period between the date a transaction denominated in a foreign currency is consummated and the date on which it is either settled or translated for inclusion in the Consolidated Balance Sheets are recognized in Selling, general and administrative expense or Interest expense (income) and other, net in the Consolidated and Combined Statements of Operations for that period.

The following table summarizes the Company’s net foreign transaction gains and losses included within the Consolidated and Combined Statements of Operations:

3 unchanged sentences

Selling, general and administrative expense $ 11,389 $ 2,597 $ 2,195

Interest (income) expense and other, net 109 191 313

Foreign currency transaction loss (gain), net $ 2,706 $ 2,386 $ 1,101

(1) This table excludes the impact of the foreign exchange loss due to the remeasurement of the Company’s Argentinian operations, as described in the “Argentina Currency” paragraph below.

Argentina Currency

Argentina is deemed to have a highly inflationary economy, resulting in the remeasurement of the company’s Argentinian operations into Brazilian real, the functional currency of the Argentinian entity’s direct parent.

Gains and losses from the remeasurement are recorded in the Company’s Consolidated and Combined Statements of Operations each year.

For the year ended December 31, 2022 the remeasurement of the financial statements of the Company’s subsidiary operating in a highly inflationary economy has resulted in a transaction foreign exchange loss to Cost of sales of $ 6.6 million, Selling, general and administrative expense of $ 3.3 million and Interest (income) expense and other, net of $ 2.4 million.

The impact to the Company’s Combined Statements of Operations for the years ended December 31, 2021 and 2020 were not material.

Debt Issuance Costs

Costs directly related to the placement of debt are capitalized and amortized to Interest expense primarily using the straight-line method over the term of the related obligation.

See Note 15, “Debt” for additional discussion regarding the Company’s borrowing arrangements.

Interest expense and other, net 1,719 109 191

Foreign currency transaction loss, net (2)

$ 13,108 $ 2,706 $ 2,386

(1) This table excludes the foreign exchange impacts of applying highly inflationary accounting for the Company’s Argentina operations for the years ended December 31, 2023 and 2022, as described in the “Argentina Highly Inflationary Accounting” paragraph below.

(2) During 2023, the weakening of the Ruble and certain other South American currencies drove the increase in the loss on transactions denominated in foreign currencies.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

Argentina Highly Inflationary Accounting

Argentina is deemed to have a highly inflationary economy, resulting in the remeasurement of the Company’s Argentinian operations into Brazilian real, the functional currency of the Argentinian entity’s direct parent.

Gains and losses from the remeasurement are recorded in the Company’s Consolidated and Combined Statements of Operations each year.

In December 2023, the Argentine peso significantly devalued due to changes in their foreign exchange policy introduced by the Argentine government.

For the year ended December 31, 2023 the remeasurement of the financial statements of the Company’s subsidiary operating in a highly inflationary economy has resulted in a transaction foreign exchange loss to Cost of sales of $ 11.5 million, Selling, general and administrative gain of $ 6.7 million and Interest (income) expense and other, net loss of $ 26.2 million.

Despite the above transaction foreign exchange loss, the Argentine subsidiary has taken pricing and operational actions to remain profitable.

For the year ended December 31, 2022, the remeasurement of the financial statements of the Company’s subsidiary operating in a highly inflationary economy has resulted in a transaction foreign exchange loss to Cost of sales of $ 6.6 million, Selling, general and administrative expense of $ 3.3 million and Interest (income) expense and other, net loss of $ 2.4 million.

The impact to the Company’s Combined Statements of Operations for the year ended December 31, 2021 was not material.

Use of Estimates

2 unchanged sentences

Actual results may differ from those estimates.

Reclassification

Certain prior period amounts have been reclassified to conform to current year presentations, including certain items within the Consolidated and Combined Statements of Comprehensive Income.

Recently Issued Accounting Pronouncements

The Company assesses the adoption impacts of recently issued accounting pronouncements on the Company’s Consolidated and Combined financial statements as well as material updates to previous assessments.

There were no new material accounting standards issued or adopted in the year of 2022 that impacted the Company.

There were no new material accounting standards adopted in the year ended December 31, 2023 that impacted the Company.

New Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires the disclosure of incremental information about significant segment expenses.

The guidance also requires disclosure of the Chief Operating Decision Maker’s (the “CODM”) position for each segment and detail of how the CODM uses financial reporting to assess their segment’s performance.

The new guidance is effective for fiscal years beginning after December 15, 2023 and for interim periods beginning after December 15, 2024.

The Company is currently evaluating the effect the adoption of the ASU may have on its disclosures.

In December 2023, the FASB issued ASU No.

2023-09, Improvements to Income Tax Disclosures , which expands disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid.

The ASU is effective for fiscal years beginning after December 15, 2024.

The Company is currently evaluating the effect the adoption of the ASU may have on its disclosures.

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 year ended December 31, 2022 in connection with the Separation.

These assets and liabilities were not included in the Company’s historical Combined Financial Statements for 2021 or 2020 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 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.

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

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

These contributions from the Former Parent wer e not previously included in the Company’s 2019 to 2021 historical carve-out financial statements.

The Company has classified asbestos-related activity included in its Consolidated and Combined 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 o f $ 7.5 million net of a tax benefit of $ 4.4 million.

See Note 19, “Commitments and Contingencies” for further information.

Cash used in operating activities related to discontinued operations for the year ended December 31, 2022 was $ 23.1 million.

On October 14, 2022, the Company completed the acquisition of Ohio Medical, LLC, a U.S.

based global leader in oxygen regulators and central gas systems, for $ 127 million, net of cash received.

In connection with the acquisition, the Company expects to realize an additional cash tax benefit with a net present value of approximately $ 15 million.

This acquisition expands the Company’s presence in industrial specialty gas applications and products and broadens the Company’s U.S.

On October 31, 2022, the Company completed the acquisition of Swift Cut Automation Limited, for $ 22 million, net of cash received.

Swift-Cut is a provider of light industrial cutting systems and combined with ESAB provides a market-leading automated cutting portfolio.

Acquisitions consummated during the year ended December 31, 2022 are accounted for under the acquisition method of accounting.

The assets acquired and liabilities assumed reported on the Consolidated Balance Sheets represent the Company’s best estimate.

These amounts are based upon certain valuations and studies that have yet to be finalized and are subject to adjustment once the detailed analyses are completed within twelve months from the respective acquisition dates.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

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

The Company provides a wide range of products with innovative technologies to solve challenges in a range of industries, including cutting, joining and automated welding.

Loss from discontinued operations, net of tax consisted of Selling, general and administrative expenses of $ 15.6 million net of a tax benefit of $ 3.3 million for the year ended December 31, 2023.

Loss from discontinued operations, net of tax consisted of Selling, general and administrative expenses of $ 7.5 million net of a tax benefit of $ 4.4 million for the year ended December 31, 2022.

See Note 19, “Commitments and Contingencies” for further information.

Cash used in operating activities related to discontinued operations for the year ended December 31, 2023 was $ 15.2 million and for the year ended December 31, 2022 was $ 23.1 million.

The Company continually evaluates potential acquisitions that either strategically fit with our existing portfolio or expand our portfolio into a new and attractive business area.

The Company has completed a number of acquisitions that have been accounted for under the acquisition method of accounting.

The Company makes an initial allocation of the purchase price at the date of acquisition based upon our understanding of the fair value of the acquired assets and assumed liabilities.

The Company obtains this information during due diligence and through other sources.

As the Company obtains additional information about these assets and liabilities, including through tangible and intangible asset appraisals, and learns more about the newly acquired business, the Company is able to refine the estimates of fair value and more accurately allocate the purchase price.

The Company makes appropriate adjustments to purchase price allocations prior to completion of the applicable measurement period, as required.

The following briefly describes our acquisition activity for the three years ended December 31, 2023.

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

On October 31, 2022, the Company completed the acquisition of Swift Cut Automation Limited, a provider of light industrial cutting systems, for $ 22 million, net of cash received.

This acquisition provides a market-leading automated cutting portfolio.

On October 14, 2022, the Company completed the acquisition of Ohio Medical, LLC, a United States based global leader in oxygen regulators and central gas systems, for $ 127 million, net of cash received.

This acquisition expands the Company’s presence in industrial specialty gas applications and products and broadens the Company’s United States presence.

The Company provides fabrication technology 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.

Substantially all revenue is recognized at a point in time.

10 unchanged sentences

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

As of December 31, 2022, 2021 and 2020, total contract liabilities were $ 25.9 million, $ 22.3 million and $ 21.6 million, respectively, and are included in Accrued liabilities on the Consolidated and Combined Balance Sheets.

As of December 31, 2023, 2022 and 2021, total contract liabilities were $ 31.2 million , $ 25.9 million and $ 22.3 million, respectively, and are included in Accrued liabilities on the Consolidated

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

Balance Sheets.

During the years ended December 31, 2023 and 2022, substantially all amounts included in the contract liability balance at the beginning of the respective year were recognized as revenue in the following year.

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 Combined Balance Sheets is as follows:

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

Year Ended December 31, 2023

3 unchanged sentences

Allowance for credit losses $ 23,471 $ 3,902 $ ( 2,289 ) $ 393 $ 25,477

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

Earnings per Share from Continuing Operations

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

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

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

16 unchanged sentences

Net effect of potentially dilutive securities (3)

422,123 98,129 —

Weighted-average shares of Common stock outstanding – dilution

3 unchanged sentences

(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, o f $ 5.7 million, $ 4.3 million and $ 3.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

(2) The total number of shares outstanding on April 4, 2022 was 60,034,311 which is being utilized for the calculation of both basic and diluted earnings per share for the years ended December 31, 2021 and December 31, 2020 as no ESAB common stock equivalents were outstanding prior to the Separation.

(2) The total number of shares outstanding on April 4, 2022 was 60,034,311 , which is utilized for the calculation of both basic and diluted earnings per share for the year ended December 31, 2021 as no ESAB common stock equivalents were outstanding prior to the Separation.

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

Separation from Enovis

Prior to the Separation, our operating results were included in the Former Parent’s various consolidated U.S.

federal and certain state income tax returns, as well as certain non-U.S.

Prior to the Separation, our operating results were included in the Former Parent’s various consolidated United States federal and certain state income tax returns, as well as certain non-United States returns.

For periods prior to the Separation, our combined financial statements reflect Income tax expense and deferred tax balances as if we had filed tax returns on a standalone basis separate from the Former Parent.

The separate return method applies the accounting guidance for income taxes to the standalone financial statements as if we were a separate taxpayer and a standalone enterprise for the periods prior to the Separation.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

For periods prior to the Separation, our pretax operating results include any transactions with the Former Parent as if it were an unrelated party.

In connection with the Separation, we entered into agreements with the Former Parent, including a Tax Matters Agreement.

The Tax Matters Agreement distinguishes between the treatment of tax matters for “joint” filings compared to “s eparate” and “unitary state” filings prior to the Separation.

“Joint” filings are returns, such as the U.S.

federal return, that include operations from both Former Parent leg al entities and the Company.

By contrast, “separate” filings are tax returns (primarily U.S.

state returns and non-U.S.

returns) that exclusively include either the Former Parent’s or the Company’s operations.

The Tax Matters Agreement distinguishes between the treatment of tax matters for “joint” filings compared to “separate” and “unitary state” filings prior to the Separation.

“Joint” filings are returns, such as the United States federal return, which include operations from both Former Parent legal entities and the Company.

By contrast, “separate” filings are tax returns (primarily United States state returns and non-United States returns) that exclusively include either the Former Parent’s or the Company’s operations.

“Unitary state” filings are state tax returns which may include legal entities of both the Company and the Former Parent.

1 unchanged sentence

The Company is also liable for fifty percent of all cash taxes paid as a result of any adjustment or redetermination or otherwise in connection with any tax contest relating to any joint return.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

In connection with the Separation, the Company was required to enter into a transfer agreement under Section 965(h) and to become the primary obligor of the remaining installment payments associated with the Section 965 liability.

19 unchanged sentences

$ 95,727 $ 69,170 $ 80,409

The Company’s Income tax expense differs from the amount that would be computed by applying the U.S.

federal statutory rate as follows:

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

The Company’s Income tax expense differs from the amount that would be computed by applying the United States federal statutory rate as follows:

Year Ended December 31,

1 unchanged sentence

(In thousands)

Taxes calculated at the U.S.

federal statutory rate $ 63,053 $ 67,008 $ 42,820

Taxes calculated at the United States federal statutory rate $ 67,010 $ 63,053 $ 67,008

State taxes 1,630 2,809 1,933

3 unchanged sentences

Research and development tax credits ( 714 ) ( 542 ) ( 587 )

Effect of U.S.

taxation on international operations 310 ( 313 ) ( 1,634 )

Effect of United States taxation on international operations 1,527 310 ( 313 )

Permanent differences, net

6 unchanged sentences

Income tax expense $ 95,727 $ 69,170 $ 80,409

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

The Company’s effective tax rate for each of 2022, 2021, and 2020 differs from the U.S.

Federal statutory rate of 21% due to withholding taxes and permanent differences relating to foreign subsidiaries, partially offset by the favorable impact from the Company’s earnings outside the U.S.

taxed at different rates than the U.S.

federal statutory rate.

Prior to the Separation, a portion of the Company’s income tax payable or receivable computed under the separate return method is adjusted to equity as it does not represent a liability or asset with the relevant taxing authorities since the Company activity for this period will be included as part of the Former Parent’s tax return, primarily the U.S.

Federal Income Tax return, filed with taxing authorities.

For the year ended December 31, 2023, the Company’s effective rate differs from the United States federal statutory rate of 21% due to changes in tax reserves, permanent differences relating to foreign subsidiaries and withholding taxes, partially offset by the favorable impact from changes in valuation allowances.

The Company’s effective tax rate for years ending December 31, 2022 and December 31, 2021 differed from the United States federal statutory rate of 21% due to the impact of withholding taxes and permanent differences relating to foreign subsidiaries, partially offset by the favorable impact from the Company’s earnings outside the United States taxed at different rates than the United States federal statutory rate.

The change in tax reserves in 2023 is largely the result of an adverse court ruling in an unrelated taxpayer’s tax case in a foreign jurisdiction.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

All deferred tax assets and liabilities have been classified as noncurrent and are included in Other assets and Other liabilities in the accompanying Consolidated and Combined Balance Sheets.

All deferred tax assets and liabilities have been classified as noncurrent and are included in Other assets and Other liabilities in the accompanying Consolidated Balance Sheets.

The temporary differences that gave rise to the significant components of deferred tax assets and liabilities are presented below:

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

(In thousands)

6 unchanged sentences

Inventory 12,238 5,685

Capitalized R&D Costs 18,178 14,160

Leases 23,987 22,713

Other 2,866 —

3 unchanged sentences

Depreciation and amortization $ ( 120,055 ) $ ( 121,858 )

Leases ( 23,987 ) ( 22,713 )

Outside basis differences and other ( 79,985 ) ( 79,623 )

1 unchanged sentence

Total deferred tax liabilities, net $ ( 72,856 ) $ ( 96,816 )

Deferred tax assets and liabilities have been classified as noncurrent and are included in Other assets and Other liabilities in the accompanying Consolidated and Combined Balance Sheets on a net jurisdictional basis as follows:

Deferred tax assets and liabilities have been classified as noncurrent and are included in Other assets and Other liabilities in the accompanying Consolidated Balance Sheets on a net jurisdictional basis as follows:

(In thousands)

2 unchanged sentences

Deferred tax liability, net $ ( 72,856 ) $ ( 96,816 )

T he Company evaluates the recoverability of its deferred tax assets on a jurisdictional basis by considering whether deferred tax assets will be realized on a more likely than not basis.

To the extent a portion or all of the applicable deferred tax assets do not meet the more likely tha n not threshold, a valuation allowance is recorded.

During the year ended December 31, 2022, the valuation allowance increased from $ 15.5 million to $ 88.2 million with a net increase of $ 4.5 million recognized as an increase to Income tax expense, and a $ 0.6 million decrease related to changes in foreign currency rates.

The increase in net operating loss carryforward, tax credit carryforward and valuation allowances was primary due to transfer from the Former Parent.

In dete rmining how much of the relevant deferred tax asset could be realized on a more likely than not basis, consideration was given to tax planning strategies and, when applicable, future taxable income.

The Company evaluates the recoverability of its deferred tax assets on a jurisdictional basis by considering whether deferred tax assets will be realized on a more likely than not basis.

To the extent a portion or all of the applicable deferred tax assets do not meet the more likely than not threshold, a valuation allowance is recorded.

During the year ended December 31, 2023, the valuation allowance decreased from $ 88.2 million to $ 79.4 million.

with a net decrease of $ 12.3 million recognized as a decrease to Income tax expense, and a $ 3.4 million increase related to changes in foreign currency rates.

The current year change primarily relates to the change in conclusion regarding the realizability of net operating loss carryforwards in a foreign jurisdiction.

In determining how much of the relevant deferred tax asset could be realized on a more likely than not basis, consideration was given to tax planning strategies and, when applicable, future taxable income.

The Company has United States federal net operating loss carryforwards of $ 11.6 million as of December 31, 2023 expiring in years 2028 through 2036.

The Company’s ability to use these various carryforwards to offset any taxable income generated in future taxable periods may be limited under Section 382 and other federal tax provisions.

As of December 31, 2023 the Company also has $ 414.6 million foreign net operating loss carryforwards primarily in the United Kingdom, Germany, the Netherlands and Sweden that may be subject to local tax restriction limitations.

The foreign net operating losses can be carried forward indefinitely, except in applicable jurisdictions that make up less than five percent of the available net operating losses.

As of December 31, 2023, the Company incurred $ 10.9 million of tax expense relating to a distribution of earnings for which it has changed its indefinite reinvestment assertion.

Other than this expense incurred in the year ended December 31, 2023, the Company has not made any other material changes to its indefinite reinvestment assertion with respect to earnings

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

The Company has U.S.

Federal net operating loss carryforwa rds of $ 18.1 million as of December 31, 2022 expiring in years 2028 through 2036.

The Comp any’s ability to use these various carryforwards to offset any taxable income generated in future tax able periods may be limited under Section 382 and other federal tax provisions.

At December 31, 2022 the Company also has $ 424.3 million foreign net operating loss carryforwards primarily in the United Kingdom, Germany, the Netherlands and Sweden that may be subject to local tax restrictive limitations including as a result of changes in ownership.

The foreign net operating losses can be carried forward indefinitely, except in applicable jurisdictions that make up less than five percent of the available net operating losses.

For the year ended December 31, 2022, the Company has changed its indefinite reinvestment assertion on $ 57.5 million of the undistributed earnings of the Company’s foreign subsidiaries.

The remaining earnings continue to be indefinitely reinvested outside the United States.

The Company has assessed a total deferred tax liability of $ 4.5 million as of December 31, 2022 on such earnings that have not been indefinitely reinvested.

This is an increase of $ 4.5 million as compared to the deferred tax liability as of December 31, 2021.

The Company has made no provision for U.S.

income taxes or additional non-U.S.

taxes on certain undistributed earnings of non-U.S.

subsidiaries.

These earnings could become subject to additional tax if the Company were to dividend those earnings or sell the Company's interest in the non-U.S.

The Company cannot practically determine the amount of additional taxes that might be payable on those earnings.

During the first quarter of 2023, the Company began to evaluate opportunities for repatriation of certain foreign earnings and will record a withholding tax charge accordingly during 2023 of approximately $ 11 million.

reinvested in its foreign operations.

The majority of our global unremitted foreign earnings have been taxed or would be exempt from United States tax upon repatriation.

The Company has made no provision for United States income taxes or additional non-United States taxes on certain undistributed earnings or outside basis differences of non-United States subsidiaries in which the Company remains indefinitely reinvested.

A portion of these undistributed earnings may be subject to foreign and United States tax consequences upon remittance.

The Company cannot practically estimate the amount of additional taxes that might be payable on those undistributed earnings.

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”).

1 unchanged sentence

The Company’s total unrecognized tax benefits were $ 30.9 million, $ 20.2 million and $ 37.7 million as of December 31, 2023, 2022 and 2021, respectively, inclusive of $ 12.1 million, $ 5.6 million and $ 6.2 million, respectively, of interest and penalties.

The Company records interest and penalties on uncertain tax positions as a component of Income tax expense, which was a benefit of $ 0.7 million, expense of $ 0.9 million and $ 0.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.

The Company records interest and penalties on uncertain tax positions as a component of Income tax expense, which was an expense of $ 7.9 million, benefit of $ 0.7 million and expense of $ 0.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The change in the balance for the year ended December 31, 2023 is primarily due to the increase in liability for an adverse court ruling in an unrelated taxpayer’s tax case in a foreign jurisdiction.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (inclusive of associated interest and penalties):

3 unchanged sentences

Addition for tax positions taken in the current period 2,987

Reductions related to settlements with taxing authorities ( 425 )

Reductions resulting from a lapse of applicable statute of limitations ( 565 )

Other, including the impact of foreign currency translation and U.S.

tax rate changes ( 340 )

Other, including the impact of foreign currency translation and United States tax rate changes ( 255 )

Balance, December 31, 2021

2 unchanged sentences

Reductions related to settlements with taxing authorities ( 922 )

Reductions resulting from a lapse of applicable statute of limitations ( 565 )

Other, including the impact of foreign currency translation and U.S.

tax rate changes ( 255 )

Transfer from Former Parent, impact of foreign currency translation and other ( 2,801 )

Other, including the impact of foreign currency translation and United States tax rate changes ( 16,897 )

Balance, December 31, 2022

2 unchanged sentences

Reductions related to settlements with taxing authorities ( 4,160 )

Transfer from Former Parent, impact of foreign currency translation and other ( 2,801 )

Reductions resulting from a lapse of applicable statute of limitations ( 473 )

Other, including the impact of foreign currency translation 1,787

Balance, December 31, 2023

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

The Company files numerous group and separate tax returns in U.S.

federal and state jurisdictions, as well as international jurisdictions.

The Company is routinely examined by various U.S.

taxing authorities.

The Company is subject to audit by the U.S., various states and foreign jurisdictions.

The Company files numerous group and separate tax returns in Unites States federal and state jurisdictions, as well as international jurisdictions.

The Company is routinely examined by various United States and non-United States taxing authorities.

The Company is subject to audit by the United States, various states and foreign jurisdictions.

In accordance with the Tax Matters Agreement with Former Parent, the Company is the primary obligor for (i) ESAB separate company state returns for all periods;

(ii) unitary state returns that include only ESAB legal entities for all period s, and (iii) ESAB separate foreign returns for all periods.

The Company also has an obligation with respect to certain liabilities associated wi th unitary state tax returns that include both ESAB legal entities and Former Parent legal entities for all periods, certain liabilities associated with pre-separation joint returns, fifty percent of the remaining Section 965 installment payments, and any tax indemnity associated with discontinued operations.

Pursuant to U.S.

tax law, the Company will file its initial U.S.

federal income tax return for the post- Separation per iod by October 2023.

The IRS has not yet begun examination of the Company.

(ii) unitary state returns that include only ESAB legal entities for all periods, and (iii) ESAB separate foreign returns for all periods.

Pursuant to United States tax law, the Company filed its initial United States federal income tax return for the post-Separation period in October 2023.

The Company reviews its global tax provisions on a quarterly basis.

Based on these reviews, the results of discussions and resolutions of matters with certain tax authorities, tax rulings and court decisions and the expiration of the statutes of limitations for continent tax liabilities are accrued or adjusted.

The Company accrues or adjusts contingent tax liabilities based on these reviews, the results of discussions and resolutions of matters with certain tax authorities, tax rulings and court decisions and the expiration of the statutes of limitations.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

Due to the difficulty in predicting with reasonable certainty when tax audits will be fully resolved and closed, the range of reasonably possible significant increases or decreases in the liability for unrecognized tax benefits that may occur within the next 12 months is difficult to ascertain.

28 unchanged sentences

$ 882,119 $ ( 382,584 ) $ 874,550 $ ( 357,383 )

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

Amortization expense related to intangible assets of $ 39.7 million , $ 35.6 million and $ 42.1 million for the years ended December 31, 2023, 2022 and 2021, respectively, are included in the Selling, general and administrative expense in the Consolidated and Combined Statements of Operations.

Expected Amortization Expense

The Company’s expected annual amortization expense for intangible assets for the next five years is as follows:

The Company’s expected annual amortization expense for acquired intangible assets for the next five years is as follows:

December 31, 2023

1 unchanged sentence

2024 $ 29,160

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

Property, Plant and Equipment, Net

28 unchanged sentences

Certain of the Company’s leases include rental payments adjusted for inflation.

The right-of-use lease asset is recorded on the Consolidated and Combined Balance Sheets, with the current lease liability being included in Accrued liabilities and noncurrent lease liability being included in Other liabilities.

The right-of-use lease asset is recorded on the Consolidated Balance Sheets, with the current lease liability being included in Accrued liabilities and noncurrent lease liability being included in Other liabilities.

Operating lease expense was $ 25.4 million, $ 21.3 million and $ 23.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.

12 unchanged sentences

Accrued and Other Liabilities

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

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

December 31, 2023 December 31, 2022

14 unchanged sentences

Accrued Warranty Liability

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

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

Year Ended December 31,

4 unchanged sentences

Cost of warranty service work performed ( 10,710 ) ( 9,680 )

Acquisition-related liability 1,278 —

Foreign exchange translation effect 201 ( 471 )

2 unchanged sentences

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 Consolidated and Combined Balance Sheets is as follows:

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

Year Ended December 31, 2023

8 unchanged sentences

Non-cash charges (3)

Segment Total 11,384

Termination benefits (1)

5,774 2,672 ( 3,391 ) 90 5,145

Facility closure costs (2)

241 8,205 ( 5,686 ) 29 2,789

Subtotal 6,015 10,877 ( 9,077 ) 119 7,934

Non-cash charges (2)

Segment Total 11,712

Total $ 24,110

Non-cash charges (2)

Total Provision $ 23,096

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

(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 CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

(3) Includes impairment of long-lived assets in connection with the closure and optimization of facilities and product lines.

Year Ended December 31, 2022

8 unchanged sentences

Non-cash charges (3)

Segment Total 11,612

Termination benefits (1)

4,247 4,219 ( 2,641 ) ( 51 ) 5,774

Facility closure costs (2)

122 2,090 ( 1,954 ) ( 17 ) 241

Subtotal 4,369 6,309 ( 4,595 ) ( 68 ) 6,015

Non-cash charges (2)

Segment Total 7,342

Total $ 23,096

Non-cash charges (2)

Total Provision $ 18,954

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

(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.

(3) Includes impairment of long-lived assets in connection with the closure and optimization of facilities and product lines.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

Benefit Plans

1 unchanged sentence

The Company uses December 31 st as the measurement date for all of its employee benefit plans.

Prior to the Separation, the Former Parent offered both funded and unfunded noncontributory defined benefit pension plans in t he United States that were share d amongst its businesses, including the Company prior to becoming plan sponsor.

The participation of the Company’s employees and retirees in this plan was as though it participated in a multiemployer plan with the Former Parent.

As a result, prior to the Separation, a proportionate share of the cost associated with this defined benefit plan was allocated to the Company based on the Company’s share of total Former Parent headcount.

This allocation is reflected within Interest expense (income) and other, net, in the Consolidated and Combined Statements of Operations.

, 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.

As part of the Separation, certain U.S.

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

The transferred plans include a defined benefit pension plan with assets of $ 201.3 million and projected benefit liabilities of $ 200.7 million, one unfunded defined benefit plan with liabilities of less than $ 0.1 million and one other post-retirement benefit plan with liabilities of $ 11.7 million, all of which were recorded in the financial statements of the Former Parent at December 31, 2021.

This allocation is reflected within Interest expense (income) and other, net, in the Consolidated and Combined Statements of Operations , 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.

As part of the Separation, certain United States defined benefit and other post-retirement plans, formerly sponsored by the Former Parent were transferred to the Company as of March 21, 2022 (“Transfer Date”).

As of the Transfer Date, the transferred plans include a defined benefit pension plan with assets of $ 201.3 million and projected benefit liabilities of $ 200.7 million, one unfunded defined benefit plan with liabilities of less than $ 0.1 million and one other post-retirement benefit plan with liabilities of $ 11.7 million, all of which were recorded in the financial statements of the Former Parent at December 31, 2021.

During the year ended December 31, 2022, the Company recognized a Pension settlement gain of $ 9.1 million related to a completed buy-out of a foreign defined benefit plan by a third party plus the merger of two Company pension plans resulting in one plan benefiting from the surplus assets in the other plan.

During the year ended December 31, 2021, the Company recognized a Pension settlement gain of $ 11.2 million when the trustees of a Company pension plan agreed to merge the plan with another Company pension plan and contribute the plan’s surplus assets.

These amounts are reflected in Pension settlement gain in the Consolidated and Combined Statements of Operations.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

These amounts are reflected in Pension settlement gain in the Consolidated and Combined Statements of Operations.

The following table summarizes the total changes in the Company’s pension and accrued post-retirement benefits and plan assets and includes a statement of the plans’ funded status:

10 unchanged sentences

Plan amendments 175 862 — —

Actuarial gain ( 60,148 ) ( 1,866 ) ( 2,807 ) ( 25 )

Actuarial loss (gain) 802 ( 60,148 ) ( 514 ) ( 2,807 )

Foreign exchange effect 4,079 ( 12,452 ) ( 1 ) ( 35 )

9 unchanged sentences

Employer contributions (1)

( 857 ) 5,315 549 636

Foreign exchange effect 3,162 ( 7,583 ) — —

1 unchanged sentence

Settlements ( 2,505 ) 9,947 — —

9,947 11,272 — —

Other 691 260 — —

1 unchanged sentence

Funded status, end of year $ ( 31,271 ) $ ( 36,972 ) $ ( 8,190 ) $ ( 8,850 )

Amounts recognized on the Consolidated and Combined Balance Sheets as of December 31:

Amounts recognized on the Consolidated Balance Sheets as of December 31:

Non-current assets $ 17,300 $ 15,701 $ — $ —

2 unchanged sentences

Total $ ( 31,271 ) $ ( 36,972 ) $ ( 8,190 ) $ ( 8,850 )

(1) Settlements includes gains of $ 9.1 million a nd $ 11.2 million classified as Pension settlement gain on the Company’s Consolidated Statement of Operations for the years ended December 31, 2022 and December 31, 2021, respectively.

(1) The employer contribution amount for the year ended December 31, 2023 includes a refund of assets totaling $ 5.1 million to the Company arising from a completed wind up of a foreign defined benefit plan.

For pension plans with accumulated benefit obligations in excess of plan assets, the accumulated benefit obligation and fair value of plan assets were $ 50.7 million and $ 3.9 million, respectively, as of December 31, 2023 and $ 201.1 million and $ 149.8 million, respectively, as of December 31, 2022.

For pensions plans with projected benefit obligations in excess of plan assets, the projected benefit obligation and fair value of plan assets were $ 206.8 million and $ 154.1 million, respectively, as of December 31, 2022 and $ 76.2 million and $ 10.7 million, respectively, as of December 31, 2021.

For pension plans with projected benefit obligations in excess of plan assets, the projected benefit obligation and fair value of plan assets were $ 55.6 million and $ 7.0 million, respectively, as of December 31, 2023 and $ 206.8 million and $ 154.1 million, respectively, as of December 31, 2022.

ESAB CORPORATION

9 unchanged sentences

Plan amendments 175 862

Actuarial gain ( 25,131 ) ( 1,787 )

Actuarial loss (gain) 335 ( 25,131 )

Foreign exchange effect 4,079 ( 12,452 )

25 unchanged sentences

2029 - 2033 89,736 35,683 3,055

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

The Company’s primary investment objective for its pension plan assets is to provide a source of retirement income for the plans’ participants and beneficiaries.

5 unchanged sentences

The actual allocation percentages as of December 31, 2023 and 2022 are consistent with the target allocation ranges of the plans.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

The following are the actual allocation percentages for the Company’s pension plan assets:

Actual Asset Allocation

United States Plans:

Equity securities:

United States 38 % 36 %

International 12 % 13 %

9 unchanged sentences

A summary of the Company’s pension plan assets for each fair value hierarchy level for the periods presented follows (see Note 17, “Fai r Value Measurements” for further description of the levels within the fair value hierarchy):

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

December 31, 2023

1 unchanged sentence

(In thousands)

United States Plans:

Cash and cash equivalents $ — $ 1,237 $ — $ — $ 1,237

Equity securities:

large cap 31,018 — — — 31,018

small/mid cap 10,789 11,289 — — 22,078

United States large cap 29,289 — — — 29,289

United States small/mid cap 10,130 16,033 — — 26,163

International 18,078 — — — 18,078

Fixed income mutual funds:

government and corporate 73,497 — — — 73,497

United States government and corporate 70,283 — — — 70,283

Other — 1,145 — — 1,145

3 unchanged sentences

Equity securities — 921 — — 921

government and corporate bonds — 24,289 — — 24,289

Non-United States government and corporate bonds — 31,147 — — 31,147

Insurance contracts — — 24,592 — 24,592

4 unchanged sentences

These investments, consisting of common/collective trusts, are valued using the NAV provided by the Trustee.

The NAV is based on the underlying investments held by the fund, that are traded in an active market, less its liabilities.

The NAV is based on the underlying investments held by the fund, which are traded in an active market, less its liabilities.

These investments are able to be redeemed in the near-term.

(2) The weighted-average interest crediting rates received in Cash and cash equivalents of foreign plans are immaterial relative to total plan assets.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

December 31, 2022

Measured at Net Asset Value Level

Measured at Net Asset Value (1)

(In thousands)

United States Plans:

Cash and cash equivalents $ — $ 1,591 $ — $ — $ 1,591

Equity securities:

United States large cap 31,018 — — — 31,018

United States small/mid cap 10,789 11,289 — — 22,078

International 18,928 — — — 18,928

Fixed income mutual funds:

United States government and corporate 73,497 — — — 73,497

Other — 1,118 — — 1,118

Foreign Plans:

2 unchanged sentences

Equity securities — 2,475 — — 2,475

government and corporate bonds — 21,310 — — 21,310

Non-United States government and corporate bonds — 24,289 — — 24,289

Insurance contracts — — 24,236 — 24,236

2 unchanged sentences

$ 134,232 $ 52,143 $ 32,675 $ — $ 219,050

(1) Certain investments that are measured at fair value using the NAV have not been classified in the fair value hierarchy.

These investments, consisting of common/collective trusts, are valued using the NAV provided by the Trustee.

The NAV is based on the underlying investments held by the fund, which are traded in an active market, less its liabilities.

These investments are able to be redeemed in the near-term.

(2) The weighted-average interest crediting rates received in Cash and cash equivalents of foreign plans are immaterial relative to total plan assets.

1 unchanged sentence

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

The following table sets forth the components of net periodic benefit cost and Other comprehensive income of the Company’s defined benefit pension plans and other post-retirement employee benefit plans:

The following table sets forth the components of net periodic benefit (income) cost and Other comprehensive income of the Company’s defined benefit pension plans and other post-retirement employee benefit plans:

Pension Benefits Other Post-Retirement Benefits

7 unchanged sentences

Amortization 1,206 4,313 1,220 — ( 181 ) —

Settlement gain ( 9,114 ) ( 11,195 ) — — 8 —

Settlement (gain) loss — ( 9,114 ) ( 11,195 ) — — 8

Other — 92 2 — — —

Expected return on plan assets ( 11,391 ) ( 11,519 ) ( 2,258 ) — — —

Net periodic benefit (income) cost $ ( 8,670 ) $ ( 8,778 ) $ 2,379 $ 68 $ 44 $ 16

Net periodic benefit cost (income) $ 2,424 $ ( 8,670 ) $ ( 8,778 ) $ 404 $ 68 $ 44

Change in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Gain) Loss:

3 unchanged sentences

Less amounts included in net periodic benefit cost:

Amortization of net (gain) loss ( 4,340 ) ( 1,228 ) ( 785 ) 181 ( 8 ) 8

Settlement/divestiture/other gain ( 67 ) — ( 89 ) — — —

Amortization of net (loss) gain ( 1,575 ) ( 4,340 ) ( 1,228 ) 479 181 ( 8 )

Settlement/divestiture/other loss ( 1,079 ) ( 67 ) — — — —

Amortization of prior service cost 38 ( 1,067 ) ( 5 ) — — —

1 unchanged sentence

Each component of net periodic benefit (income) cost is included in the Company’s Consolidated and Combined Statements of Operations for the years ended December 31, 2023, 2022 and 2021.

Service cost is included within Selling, general and administrative expense with the non-service costs included within Interest expense (income) and other, net.

Settlement gains of $ 9.1 million and $ 11.2 million are recorded within Pension settlement gain on the Company’s Consolidated Statement of Operations for the years ended December 31, 2022 and 2021, respectively.

The following table sets forth the components of net periodic benefit cost and Other comprehensive income of the foreign defined benefit pension plans, included in the table above:

Service cost is included within Selling, general and administrative expense with the non-service costs net of expected return on plan assets and settlement gains included within Interest expense (income) and other, net.

Settlement gains of $ 9.1 million and $ 11.2 million are recorded within Pension settlement gain on the Company’s Consolidated and Combined Statement of Operations for the years ended December 31, 2022 and 2021, respectively.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

The following table sets forth the components of net periodic benefit (income) cost and Other comprehensive income of the foreign defined benefit pension plans, included in the table above:

Foreign Pension Benefits

9 unchanged sentences

Expected return on plan assets ( 2,475 ) ( 2,063 ) ( 2,258 )

Net periodic benefit (income) cost $ ( 6,553 ) $ ( 8,902 ) $ 2,244

Net periodic benefit cost (income) $ 2,821 $ ( 6,553 ) $ ( 8,902 )

Change in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Gain) Loss:

3 unchanged sentences

Amortization of net loss ( 78 ) ( 714 ) ( 1,126 )

Settlement/divestiture/other gain ( 67 ) — ( 89 )

Settlement/divestiture/other loss ( 1,079 ) ( 67 ) —

Amortization of prior service cost 38 ( 1,067 ) ( 5 )

Total recognized in Other comprehensive (gain) loss $ ( 13,248 ) $ ( 6,841 ) $ 5,709

The components of net unrecognized pension and other post-retirement benefit cost included in Accumulated other comprehensive loss in the Consolidated and Combined Balance Sheets that have not been recognized as a component of net periodic benefit cost are as follows:

Total recognized in Other comprehensive loss (gain) $ 1,040 $ ( 13,248 ) $ ( 6,841 )

The components of net unrecognized pension and other post-retirement benefit cost included in Accumulated other comprehensive loss in the Consolidated Balance Sheets that have not been recognized as a component of net periodic benefit cost are as follows:

Pension Benefits Other Post-Retirement

2 unchanged sentences

Net actuarial loss (gain) $ 61,573 $ 71,066 $ ( 5,234 ) $ ( 5,199 )

Prior service (income) cost ( 112 ) 95 — —

Prior service income ( 81 ) ( 112 ) — —

Total $ 61,492 $ 70,954 $ ( 5,234 ) $ ( 5,199 )

8 unchanged sentences

(1) Weighted-average rate of increase is only applicable to plans with compensation increase assumptions.

The key economic assumptions used in the computation of net periodic benefit cost are as follows:

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

The key economic assumptions used in the computation of net periodic benefit cost are as follows:

Pension Benefits Other Post-Retirement Benefits

14 unchanged sentences

The rate was assumed to decrease gradually to 4.0 % by 2034 and remain at that level thereafter for benefits covered under the plans.

The expected long-term rate of return on plan assets was based on the Company’s investment policy target allocation of the asset portfolio between various asset classes and the expected real returns of each asset class over various periods of time that are consistent with the long-term nature of the underlying obligations of these plans.

The expected long-term rate of return on plan assets is determined using the calculated value of plan assets, which is based on the Company’s investment policy target allocation of the asset portfolio between various asset classes and the expected real returns of each asset class over various periods of time that are consistent with the long-term nature of the underlying obligations of these plans.

The Company maintains defined contribution plans covering certain union and non-union employees.

The Company’s expense for the years ended December 31, 2023, 2022 and 2021 was $ 7.6 million, $ 8.7 million and $ 7.9 million, respectively.

Long-term debt consisted of the following:

December 31, 2022

Long-term debt consists of the following:

(In thousands)

4 unchanged sentences

Long-term debt $ 1,018,057 $ 1,218,643

(1) In the Company’s Consolidated Balance sheet, $ 1.2 million of deferred financing fees related to the Revolving Facility are included in Other assets and $ 2.4 million of deferred financing fees related to the Term Facilities are recorded as a contra-liability within Long-term debt.

Term Loans and Revolving Credit Facility

6 unchanged sentences

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

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

The Revolving Facility contains a $ 300 million 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.

4 unchanged sentences

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 remained unchanged.

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

As of December 31, 2023, the Credit Agreement consists 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 aggregate principal amount of $ 395 million (the “Term Loan A-1 Facility”), with a maturity date of April 4, 2027;

• A Term Loan A-3 loan with an aggregate principal amount of $ 593 million (the “Term Loan A-3 Facility”) with a maturity date of April 3, 2025.

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.

In addition, the Credit Agreement requires that the Company maintains certain financial covenants and the Company was in compliance with all of its debt covenants as of December 31, 2023.

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 Credit Agreement Amendment), in each case, plus the applicable interest rate margin.

Certain United States 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”) 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 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”) 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 Credit Agreement Amendment), in each case, plus the applicable interest rate margin.

The applicable interest rate margin changes 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 %).

2 unchanged sentences

Refer to Note 16, “Derivatives” for additional information.

As of December 31, 2022, the weighted-average interest rate of borrowings under the Credit Agreement was 4.54 %, including the net impact from the interest rate and cross currency swaps and excluding accretion of deferred financing fees, and there wa s $ 529 million of borrowing capacity available on the Revolving Facility.

Other Indebtedness

In addition to the debt agreements discussed above, the Company also has the ability to inc ur approximately $ 77 million of indebtedness pursuant to certain uncommitted credit lines, consisting of an uncommitted credit line that the Company currently has in place that 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 $ 102.9 million.

Total letters of credit of $ 31.5 million were outstanding as of December 31, 2022.

As of December 31, 2023, the weighted-average interest rate of borrowings under the Credit Agreement was 5.223 %, including the net impact from the interest rate and cross currency swaps and excluding accretion of deferred financing fees, and there was $ 718 million of borrowing capacity available on the Revolving Facility.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

Other Indebtedness

In addition to the debt agreements discussed above, the Company also has the ability to inc ur approxi mately $ 78 million of indebtedness pursuant to certain uncommitted credit lines, consisting of an uncommitted credit line that the Company currently has in place that 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 of $ 109.0 million.

Total letters of credit of $ 28.6 million were outstanding as of December 31, 2023.

Deferred Financing Fees

In total, the Company had deferred financing fees of $ 3.6 million included in its Consolidated and Combined Balance Sheet as of December 31, 2022, 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 $ 2.3 million included in its Consolidated Balance Sheet as of December 31, 2023, which will be charged to Interest expense (income) 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 $ 3.6 million, $ 1.2 million of deferred financing fees relating to the Revolving Facility are included in Other assets and $ 2.4 million of deferred financing fees relating to the Term Facilities are recorded as a contra-liability within Long-term debt.

Contractual Maturities

The contractual maturities of the Company’s debt is as follows:

Of the $ 2.3 million, $ 0.9 million of deferred financing fees relating to the Revolving Facility are included in Other assets and $ 1.4 million of deferred financing fees relating to the Term Facilities are recorded as a contra-liability within Long-ter m debt.

The Company’s minimum principal payments for the next five years are as follows:

December 31, 2023

9 unchanged sentences

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

The Company records derivatives in the Consolidated and Combined Balance Sheets at fair value.

The Company records derivatives in the Consolidated Balance Sheets at fair value.

Cash Flow Hedges

5 unchanged sentences

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.

The above interest rate swap agreements are designated and qualify as a cash flow hedge, and as such the gain or loss on the derivative instrument due to the change in fair value is reported as a component of accumulated other comprehensive income (“AOCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

The above interest rate swap agreements are designated and qualify as a cash flow hedge, and as such the gain or loss on the derivative instrument due to the change in fair value is reported as a component of AOCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

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

1 unchanged sentence

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 Statements of Cash Flows.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

The Company expects a gain of $ 7.3 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 Company expects a gain o f $ 6.7 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 December 31, 2023.

1 unchanged sentence

Year Ended December 31,

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

Derivative type (Gain) loss recognized in the Consolidated and Combined Statements of Operations:

(In thousands)

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

(In thousands)

Cross currency swap agreements Interest expense (income) and other, net $ ( 4,779 ) $ ( 2,181 )

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

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

The table below shows the fair value of the derivatives recognized in the Company’s Consolidated Balance Sheets:

December 31, 2023

Designated as hedging instruments Other Liabilities Other Assets

December 31, 2022

Designated as hedging instruments Other Liabilities Other Assets Other Liabilities Other Assets

(In thousands)

2 unchanged sentences

Total $ 22,232 $ 9,522 $ 10,769 $ 14,342

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

Derivatives Not Designated as Hedging Instruments

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As of December 31, 2023 and December 31, 2022, the Company had foreign currency contracts related to purchases and sales with notional values of $ 232.5 million and $ 260.0 million, respectively.

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

December 31, 2023 December 31, 2022

Not designated as hedging instruments Accrued Liabilities Other Current Assets Accrued Liabilities Other Current Assets

(In thousands)

Foreign currency contracts $ 596 $ 1,088 $ 2,166 $ 3,682

The amounts in the table above as of December 31, 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 $ 1.2 million increase in Other current assets with a corresponding increase in Accrued liabilities.

The Company recognized the following in its Consolidated and Combined Financial Statements related to its derivative instruments not designated in a hedging relationship:

2 unchanged sentences

(In thousands)

Change in unrealized gains 1,338 177 1,426

Change in unrealized (loss) gain ( 1,023 ) 1,338 177

Realized loss (1)

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(1) The year ended December 31, 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 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 Statements of Operations .

6 unchanged sentences

Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

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 (see Note 14, “Benefit Plan s” for classification of the assets of the Company’s benefit plans within the fair value hierarchy):

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

December 31, 2023

2 unchanged sentences

Foreign currency contracts - not designated as hedges — 2,261 — 2,261

— 3,682 — 3,682

Interest rate swap agreements — 9,522 — 9,522

2 unchanged sentences

Foreign currency contracts - not designated as hedges $ — $ 1,769 $ — $ 1,769

$ — $ 2,166 $ — $ 2,166

Cross currency swap agreements — 22,232 — 22,232

1 unchanged sentence

$ — $ 27,489 $ — $ 27,489

(1) Included within Other Current Assets in the Consolidated Balance Sheet.

(2) Included within Accrued Liabilities in the Consolidated Balance Sheet.

December 31, 2022

2 unchanged sentences

Foreign currency contracts - not designated as hedges — 3,682 — 3,682

— 2,487 — 2,487

Interest rate swap agreements — 14,342 — 14,342

Deferred compensation plans — 2,501 — 2,501

$ 8,195 $ 20,525 $ — $ 28,720

Foreign currency contracts - not designated as hedges $ — $ 2,166 $ — $ 2,166

Cross currency swap agreements — 10,769 — 10,769

Deferred compensation plans — 2,501 — 2,501

$ — $ 15,436 $ — $ 15,436

(1) Included within Other Current Assets in the Consolidated Balance Sheet.

(2) Included within Accrued Liabilities in the Consolidated Balance Sheet.

The Company’s cash equivalents consist of investments in interest-bearing deposit accounts and money market mutual funds which are valued based on quoted market prices.

The Company’s cash equivalents consist of investments in foreign interest-bearing deposit accounts and foreign money market mutual funds that are valued based on quoted market prices.

The fair value of these investments approximate cost due to their short-term maturities and the high credit quality of the issuers of the underlying securities.

3 unchanged sentences

Refer to Note 16, “Derivatives” for additional information.

There were no transfers in or out of Level One, Two or Three during the years ended December 31, 2022 and 2021.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

There were no transfers in or out of Level One, Two or Three during the years ended December 31, 2023 and 2022.

Concentration of Credit Risk

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There are no customers which represent more than 10% of the Company’s Accounts receivable, net as of December 31, 2023 and 2022.

FABRICATION TECHNOLOGY BUSINESS OF COLFAX CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

Accumulated Other Comprehensive Loss

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Accumulated Other Comprehensive Loss Components

Net Unrecognized Pension and Other Post-Retirement Benefit Cost Foreign Currency Translation Adjustment Loss on Net Investment Hedges Gain on Cash Flow Hedges Total

Net Unrecognized Pension and Other Post-Retirement Benefit Cost Foreign Currency Translation Adjustment Net Investment Hedges Cash Flow Hedges Total

(In thousands)

1 unchanged sentence

Other comprehensive income (loss) before reclassifications:

Net actuarial loss ( 4,328 ) — — — ( 4,328 )

Net actuarial gain 7,479 — — — 7,479

Foreign currency translation adjustment 1,534 ( 72,867 ) — — ( 71,333 )

5 unchanged sentences

Other comprehensive income (loss) before reclassifications:

Amounts contributed by Former Parent (2)

( 50,504 ) ( 8,759 ) — — ( 59,263 )

Net actuarial gain 113 — — — 113

Foreign currency translation adjustment 1,712 ( 82,351 ) ( 8,336 ) — ( 88,975 )

Loss on long-term intra-entity foreign currency transactions — ( 83,105 ) — — ( 83,105 )

Unrealized gain on cash flow hedges — — — 10,782 10,782

Other comprehensive (loss) income before reclassifications ( 48,679 ) ( 174,215 ) ( 8,336 ) 10,782 ( 220,448 )

4 unchanged sentences

Other comprehensive income (loss) before reclassifications:

Amounts contributed by Former Parent (2)

( 50,504 ) ( 8,759 ) — — ( 59,263 )

Net actuarial gain 8,969 — — — 8,969

Foreign currency translation adjustment ( 3,285 ) ( 11,143 ) ( 8,879 ) — ( 23,307 )

Loss on long-term intra-entity foreign currency transactions — ( 83,105 ) — — ( 83,105 )

Gain on long-term intra-entity foreign currency transactions — 70,428 — — 70,428

Unrealized gain on cash flow hedges — — — 4,834 4,834

7 unchanged sentences

(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.

“Benefit Plans” for additional details.

See Note 14, “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 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.

(3) During the year ended December 31, 2022, the amount on this line within the Gain on Cash Flow Hedges column is a component of Interest expense (income) and other, net.

(3) During the years ended December 31, 2023 and 2022, the amount on this line within the Cash Flow Hedges column is a component of Interest expense (income) and other, net.

See Note 16, “Derivatives,” for additional details.

During the years ended December 31, 2022, 2021 and 2020, Noncontrolling interest decreased by $ 3.6 million, $ 1.1 million and $ 0.1 million, respectively, as a result of Other comprehensive loss, primarily due to foreign currency translation adjustments.

Share-Based Payments

5 unchanged sentences

For the three months ended April 1, 2022, $ 0.7 million of stock-based compensation expense was allocated to the Company.

For the years ended December 31, 2021 and 2020, $ 2.6 million and $ 3.0 million, respectively, was allocated to the Company.

For the year ended December 31, 2021, $ 2.6 million was allocated to the Company.

Following the Separation, the Company independently incurs stock compensation expenses as a stand-alone company.

2 unchanged sentences

The terms of the equity awards 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.

Other than converted or replacement equity awards of ESAB issued in replacement of the Former 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.

1 unchanged sentence

Stock-based compensation expense is generally recognized as a component of Selling, general and administrative expense in the Consolidated and Combined Statements of Operations.

As of December 31, 2022 , the Company had $ 19.0 million of unrecognized compensation expense related to stock-based awards that will be recognized over a weighted-average period of 2.30 years.

Stock Options

3 unchanged sentences

For the year ended December 31, 2023, the Stock-based compensation expense for the stock option awards was $ 2.2 million.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

As of December 31, 2023 , the Company had $ 2.3 million of unrecognized compensation expense related to stock option awards that will be recognized over a weighted-average period of 1.9 years.

Restricted Stock Units

During the year ended December 31, 2022, the Company granted certain employees performance-based restricted stock units (“PRSUs”), the vesting of which is fully based on company specific profit performance metrics over a three-year performance period.

During the year ended December 31, 2023 and 2022, the Company granted certain employees performance-based restricted stock units (“PRSUs”), the vesting of which is fully based on company specific performance metrics over a three-year performance period.

The awards also have a service requirement that equals the respective performance periods.

These PRSUs are valued at the market value of a share of common stock on the date of grant taking into consideration the probability of achieving the specified performance goal.

The ultimate payout of PRSUs with a profit performance metric adjusts the cumulative expense based on its estimate and the percent of the requisite service period that has elapsed.

Under the Stock Plan, the Compensation Committee may also award non-performance-based restricted stock units (“RSUs”) to select executives, employees and outside directors, which typically vest over three years after the date of grant.

The ultimate payout of PRSUs with a performance metric adjusts the cumulative expense based on its estimate and the percent of the requisite service period that has elapsed.

For the year ended December 31, 2023, the Stock-based compensation expense for the PRSU’s was $ 3.1 million.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

Under the Stock Plan, the Compensation Committee may also award RSUs to select executives, employees and outside directors, which typically vest over three years after the date of grant.

With limited exceptions, the employee must remain in service until the vesting date.

The Compensation Committee determines the terms and conditions of each award, including any restriction period and other criteria applicable to the awards.

For the year ended December 31, 2023, the Stock-based compensation expense for the RSU’s was $ 9.8 million.

The activity of the Company’s PRSUs and RSUs is as follows:

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Balance at December 31, 2022 110,288 $ 53.99 464,278 $ 50.80

Awards converted from Former Parent plan 58,636 58.03 333,223 52.89

Granted 83,873 61.32 183,605 61.46

3 unchanged sentences

The fair value of shares vested during the year ended December 31, 2023 was $ 8.9 million .

As of December 31, 2023 , the Company had $ 18.4 million of unrecognized compensation expense related to PRSU and RSU awards that will be recognized over a weighted-average period of 2.0 years.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

Commitments and Contingencies

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

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

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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.

3 unchanged sentences

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

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

December 31, 2022

Asbestos-related claims activity since December 31, 2022 and 2021, respectively, is as follows:

Year Ended December 31,

(Number of claims)

2 unchanged sentences

Claims resolved (2)

( 5,085 ) ( 4,791 )

Claims unresolved, end of period 13,648 14,106

Average cost of resolved claims (3)

$ 9,524 $ 10,017

(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.

(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.

(3) Excludes claims settled in Mississippi for which the majority of claims have historically been resolved for no payment and insurance recoveries.

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

December 31, 2022

The Company’s Consolidated Balance Sheets include the following amounts related to asbestos-related litigation:

(In thousands)

Long-term asbestos insurance asset (1)

$ 221,489 $ 215,112

Long-term asbestos insurance receivable (1)

17,868 17,231

Accrued asbestos liability (2)

32,908 30,108

Long-term asbestos liability (3)

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

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

234,796 230,581

(1) Included in Other assets in the Consolidated Balance Sheets.

(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 Consolidated Balance Sheets.

(3) Included in Other liabilities in the Consolidated Balance Sheets.

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

12 unchanged sentences

Segment Information

ESAB is a world leader in fabrication and gas control technology, providing our partners with advanced equipment, consumables, gas control equipment, robotics, and digital solutions, which enable the everyday and extraordinary work that shapes our world.

ESAB is a world leader in fabrication and gas control technology, providing our partners with fabrication technology advanced equipment, consumables, gas control equipment, robotics and digital solutions, which enable the everyday and extraordinary work that shapes our world.

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 segment Adjusted EBITDA, which represents Operating income excluding the impact of Restructuring and other related charges, separation costs, transaction and integration costs, acquisition-related amortization and other non-cash 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 Pension settlement gain, Restructuring and other related charges, Separation costs, Acquisition - amortization and other related charges and Depreciation and other amortization .

The Company’s segment results were as follows:

40 unchanged sentences

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

(2) I ncludes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expense, impairment of long-lived assets and other costs in connection with the closure and optimization of facilities and product lines .

(3) I ncludes non-recurrin g charges and employee costs related to the planning and execution of t he separation from Enovis within the Selling, general and administrative expense line within the Consolidated and Combined Statements of Operations.

23 unchanged sentences

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 a license agreement for Enovis Growth Excellence Business System (“EGX”).

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 stockholders and registration rights agreement, an intellectual property matters agreement and a license agreement for EBX.

The Separation and Distribution Agreement

3 unchanged sentences

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 transition services agreement 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.

As of the year ended December 31, 2023, the majority of the related obligations have been closed out.

Tax Matters Agreement

3 unchanged sentences

Stockholders and Registration Rights Agreement

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

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

Intellectual Property Matters Agreement

3 unchanged sentences

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued)

EGX License Agreement

The EGX 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 EGX, solely in support of its businesses.

EBX License Agreement

The EBX 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 EBX, 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, under the EGX license agreement, Enovis and the Company each license to each other improvements made by such party to EGX during the first two years of the term of the EGX license agreement.

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

Allocated Expenses

2 unchanged sentences

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 three months ended April 1, 2022 and the years ended December 31, 2021, and 2020 combined financial statements;

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 three months ended April 1, 2022 and the year ended December 31, 2021 combined 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 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.

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 Statements of Cash Flows.

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

1 unchanged sentence

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 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 $ 29.5 million and $ 24.2 million for the years ended December 31, 2021 and 2020, respectively, and are included in the Selling, general and administrative expense in the Consolidated and Combined Statements of Operations.

The Company’s allocated expenses from the Former Parent were $ 6.0 million for the three months ended April 1, 2022, and $ 29.5 million for the year ended December 31, 2021 and are included in the Selling, general and administrative expense in the Consolidated and Combined Statements of Operations.

Following the Separation, the Company independently incurs expenses as a stand-alone company.

1 unchanged sentence

Subsequent Events

The dividend of $ 3.0 million included in Accrued liabilities in the Consolidated Balance Sheet at December 31, 2022 was paid on January 13, 2023, to stockholders of record as of Decembers 30, 2022.

In addition, on March 2, 2023, the Board of Directors declared a quarterly cash dividend of $ 0.05 per share of ESAB’s common stock payable on April 14, 2023, t o stockholders of record as of March 31, 2023.

On January 11, 2023, the Company completed the acquisition of Therapy Equipment Limited, a regional leader in oxygen regulators, for approximately $ 16 million.

The dividend of $ 3.6 million included in Accrued liabilities in the Consolidated Balance Sheet at December 31, 2023 was paid on January 12, 2024, to stockholders of record as of December 29, 2023.

In addition, on February 22, 2024, the Board of Directors declared a quarterly cash dividend of $ 0.06 per share of ESAB’s common stock payable on April 12, 2024, to stockholders of record as of March 29, 2024.

On February 26, 2024, the Company completed the acquisition of Sager S.A., a welding repair and maintenance product and service leader in South America for approximately $ 18.5 million of cash consideration.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data