What changed in this filing

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Item 1. Financial Statements

2024-05-01 compared with 2023-11-01 · 200 added, 321 removed, 420 unchanged (55% of the section changed)

1 unchanged sentence

ESAB CORPORATION

CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF OPERATIONS

CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS

Dollars in thousands, except per share amounts

Three Months Ended Nine Months Ended

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Three Months Ended

March 29, 2024 March 31, 2023

Net sales $ 689,744 $ 684,000

4 unchanged sentences

Operating income 110,653 90,663

Pension settlement gain — ( 3,300 ) — ( 3,300 )

Pension settlement loss 12,155 —

Interest expense and other, net 17,091 19,510

14 unchanged sentences

Net income per share – diluted $ 0.98 $ 0.52

See Notes to Consolidated and Combined Condensed Financial Statements.

See Notes to Consolidated and Condensed Financial Statements.

ESAB CORPORATION

CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED AND CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

Dollars in thousands

Three Months Ended Nine Months Ended

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Three Months Ended

March 29, 2024 March 31, 2023

Net income $ 61,594 $ 33,216

2 unchanged sentences

( 25,354 ) 42,084

Unrealized (loss) gain on derivatives designated and qualifying as cash flow hedges, net of tax (benefit) expense of $( 13 ), $ 2,895 , $ 553 and $ 2,894

Unrealized income (loss) on derivatives designated and qualifying as cash flow hedges, net of tax expense (benefit) of $ 295 and $( 1,045 )

1,013 ( 3,581 )

Defined benefit pension and other post-retirement plan activity, net of tax expense of $ 203 and $ 66

240 766 1,404 2,322

Other comprehensive loss ( 63,615 ) ( 88,066 ) ( 4,681 ) ( 233,586 )

Comprehensive (loss) income ( 4,502 ) ( 34,750 ) 154,871 ( 67,843 )

comprehensive income (loss) attributable to noncontrolling interest 853 ( 181 ) 4,377 ( 693 )

Comprehensive (loss) income attributable to ESAB Corporation $ ( 5,355 ) $ ( 34,569 ) $ 150,494 $ ( 67,150 )

See Notes to Consolidated and Combined Condensed Financial Statements.

Other comprehensive (loss) income ( 23,712 ) 38,780

Comprehensive income 37,882 71,996

Comprehensive income attributable to noncontrolling interest ( 1,320 ) ( 1,814 )

Comprehensive income attributable to ESAB Corporation $ 36,562 $ 70,182

See Notes to Consolidated and Condensed Financial Statements.

ESAB CORPORATION

1 unchanged sentence

Dollars in thousands, except share and per share amounts

September 29, 2023 December 31, 2022

March 29, 2024 December 31, 2023

CURRENT ASSETS:

20 unchanged sentences

Total liabilities 2,145,111 2,180,972

Common stock - $ 0.001 par value - 600,000,000 shares authorized, 60,271,072 and 60,094,725 shares outstanding as of September 29, 2023 and December 31, 2022, respectively

Common stock - $ 0.001 par value - 600,000,000 shares authorized, 60,424,421 and 60,295,634 shares outstanding as of March 29, 2024 and December 31, 2023, respectively

Additional paid-in capital 1,881,534 1,881,054

5 unchanged sentences

Total liabilities and equity $ 3,827,489 $ 3,828,629

See Notes to Consolidated and Combined Condensed Financial Statements.

See Notes to Consolidated and Condensed Financial Statements.

ESAB CORPORATION

CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF EQUITY

CONSOLIDATED AND CONDENSED STATEMENTS OF EQUITY

Dollars in thousands, except share and per share amounts

6 unchanged sentences

— — — ( 3,641 ) — — ( 3,641 )

Distributions to noncontrolling owners — — — — — ( 1,359 ) ( 1,359 )

Other comprehensive gain, net of tax benefit of $ 934

— — — — 38,279 501 38,780

Common stock-based award activity 127,538 — 2,229 — — — 2,229

Balance at March 31, 2023

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

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

Dividends declared ($ 0.06 per share)

— — — ( 3,644 ) — — ( 3,644 )

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

— — — — 20,094 60 20,154

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

Balance at June 30, 2023

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

Net income — — — 57,570 — 1,543 59,113

Dividends declared ($ 0.06 per share)

— — — ( 3,646 ) — — ( 3,646 )

Distributions to noncontrolling owners — — — — — ( 982 ) ( 982 )

Other comprehensive loss, net of tax expense of $ 2,029

1 unchanged sentence

Common stock-based award activity 128,787 — 480 — — — 480

Balance at September 29, 2023

Balance at March 29, 2024

60,424,421 $ 60 $ 1,881,534 $ 406,867 $ ( 647,661 ) $ 41,578 $ 1,682,378

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

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

Shares Amount

2 unchanged sentences

Net income — — — 31,903 — 1,313 33,216

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

Other comprehensive loss, net of tax expense of $ 579

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

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

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

Balance at April 1, 2022

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

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

Dividends declared ($ 0.05 per share)

— — — ( 3,033 ) — — ( 3,033 )

Other comprehensive loss, net of tax expense of $ 594

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

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

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

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

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

Balance at July 1, 2022

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

Net income — — — 52,354 — — 962 53,316

Dividends declared ($ 0.05 per share)

— — — ( 3,029 ) — — — ( 3,029 )

Distributions to noncontrolling owners — — — — — ( 1,359 ) ( 1,359 )

Other comprehensive loss, net of tax expense of $ 4,760

Other comprehensive gain, net of tax benefit of $ 934

— — — — 38,279 501 38,780

Common stock-based award activity 127,538 — 2,229 — — — 2,229

Balance at September 30, 2022

Balance at March 31, 2023

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

See Notes to Consolidated and Combined Condensed Financial Statements.

See Notes to Consolidated and Condensed Financial Statements.

ESAB CORPORATION

CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF CASH FLOWS

CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS

Dollars in thousands

Nine Months Ended

September 29, 2023 September 30, 2022

Three Months Ended

March 29, 2024 March 31, 2023

Cash flows from operating activities:

5 unchanged sentences

Non-cash interest expense 1,062 299

Pension settlement gain — ( 3,300 )

Pension settlement loss 12,155 —

Changes in operating assets and liabilities:

8 unchanged sentences

Acquisition, net of cash received ( 18,067 ) ( 18,721 )

Other ( 1,501 ) —

Net cash used in investing activities ( 26,614 ) ( 25,749 )

Cash flows from financing activities:

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

Proceeds from borrowings on revolving credit facility 115,000 187,000

1 unchanged sentence

Repayments of borrowings on revolving credit facility and other ( 139,035 ) ( 189,765 )

Payment of deferred financing fees and other — ( 4,904 )

Payment of deferred consideration — ( 1,500 )

Payment of dividends ( 3,635 ) ( 3,033 )

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

Distributions to noncontrolling interest holders — ( 1,249 )

Transfers from Former Parent, net — 2,847

Net cash used in financing activities ( 33,920 ) ( 7,047 )

Effect of foreign exchange rates on Cash and cash equivalents ( 9,441 ) 4,769

Increase in Cash and cash equivalents 10,809 19,425

(Decrease) increase in Cash and cash equivalents ( 25,508 ) 10,040

Cash and cash equivalents, beginning of period 102,003 72,024

Cash and cash equivalents, end of period $ 76,495 $ 82,064

See Notes to Consolidated and Combined Condensed Financial Statements.

See Notes to Consolidated and Condensed Financial Statements.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

Organization and Basis of Presentation

Founded in 1904, ESAB Corporation (“ESAB” or the “Company”) is a premier narrowly diversified global 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 ESAB Business Excellence (“EBX”) allows the Company to realize its 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.

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 and workflow solutions and its business system ESAB Business Excellence (“EBX”) enables the Company’s purpose of Shaping the world we imagine TM .

The Company conducts its operations through two reportable segments.

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.

On April 4, 2022, ESAB Corporation completed its spin-off from Colfax Corporation (“Colfax,” “Enovis” or “Former Parent”) and became an independent, public-traded company (the “Separation”).

The Company’s fiscal year ends December 31.

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

As used herein, the third quarter results for 2023 and 2022 refer to the 13-week periods ended September 29, 2023 and September 30, 2022, respectively.

Separation from Enovis

On April 4, 2022, 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 “Separation”).

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

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

In November 2022, Enovis sold a total of 6.0 million shares of the Company’s common stock as part of a secondary offering.

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

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

As used herein, the first quarter results for 2024 and 2023 refer to the 13-week periods ended March 29, 2024 and March 31, 2023, respectively.

Russia and Ukraine Conflict

1 unchanged sentence

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

For the three and nine months ended September 29, 2023, Russia represented approximate ly 5 % of the Company’s total revenue, and app roximately $ 3 million and $ 10 million of its N et income, respectively.

Russia also has approximately 4 % of the Company’s total net assets excluding any goodwill allocation as of September 29, 2023.

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

Russia has a cumulative translation loss of approximately $ 125 million as of September 29, 2023, which could be realized upon a transition out.

For the three months ended March 29, 2024, Russia represented approximately 5 % of the Company’s total revenue, and approximately $ 4 million of its Net income.

Russia also has approximately 3 % of the Company’s total net assets excluding any goodwill allocation as of March 29, 2024.

In case of a 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 $ 118 million as of March 29, 2024, which could be realized upon a transition out.

The Company is closely monitoring developments in Ukraine and Russia.

1 unchanged sentence

Basis of Presentation

Prior to the Separation on April 4, 2022, the historical financial statements were prepared on a combined basis and were derived from the consolidated financial statements of Enovis.

For the periods subsequent to April 4, 2022, the financial statements are presented on a consolidated basis as the Company became a standalone public company as of that date.

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

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

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

The Company’s allocated expenses from the Former Parent were $ 6.0 million for the three months ended April 1, 2022.

ESAB CORPORATION

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

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

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

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

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

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

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

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

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

The Consolidated and Condensed Financial Statements included herein have been prepared by the Company pursuant to the rules and regulations of the Security and Exchange Commission (“SEC”).

Certain information and footnote disclosures normally included in the financial statements prepared in accordance with the accounting principles generally accepted in the United States (“U.S.

GAAP”) have been condensed or omitted pursuant to SEC rules and regulations;

however the Company believes that the disclosures are adequate to make the information presented not misleading.

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

Intercompany transactions and accounts are eliminated in consolidation.

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

Actual results may differ from those estimates.

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

Research and development costs were $ 9.0 million and $ 28.1 million during the three and nine months ended September 29, 2023, respectively, and $ 8.0 million and $ 27.1 million during the three and nine months ended September 30, 2022, respectively.

Research and development costs were $ 10.1 million and $ 9.6 million during the three months ended March 29, 2024 and March 31, 2023, respectively.

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

The Company expects to continue making significant expenditures for research and development to maintain and improve its competitive positions.

The results of operations for the three and nine months ended September 29, 2023 are not necessarily indicative of the results of operations that may be achieved for the full year.

In addition to the factors discussed elsewhere in this Form 10-Q, quarterly results are affected by seasonal variations in the Company’s businesses, and European operations typically experience a slowdown during the July, August and December holiday seasons.

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

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

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

The accompanying interim Consolidated and Condensed Financial Statements and the related notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”), filed with the SEC on February 29, 2024.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

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 in connection with the Separation.

ESAB CORPORATION

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

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

Loss from discontinued operations, net of taxes consists of Selling, general and administrative expenses of $ 2.2 million and $ 5.2 million , and a tax benef it of $ 0.5 million and $ 1.0 million f or the three and nine months ended September 29, 2023, respectively.

Loss from discontinued operations, net of tax consists of Selling, general and administrative expenses of $ 1.3 million and $ 6.2 million, and a tax benefit of $ 0.3 million and $ 1.3 million for the three and nine months ended September 30, 2022, respectively .

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

This activity consists primarily of expected settlements, legal and administrative expenses associated with the above liabilities.

For the three months ended March 29, 2024 and March 31, 2023, respectively, loss from discontinued operations, net of taxes was $ 1.3 million and $ 0.9 million .

S ee Note 14, “Commitments and Contingencies” for further information.

Cas h used in operating activities related to discontinued operations for the three and nine months ended September 29, 2023 was $ 2.5 million and $ 12.2 million, respectively, and was $ 5.6 million and $ 19.3 million for the three and nine months ended September 30, 2022, respectively.

Cas h used in operating activities related to discontinued operations for the three months ended March 29, 2024 and March 31, 2023 was $ 3.7 million and $ 5.4 million , respectively.

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 $ 18.1 million, net of cash received.

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

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

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

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.

Substantially all revenue is recognized at a point in time.

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

March 29, 2024 March 31, 2023

(In thousands)

4 unchanged sentences

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

Given the nature of the business, the total amount of unsatisfied performance obligations with an original contract duration of greater than one year as of September 29, 2023 is immaterial.

Given the nature of the business, the total amount of unsatisfied performance obligations with an original contract duration of greater than one year as of March 29, 2024 is immaterial.

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

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

During the three and nine months ended September 29, 2023, revenue recognized that was included in the contract liability balance at the beginning of the year w as $ 2.3 million and $ 16.7 million, res pectively.

During the three and nine months ended September 30, 2022, revenue recognized that was included in the contract liability balance at the beginning of the year was $ 4.6 million and $ 19.0 million, respectively.

As of September 29, 2023 and September 30, 2022, total contract liabilities were $ 29.5 million and $ 22.5 million, respectively, and were included in Accrued liabilities on the Company’s Consolidated and Condensed Balance Sheets.

As of December 31, 2023 and December 31, 2022, total contract liabilities were $ 31.2 million and $ 25.9 million, respectively, and were included in Accrued liabilities on the Consolidated and Condensed Balance Sheets.

During the three months ended March 29, 2024 and March 31, 2023, revenue recognized that was included in the contract liabilities balance at the beginning of the year was $ 16.2 million and $ 11.1 million, respectively.

As of March 29, 2024 and March 31, 2023, total contract liabilities were $ 29.5 million and $ 28.3 million, respectively, and were included in Accrued liabilities on the Company’s Consolidated and Condensed Balance Sheets.

ESAB CORPORATION

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

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

Allowance for Credit Losses

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

Nine Months Ended September 29, 2023

Three Months Ended March 29, 2024

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

6 unchanged sentences

Three Months Ended

Nine Months Ended

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

March 29, 2024 March 31, 2023

(In thousands, except share and per share data)

5 unchanged sentences

Weighted-average shares of Common stock outstanding – basic 60,346,121 60,146,348

60,265,516 60,063,553 60,216,606 60,045,306

Income per share from continuing operations – basic $ 1.01 $ 0.54

2 unchanged sentences

Weighted-average shares of Common stock outstanding – basic 60,346,121 60,146,348

60,265,516 60,063,553 60,216,606 60,045,306

Net effect of potentially dilutive securities (2)

2 unchanged sentences

Net income per share from continuing operations – diluted $ 1.00 $ 0.54

(1) Net income from continuing operations attributable to ESAB Corporation for the respective periods is calculated using Net income from continuing operations, less Income attributable to noncontrolling interest, net of taxes, of $ 1.5 million and $ 4.5 million for the three and nine months ended September 29, 2023, respectively, and $ 1.0 million and $ 2.7 million for the three and nine months ended September 30, 2022, respectively.

(1) Net income from continuing operations attributable to ESAB Corporation for the respective periods is calculated using Net income from continuing operations, less Income attributable to noncontrolling interest, net of taxes, of $ 1.6 million for the three months ended March 29, 2024 and $ 1.3 million for the three months ended March 31, 2023.

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

(3) Prior to the Separation, the Company did not have any publicly-traded common stock or equivalents issued and outstanding.

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

During the three and nine months ended September 29, 2023, Income from continuing operations before income taxes was $ 80.6 million and $ 241.6 million, respectively, while Income tax expense was $ 19.8 million and $ 77.8 million, respectively.

During the three months ended March 29, 2024, Income from continuing operations before income taxes was $ 81.4 million, while Income tax expense was $ 18.5 million.

The effective tax rate was 22.7 % for the three months ended March 29, 2024.

The effective tax rate differed from the 2024 U.S.

federal statutory rate of 21.0% primarily due to withholding taxes.

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

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

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

federal statutory rate of 21.0% primarily due to discrete tax expenses in 2023 for dividend withholding taxes and an increase in the liability for uncertain tax positions as discussed below, that do not recur in 2024.

ESAB CORPORATION

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

The effective tax rate was 24.6 % and 32.2 % for the three and nine months ended September 29, 2023, respectively.

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

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

During the three and nine months ended September 30, 2022 , Income from continuing operations before income taxes was $ 72.1 million and $ 234.3 million, respectively, while Income tax expense was $ 17.8 million and $ 63.6 million, respectively.

The effective tax rate was 24.7 % and 27.2 % for the three and nine months ended September 30, 2022.

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

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

During the nine months ended September 29, 2023, the Company changed its indefinite reinvestment assertion on certain undistributed earnings of the Company’s foreign subsidiaries, resulting in a total tax expense of $ 10.9 million, which was recorded in the three months ended March 31, 2023, on such earnings that have not been indefinitely reinvested.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

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

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

During the nine months ended September 29, 2023, due to an adverse court ruling in a tax case in a foreign jurisdiction the Company increased the related liability for uncertain tax positions by $ 9.4 million partially offset by changes in other positions that occurred during the three months ended March 31, 2023.

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

Inventories, Net

Inventories, net consisted of the following:

September 29, 2023 December 31, 2022

March 29, 2024 December 31, 2023

(In thousands)

6 unchanged sentences

$ 405,601 $ 392,858

At September 29, 2023 and December 31, 2022 , 29.9 % a nd 31.5 % of total inventories, respectively, were valued using the LIFO method.

At March 29, 2024 and December 31, 2023 , 26.0 % a nd 27.4 % of total inventories, respectively, were valued using the LIFO method.

Accrued and Other Liabilities

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

September 29, 2023 December 31, 2022

March 29, 2024 December 31, 2023

Current Noncurrent Current Noncurrent

3 unchanged sentences

Asbestos liability 34,111 223,829 32,908 234,796

Contract liability 29,488 — 25,899 —

Lease liability 20,271 74,700 18,664 76,163

Contract liabilities 29,548 — 31,248 —

Lease liabilities 22,936 73,995 22,794 76,609

Warranty liability 12,936 — 12,606 —

4 unchanged sentences

ESAB CORPORATION

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

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

Accrued Warranty Liability

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

Nine Months Ended

September 29, 2023 September 30, 2022

Three Months Ended

March 29, 2024 March 31, 2023

(In thousands)

3 unchanged sentences

Cost of warranty service work performed ( 2,647 ) ( 2,678 )

Acquisition-related liability 1,278 —

Foreign exchange translation effect ( 207 ) 964

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 Condensed Balance Sheets is as follows:

Nine Months Ended September 29, 2023

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

Three Months Ended March 29, 2024

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

5 unchanged sentences

1,104 604 ( 1,404 ) ( 59 ) 245

Subtotal $ 7,818 12,391 $ ( 15,443 ) $ 158 $ 4,924

Non-cash charges (3)

Total $ 5,699 $ 1,924 $ ( 2,911 ) $ ( 411 ) $ 4,301

1 unchanged sentence

(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.

Benefit Plans

The Company sponsors various defined benefit plans and other post-retirement benefits plans, including health and life insurance, for certain eligible employees or former employees.

During the three months ended March 29, 2024, the Company recognized a non-cash pension settlement loss of $ 12.2 million related to the transfer of plan assets to a third party as part of externalizing the risk associated with a foreign defined benefit plan.

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

Long-term debt consisted of the following:

September 29, 2023 December 31, 2022

March 29, 2024 December 31, 2023

(In thousands)

4 unchanged sentences

Long-term debt $ 992,798 $ 1,018,057

ESAB CORPORATION

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

Term Loans and Revolving Credit Facility

1 unchanged sentence

The Credit Agreement initially consisted of the following facilities:

ESAB CORPORATION

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

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

8 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 Credit Agreement currently consists of the following facilities:

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

As March 29, 2024, the Credit Agreement consisted of the following facilities:

• A $ 750 million revolving credit facility (the “Revolving Facility”) with a maturity date of April 4, 2027, of which $ 12 million was drawn;

• A Term A-1 loan with an aggregate principal amount of $ 393 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 $ 600 million (the “Term Loan A-3 Facility”) with a maturity date of April 3, 2025.

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

• A Term A-3 loan with an aggregate principal amount of $ 589 million (the “Term Loan A-3 Facility”) with a maturity date of April 3, 2025.

Refer to Note 16, “Subsequent Events” for further information.

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

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

1 unchanged sentence

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.

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”) 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.

The applicable interest rate margin changes based upon the Company’s total leverage ratio (consolidated total debt divided by EBITDA, according to the definitions in the credit agreement and ranging from 1.125 % to 1.750 % or in the case of the base rate margin, 0.125 % to 0.750 %).

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

ESAB CORPORATION

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

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

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 (consolidated total debt divided by EBITDA, as defined in the credit agreement and ranging from 1.125 % to 1.750 % or in the case of the base rate margin, 0.125 % to 0.750 %).

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

To manage exposures to currency exchange rates and interest rates arising in Long-term debt, the Company entered into interest rate and cross currency swap agreements during the year ended December 31, 2022.

Refer to Note 11, “Derivatives” for additional information.

As of September 29, 2023, the weighted-average interest rate of borrowings under the Credit Agreement wa s 5.22 %, in cluding the net impact from the interest rate and cross currency swaps and excluding accretion of deferred financing fees, and there was $ 653 million of borrowing capacity available under the Revolving Facility, subject to meeting financial covenants and other requirements.

Deferred Financing Fees

The Company had total deferred financing fees of $ 2.7 million i ncluded in its Consolidated Balance Sheet as of September 29, 2023, which will be charged to Interest expense and other, net, using the straight-line method.

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

Of the $ 2.7 million, $ 1.0 million of deferred financing fees relating to the Revolving Facility are included in Other assets a nd $ 1.7 million of deferred financing fees relating to the Term Facilities are recorded as a contra-liability within Long-term debt.

As of March 29, 2024, the weighted-average interest rate of borrowings under the Credit Agreement was 5.09 %, including the net impact from the interest rate and cross currency swaps and excluding accretion of deferred financing fees, and there was $ 738 million of borrowing capacity available under the Revolving Facility, subject to meeting financial covenants and other requirements.

Other Indebtedness

1 unchanged sentence

The Company is party to letter of credit facilities with an aggregate capacity of $ 109.0 million.

Total letters of credit of $ 28.1 million were outstanding as of September 29, 2023.

Total letters of credit of $ 28.3 million were outstanding as of March 29, 2024.

Deferred Financing Fees

The Company had total deferred financing fees of $ 1.3 million included in its Consolidated Balance Sheet as of March 29, 2024, which will be charged to Interest expense and other, net, using the straight-line method.

Of the $ 1.3 million, $ 0.8 million of deferred financing fees relating to the Revolving Facility are included in Other assets and $ 0.5 million of deferred financing fees relating to the Term Facilities are recorded as a contra-liability within Long-term debt.

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

3 unchanged sentences

Counterparties include a number of major banks and financial institutions.

None of the concentrations of risk with an individual counterparty was considered significant as of September 29, 2023.

None of the concentrations of risk with an individual counterparty was considered significant as of March 29, 2024.

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

5 unchanged sentences

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

The spread was 1.250 % as of September 29, 2023.

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

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 (loss) (“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.

The Company did not have any ineffectiveness related to cash flow hedges during the nine months ended September 29, 2023 .

In March 2024, the Company received $ 5.5 million to settle one of the interest rate swaps associated with the Company’s floating-rate debt.

The termination of the interest rate swap related to the anticipated repayment of the Term A-3 Facility when

ESAB CORPORATION

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

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

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

completed in April with the proceeds of the April 2024 $ 700 million Senior Note Offering.

Refer to Note 16, “Subsequent Events” for further information.

As this interest rate swap was designated as a cash flow hedge, $ 5.5 million was deferred in accumulated other comprehensive income (loss) (“AOCI”) and will be recognized in earnings over the period the originally forecasted hedged transaction impacts earnings.

The remaining $ 300 million swap will continue to be hedged against the remaining floating-rate debt.

For the remaining swap, the spread was 1.250 % as of March 29, 2024.

This agreement involves 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.

This interest rate swap agreement is designated and qualifies 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.

The Company did not have any ineffectiveness related to the cash flow hedges during the three months ended March 29, 2024 .

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

The Company expects a gain of $ 4.0 million , net of tax, r elated 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 September 29, 2023.

The effects of designated cash flow hedges on the Company’s Consolidated and Combined Condensed Statements of Operations consisted of the following:

Three Months Ended Nine Months Ended

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

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

The expected gain to be reclassified is based on current forward rates in active markets as of March 29, 2024.

The effects of designated cash flow hedges on the Company’s Consolidated and Condensed Statements of Operations consisted of the following:

Three Months Ended

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

March 29, 2024 March 31, 2023

(In thousands)

6 unchanged sentences

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

Dollar aggregate notional amount of $ 275 million at September 29, 2023, and they mature in April 2025.

Dollar aggregate notional amount of $ 275 million at March 29, 2024, and they mature in April 2025.

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

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

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

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

The Com pany did not have any ineffectiveness related to net investment hedges during the nine months ended September 29, 2023 .

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

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

Combined Condensed Statements of Operations consisted of the following:

Three Months Ended Nine Months Ended

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

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

The Com pany did not have any ineffectiveness related to net investment hedges during the three months ended March 29, 2024 .

ESAB CORPORATION

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

The effects of the excluded components of designated net investment hedges on the Company’s Consolidated and Condensed Statements of Operations consisted of the following:

Three Months Ended

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

March 29, 2024 March 31, 2023

(In thousands)

Cross currency swap agreements Interest expense and other, net $ ( 1,179 ) $ ( 1,201 )

ESAB CORPORATION

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

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

September 29, 2023 December 31, 2022

Designated as hedging instruments:

Other Liabilities Other Assets Other Liabilities Other Assets

March 29, 2024 December 31, 2023

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

(In thousands)

4 unchanged sentences

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

As of September 29, 2023 and December 31, 2022, the Company had foreign currency contracts related to purchases and sales with notional values of $ 202.5 million and $ 260.0 million, respectively.

As of March 29, 2024 and December 31, 2023, the Company had foreign currency contracts related to purchases and sales with notional values of $ 267.2 million and $ 232.5 million, respectively.

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

September 29, 2023 December 31, 2022

Not designated as hedging instruments:

Accrued Liabilities Other Current Assets Accrued Liabilities Other Current Assets

March 29, 2024 December 31, 2023

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

(In thousands)

Foreign currency contracts $ 431 $ 874 $ 596 $ 1,088

The amounts in the table above as of September 29, 2023 reflect the fair value of the Company’s foreign currency contracts on a net basis where allowable under master netting agreements.

The amounts in the table above as of March 29, 2024 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 $ 0.6 million increase in Other current assets with a corresponding increase in Accrued liabilities.

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

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

Three Months Ended

Nine Months Ended

Foreign currency contracts September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Foreign currency contracts March 29, 2024 March 31, 2023

(In thousands)

Change in unrealized gains (losses) $ ( 49 ) $ 143

Realized gain (loss) ( 370 ) ( 740 ) 896 ( 17,235 )

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

Realized gains (losses) ( 394 ) 1,027

Fair Value Measurements

1 unchanged sentence

The estimated fair values may not represent actual values of the financial instruments that could be realized as of the balance sheet date or that will be realized in the future.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

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:

September 29, 2023

March 29, 2024

(In thousands)

21 unchanged sentences

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

For the nine months ended September 29, 2023, the impact of the credit valuation adjustment on the Company’s derivatives is immaterial.

For the three months ended March 29, 2024, the impact of the credit valuation adjustment on the Company’s derivatives is immaterial.

Refer to Note 11, “Derivatives” for additional information.

There were no transfers in or out of Level One, Two or Three during the nine months ended September 29, 2023.

There were no transfers in or out of Level One, Two or Three during the three months ended March 29, 2024.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

Accumulated Other Comprehensive Loss

The following tables present the changes in the balances of each component of AOCI including reclassifications out of AOCI for the nine months ended September 29, 2023 and September 30, 2022.

The following tables present the changes in the balances of each component of AOCI including reclassifications out of AOCI for the three months ended March 29, 2024 and March 31, 2023.

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

5 unchanged sentences

Other comprehensive income (loss) before reclassifications:

Net actuarial loss ( 2 ) — — — ( 2 )

Foreign currency translation adjustment 243 ( 38,265 ) 4,995 — ( 33,027 )

1 unchanged sentence

Unrealized loss on cash flow hedges — — — 3,920 3,920

Other comprehensive (loss) income before reclassifications ( 110 ) 43,777 ( 2,086 ) ( 2,051 ) 39,530

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

279 — — ( 1,530 ) ( 1,251 )

Net current period Other comprehensive (loss) income 169 43,777 ( 2,086 ) ( 3,581 ) 38,279

Balance at March 31, 2023

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

Other comprehensive income (loss) before reclassifications 243 ( 30,269 ) 4,995 3,920 ( 21,111 )

Net actuarial loss ( 2 ) — — — ( 2 )

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

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

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

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

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

629 — — ( 2,907 ) ( 2,278 )

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

Balance at June 30, 2023

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

Other comprehensive income (loss) before reclassifications:

Net actuarial gain 4 — — — 4

Foreign currency translation adjustment 161 ( 79,233 ) 5,992 — ( 73,080 )

Gain on long-term intra-entity foreign currency transactions — 9,962 — — 9,962

Unrealized gain on cash flow hedges — — — 767 767

Other comprehensive income (loss) before reclassifications 165 ( 69,271 ) 5,992 767 ( 62,347 )

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

236 — — ( 814 ) ( 578 )

Net current period Other comprehensive (loss) income 401 ( 69,271 ) 5,992 ( 47 ) ( 62,925 )

Balance at September 29, 2023

Net current period Other comprehensive income (loss) 872 ( 30,269 ) 4,995 1,013 ( 23,389 )

Balance at March 29, 2024

$ ( 58,933 ) $ ( 584,891 ) $ ( 12,220 ) $ 8,383 $ ( 647,661 )

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

(2) During the three and nine months ended September 29, 2023, the amount on this line within the Cash Flow Hedges column is a component of Interest expense and other, net.

(2) During the three months ended March 29, 2024, the amount within Cash Flow Hedges is a component of Interest expense and other, net.

See Note 11, “Derivatives” for additional details.

5 unchanged sentences

Other comprehensive income (loss) before reclassifications:

Foreign currency translation adjustment 490 ( 45,171 ) — — ( 44,681 )

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

Amounts reclassified from Accumulated other comprehensive loss (1)

786 — — — 786

Amounts contributed by Former Parent (2)

( 50,504 ) ( 8,759 ) — — ( 59,263 )

Net current period Other comprehensive income (loss) ( 49,228 ) ( 53,930 ) — — ( 103,158 )

Balance at April 1, 2022

$ ( 70,424 ) $ ( 493,622 ) $ — $ — $ ( 564,046 )

Other comprehensive income (loss) before reclassifications:

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

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

Amounts reclassified from Accumulated other comprehensive loss (1)

770 — — — 770

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

Balance at July 1, 2022

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

Other comprehensive income (loss) before reclassifications:

Net actuarial loss ( 2 ) — — — ( 2 )

Foreign currency translation adjustment ( 108 ) 31,276 ( 2,086 ) — 29,082

Unrealized gain on cash flow hedges — — — 9,150 9,150

Other comprehensive income (loss) before reclassifications 3,685 ( 108,755 ) 7,421 9,150 ( 88,499 )

Gain on long-term intra-entity foreign currency transactions — 12,501 — — 12,501

Unrealized loss on cash flow hedges — — — ( 2,051 ) ( 2,051 )

Other comprehensive (loss) income before reclassifications ( 110 ) 43,777 ( 2,086 ) ( 2,051 ) 39,530

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

279 — — ( 1,530 ) ( 1,251 )

Net current period Other comprehensive income (loss) 4,451 ( 108,755 ) 7,421 9,960 ( 86,923 )

Balance at September 30, 2022

Net current period Other comprehensive (loss) income 169 43,777 ( 2,086 ) ( 3,581 ) 38,279

Balance at March 31, 2023

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

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

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

(3) During the three and nine months ended September 30, 2022, the amount on this line within the Cash Flow Hedges column is a component of Interest expense and other, net.

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

See Note 11, “Derivatives” for additional details.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

Commitments and Contingencies

Asbestos Contingencies

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

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

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

4 unchanged sentences

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

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

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

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

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

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

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

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

9 unchanged sentences

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

ESAB CORPORATION

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

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

Nine Months Ended

September 29, 2023 September 30, 2022

Three Months Ended

March 29, 2024 March 31, 2023

(Number of claims)

7 unchanged sentences

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

September 29, 2023 December 31, 2022

March 29, 2024 December 31, 2023

(In thousands)

7 unchanged sentences

223,829 234,796

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

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

(1) Included in Other assets 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.

8 unchanged sentences

Segment Information

ESAB is a premier narrowly diversified global leader in connected fabrication technology and gas control solutions.

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

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

ESAB is a focused premier industrial compounder.

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

The Company conducts its operations through two reportable segments.

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

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

ESAB CORPORATION

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

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 (loss), Restructuring and other related charges, acquisition - amortization and other related charges and depreciation and other amortization .

The Com pany’s segment results were as follows:

Three Months Ended

Nine Months Ended

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

March 29, 2024 March 31, 2023

(In thousands)

8 unchanged sentences

Three Months Ended

Nine Months Ended

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

March 29, 2024 March 31, 2023

(In thousands)

3 unchanged sentences

17,091 19,510

Pension settlement gain — ( 3,300 ) — ( 3,300 )

Pension settlement loss 12,155 —

Restructuring and other related charges 1,924 9,444

Separation costs (2)

— 1,834 — 8,923

Acquisition - amortization and other related charges (2)

9,285 7,217 27,826 22,524

Depreciation and other amortization 8,783 8,593

Adjusted EBITDA $ 129,137 $ 117,989

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

(2) Includes non-recurring charges and employee costs related to the planning and execution of the Separation from Enovis within the Selling, general and administrative expense line within the Consolidated and Combined Condensed Statements of Operations.

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

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

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

R elated Party Transactions

Related Party Agreements

On April 4, 2022, in connection with the Separation, the Company entered into several agreements with Enovis that govern the Separation and provide a framework for the relationship between the parties going forward.

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

Allocated Expenses

Prior to the Separation, the Company operated as part of the Former Parent and not as a stand-alone company.

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

These amounts included, but were not limited to, items such as general management and executive oversight,

compliance, human resources, procurement, and legal functions and financial management, including public company reporting, consolidated tax filings and tax planning.

Management considered the allocation methodologies used by the Former Parent to be reasonable and to appropriately reflect the related expenses attributable to the Company for purposes of the three months ended April 1, 2022;

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 for the three months ended April 1, 2022 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.

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

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

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

The Company’s allocated expenses from the Former Parent were $ 6.0 million for the three months ended April 1, 2022.

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

therefore, no related amounts were reflected on the Company’s financial statements for the nine months ended September 29, 2023.

Net Parent Investment

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

Subsequent Events

The dividend of $ 3.6 million included in Accrued liabilities in the Consolidated Balance Sheet at September 29, 2023 was paid on October 13, 2023 to stockholders of record as of September 29, 2023.

On April 9, 2024, the Company completed a $ 700.0 million Senior Note Offering (“the Offering”).

The Offering has a contractual interest rate of 6.25 % and expected maturity date of April 15, 2029.

The Company used the net proceeds from the Offering to repay $ 588.8 million of borrowings under its Term Loan A-3 Facility and pay fees associated with the Offering.

The Company intends to use the remaining proceeds received to repay borrowings under its Revolving Facility and other general corporate purposes.

The Offering did not have any material changes to the required financial covenants for the Company.

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

On April 30, 2024, the Company reached an agreement to acquire SUMIG Soluções para Solda e Corte Ltda, a South American light automation and equipment business for approximately $ 74 million of cash consideration.

This acquisition is expected to be completed during the second half of 2024, subject to the receipt of applicable regulatory approvals and customary closing conditions.

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

What changed 10-Q

Item 1. Financial Statements