What changed in this filing

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Item 1. Financial Statements

2024-08-02 compared with 2024-05-01 · 179 added, 131 removed, 489 unchanged (39% of the section changed)

4 unchanged sentences

Three Months Ended

March 29, 2024 March 31, 2023

Six Months Ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

Net sales $ 707,053 $ 720,422 $ 1,396,797 $ 1,404,422

25 unchanged sentences

Dollars in thousands

Three Months Ended

March 29, 2024 March 31, 2023

Three Months Ended Six Months Ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

Net income $ 84,369 $ 67,223 $ 145,963 $ 100,439

Other comprehensive (loss) income:

Foreign currency translation, net of tax expense of $ 1,531 and $ 45

Foreign currency translation, net of tax expense (benefit) of $ 416 , $( 483 ), $ 1,947 and $( 438 )

( 14,557 ) 13,736 ( 39,911 ) 55,820

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

Unrealized (loss) income on derivatives designated and qualifying as cash flow hedges, net of tax (benefit) expense of $( 539 ), $ 1,611 , $( 244 ) and $ 566

( 1,851 ) 5,531 ( 838 ) 1,950

Defined benefit pension and other post-retirement plan activity, net of tax expense of $ 44 , $ 65 , $ 247 and $ 131

327 887 956 1,164

Other comprehensive (loss) income ( 16,081 ) 20,154 ( 39,793 ) 58,934

6 unchanged sentences

Dollars in thousands, except share and per share amounts

March 29, 2024 December 31, 2023

June 28, 2024 December 31, 2023

CURRENT ASSETS:

20 unchanged sentences

Total liabilities 2,217,686 2,180,972

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

Common stock - $ 0.001 par value - 600,000,000 shares authorized, 60,438,838 and 60,295,634 shares outstanding as of June 28, 2024 and December 31, 2023, respectively

Additional paid-in capital 1,886,367 1,881,054

21 unchanged sentences

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

Net income — — — 82,907 — 1,462 84,369

Dividends declared ($ 0.08 per share)

— — — ( 4,856 ) — — ( 4,856 )

Distributions to noncontrolling owners — — — — — ( 1,218 ) ( 1,218 )

Other comprehensive loss, net of tax benefit of $ 79

— — — — ( 15,712 ) ( 369 ) ( 16,081 )

Common stock-based award activity 14,417 — 4,833 — — — 4,833

Balance at June 28, 2024

60,438,838 $ 60 $ 1,886,367 $ 484,918 $ ( 663,373 ) $ 41,453 $ 1,749,425

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

11 unchanged sentences

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

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

Dividends declared ($ 0.06 per share)

— — — ( 3,644 ) — — ( 3,644 )

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

— — — — 20,094 60 20,154

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

Balance at June 30, 2023

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

See Notes to Consolidated and Condensed Financial Statements.

2 unchanged sentences

Dollars in thousands

Three Months Ended

March 29, 2024 March 31, 2023

Six Months Ended

June 28, 2024 June 30, 2023

Cash flows from operating activities:

16 unchanged sentences

Acquisition, net of cash received ( 18,050 ) ( 18,235 )

Other ( 1,501 ) —

Other investing ( 3,059 ) —

Net cash used in investing activities ( 36,938 ) ( 33,298 )

Cash flows from financing activities:

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

Repayments of borrowings on term credit facility ( 6,250 ) —

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

Proceeds from borrowings on Senior Notes 700,000 —

Proceeds from borrowings on revolving credit facilities and other 205,000 280,000

Repayments of borrowings on Term Loans ( 597,500 ) —

Repayments of borrowings on revolving credit facilities and other ( 237,005 ) ( 340,537 )

Payment of debt issuance costs and other ( 15,718 ) —

Payment of dividends ( 7,278 ) ( 6,061 )

Distributions to noncontrolling interest holders ( 1,218 ) ( 1,274 )

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

Net cash provided by (used in) financing activities 46,281 ( 67,872 )

Effect of foreign exchange rates on Cash and cash equivalents ( 10,359 ) 2,874

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

Increase in Cash and cash equivalents 126,467 2,425

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

11 unchanged sentences

The Company’s fiscal year ends December 31.

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

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

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

As used herein, the second quarter results for 2024 and 2023 refer to the 13-week periods ended June 28, 2024 and June 30, 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 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.

For the three and six months ended June 28, 2024, Russia represented approximately 6 % and 5 % of the Company’s total revenue, respectively, and approximately $ 5 million and $ 10 million of its Net income, respectively.

Russia also has approximately 5 % of the Company’s total net assets excluding any goodwill allocation as of June 28, 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.

Russia has a cumulative translation loss of approximately $ 113 million as of June 28, 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

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”).

The Consolidated and Condensed Financial Statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities 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.

4 unchanged sentences

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

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.

Research and development costs were $ 9.7 million and $ 19.8 million during the three and six months ended June 28, 2024, respectively, and $ 9.5 million and $ 19.1 million during the three and six months ended June 30, 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.

7 unchanged sentences

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 .

Loss from discontinued operations, net of taxes was $ 1.2 million and $ 2.5 million for the three and six months ended June 28, 2024, respectively, and $ 1.6 million and $ 2.5 million for the three and six months ended June 30, 2023, respectively.

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

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.

Cas h used in operating activities related to discontinued operations for the three and six months ended June 28, 2024 was $ 4.8 million and $ 8.5 million, respectively, and for the three and six months ended June 30, 2023 it was $ 4.4 million and $ 9.7 million , respectively.

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.

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.

5 unchanged sentences

Three Months Ended

March 29, 2024 March 31, 2023

Six Months Ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 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 March 29, 2024 is immaterial.

Given the nature of the business, the total amount of unsatisfied performance obligations with an original contract duration of greater than one year as of June 28, 2024 is immaterial.

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

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.

During the three and six months ended June 28, 2024, revenue recognized that was included in the contract liabilities balance at the beginning of the year was $ 5.1 million and $ 21.3 million, respectively.

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

As of June 28, 2024 and June 30, 2023, total contract liabilities were $ 27.9 million and $ 28.2 million, respectively.

ESAB CORPORATION

2 unchanged sentences

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

Three Months Ended March 29, 2024

Six Months Ended June 28, 2024

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

6 unchanged sentences

Three Months Ended

March 29, 2024 March 31, 2023

Six Months Ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

(In thousands, except share and per share data)

13 unchanged sentences

Net income per share from continuing operations – diluted $ 1.37 $ 1.10 $ 2.37 $ 1.64

(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.

(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 $ 3.1 million for the three and six months ended June 28, 2024, respectively, and $ 1.7 million and $ 3.0 million for the three and six months ended June 30, 2023, respectively.

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

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.

During the three and six months ended June 28, 2024, Income from continuing operations before income taxes was $ 103.4 million and $ 184.8 million, respectively, while Income tax expense was $ 17.9 million and $ 36.4 million, respectively.

The effective tax rate was 17.3 % and 19.7 % for the three and six months ended June 28, 2024, respectively.

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.

federal statutory rate of 21.0% primarily due to a favorable final ruling in a tax case in a foreign jurisdiction.

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

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

The effective tax 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.

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.

ESAB CORPORATION

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 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.

During the six months ended June 30, 2023, the Company recorded total tax expense of $ 10.9 million relating to a change in its indefinite reinvestment assertion on certain foreign undistributed earnings.

Additionally, the Company increased the net liability for uncertain tax positions by $ 9.4 million primarily relating to an adverse court ruling in a tax case in a foreign jurisdiction.

During the three months ended June 28, 2024, a favorable final ruling in a tax case in a foreign jurisdiction was decided and the Company released the related liability for uncertain tax positions for a net tax benefit of $ 7.9 million.

As a result of the release in the uncertain tax position for the period ending June 28, 2024, the ending unrecognized tax balance decreased by $ 17.7 million.

Inventories, Net

Inventories, net consisted of the following:

March 29, 2024 December 31, 2023

June 28, 2024 December 31, 2023

(In thousands)

6 unchanged sentences

$ 426,520 $ 392,858

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

At June 28, 2024 and December 31, 2023 , 24.6 % a nd 27.4 % of total inventories, respectively, were valued using the last-in, first-out (“LIFO”) method.

Accrued and Other Liabilities

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

March 29, 2024 December 31, 2023

June 28, 2024 December 31, 2023

Current Noncurrent Current Noncurrent

14 unchanged sentences

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

Three Months Ended

March 29, 2024 March 31, 2023

Six Months Ended

June 28, 2024 June 30, 2023

(In thousands)

8 unchanged sentences

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

Six Months Ended June 28, 2024

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

7 unchanged sentences

(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.

(2) Includes the cost of relocating associates, relocating equipment and other costs 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.

During the six months ended June 28, 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:

March 29, 2024 December 31, 2023

June 28, 2024 December 31, 2023

(In thousands)

Term loans $ 390,000 $ 987,500

Senior unsecured notes 700,000 —

Revolving credit facilities — 32,000

4 unchanged sentences

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

Term Loans and Revolving Credit Facility

Senior Notes, Term Loans and Revolving Credit Facility

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

The Credit Agreement initially consisted of the following facilities:

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

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

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

The Credit Agreement initially consisted of a $ 750 million revolving credit facility (the “Revolving Facility”) with a maturity date of April 4, 2027, a Term A-1 loan with an initial aggregate principal amount of $ 400 million (the “Term Loan A-1 Facility”), with a maturity date of April 4, 2027;

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

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

2 unchanged sentences

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

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

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

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

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

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

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 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.

On April 9, 2024, the Company issued a $ 700.0 million in aggregate principal amount of 6.25 % senior notes due 2029 (the “Senior Notes”).

The Senior Notes have a contractual interest rate of 6.25 % and maturity date of April 15, 2029.

The Company used the net proceeds from the Senior Notes offering to pay off its Term Loan A-3 Facility and pay fees associated with the offering.

As of June 28, 2024, the Company’s long-term Debt consisted of the following facilities:

• A $ 750 million Revolving Facility with a maturity date of April 4, 2027, with zero dollars drawn;

• A Term Loan A-1 Facility with an aggregate principal amount of $ 390 million with a maturity date of April 4, 2027;

• Senior Notes with an aggregate principal amount of $ 700 million with a maturity date of April 15, 2029.

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.

3 unchanged sentences

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

ESAB CORPORATION

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.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

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.

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

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.

As of June 28, 2024, the weighted-average interest rate of borrowings under the Credit Agreement and Senior Notes was 5.13 %, including the net impact from the interest rate and cross currency swaps and excluding accretion of deferred financing fees, and there was $ 750 million of borrowing capacity available under the Revolving Facility, subject to the Company 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 $ 108.6 million.

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

Total letters of credit of $ 27.9 million were outstanding as of June 28, 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.

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 $ 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 had total deferred financing fees of $ 11.2 million included in its Consolidated and Condensed Balance Sheets as of June 28, 2024, which will be charged to Interest expense and other, net, over the term of the related debt instruments.

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

Of the $ 11.2 million, $ 0.8 million of deferred financing fees relating to the Revolving Facility are included in Other assets and $ 10.4 million of deferred financing fees relating to the Term Facilities and Senior Notes 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 March 29, 2024.

None of the concentrations of risk with an individual counterparty was considered significant as of June 28, 2024.

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

2 unchanged sentences

On July 14, 2022, the Company entered into two interest rate swap agreements to manage interest rate risk exposure.

The aggregate notional amount of these contracts is $ 600 million and they mature in April 2025.

The aggregate notional amount of these contracts was $ 600 million and they mature in April 2025.

These interest rate swap agreements utilized by the Company effectively modify the Company’s exposure to interest rate risk by converting a portion of the Company’s floating-rate debt to a fixed rate of 3.293 %, plus a spread, thus reducing the impact of interest-rate changes on future interest expense.

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

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

In March 2024, the Company settled one of the interest rate swaps associated with the Company’s floating-rate debt and received $ 5.5 million in connection with that settlement.

The termination of the interest rate swap was related to the repayment of the Term A-3 Facility in April 2024.

Refer to Note 10, “Debt” 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 is expected to continue to be hedged against the remaining floating-rate debt.

ESAB CORPORATION

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.

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.

For the remaining swap, the spread was 1.250 % as of June 28, 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.

1 unchanged sentence

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

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

The Company did not have any ineffectiveness related to the cash flow hedges during the six months ended June 28, 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 March 29, 2024.

The Company expects a gain of $ 3.4 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 June 28, 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

Three Months Ended Six Months Ended

Derivative Type (Gain) Recognized in the Consolidated and Condensed Statements of Operations:

March 29, 2024 March 31, 2023

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

(In thousands)

1 unchanged sentence

Net Investment Hedges

On July 22, 2022, the Company entered into two cross-currency swap agreements to partially hedge its net investment in its Euro-denominated subsidiaries against adverse movements in exchange rates between the U.S.

On July 22, 2022, the Company entered into two cross-currency swap agreements, set to mature in April 2025, to partially hedge its net investment in its Euro-denominated subsidiaries against adverse movements in exchange rates between the U.S.

Dollar and the Euro.

In addition, the cross-currency swap agreements include provisions to exchange fixed-rate payments in U.S.

The cross-currency swap agreements include provisions to exchange fixed-rate payments in U.S.

Dollar for fixed-rate payments in Euro and are designated and qualify as a net investment hedge.

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

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

Dollar aggregate notional amount of $ 275 million.

Prior to the maturity of these two cross-currency swaps, on June 25, 2024 the Company de-designated these swaps and entered into four new cross-currency swaps for the same above notional amounts that mature in October 2026.

These swaps are designated and accounted for as a net investment hedge.

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 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 Statements 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 three months ended March 29, 2024 .

Due to the de-designation transaction above on June 25, 2024, the Company will keep the balance in AOCI related to the original derivative for the duration that the investment is held.

The Com pany did not have any ineffectiveness related to net investment hedges during the six months ended June 28, 2024 .

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 Condensed Statements of Cash Flows.

2 unchanged sentences

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

Three Months Ended Six Months Ended

Derivative Type (Gain) Recognized in the Consolidated and Condensed Statements of Operations:

March 29, 2024 March 31, 2023

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

(In thousands)

Cross currency swap agreements Interest expense and other, net $ ( 1,175 ) $ ( 1,187 ) $ ( 2,354 ) $ ( 2,388 )

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

March 29, 2024 December 31, 2023

The table below shows the fair value of the derivatives recognized in the Consolidated and Condensed Balance Sheets:

June 28, 2024 December 31, 2023

Designated as Hedging Instruments Other Liabilities Other Assets Other Liabilities Other Assets

5 unchanged sentences

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

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:

March 29, 2024 December 31, 2023

As of June 28, 2024 and December 31, 2023, the Company had foreign currency contracts related to purchases and sales with notional values of $ 258.5 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 and Condensed Balance Sheets:

June 28, 2024 December 31, 2023

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

1 unchanged sentence

Foreign currency contracts $ 1,227 $ 2,348 $ 596 $ 1,088

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.

The amounts in the table above as of June 28, 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 $ 1.3 million increase in Other current assets with a corresponding increase in Accrued liabilities.

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

Foreign currency contracts March 29, 2024 March 31, 2023

Three Months Ended Six Months Ended

Foreign currency contracts June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

(In thousands)

Change in unrealized gains (losses) $ 678 $ ( 1,437 ) $ 629 $ ( 1,293 )

Realized gains (losses) ( 394 ) 1,027

Realized gains 2,542 238 378 1,265

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 Condensed Statements of Operations.

Fair Value Measurements

The carrying values of financial instruments, including Trade receivables and Accounts payable, approximate their fair values due to their short-term maturities.

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)

Financial Instruments and Fair Value Measurements

The carrying values of financial instruments, including Trade receivables and Accounts payable, approximate their fair values due to their short-term maturities.

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.

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

March 29, 2024

June 28, 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 three months ended March 29, 2024, the impact of the credit valuation adjustment on the Company’s derivatives is immaterial.

For the six months ended June 28, 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 three months ended March 29, 2024.

There were no transfers in or out of Level One, Two or Three during the six months ended June 28, 2024.

ESAB CORPORATION

1 unchanged sentence

Accumulated Other Comprehensive Loss

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

The following tables present the changes in the balances of each component of AOCI including reclassifications out of AOCI for the six months ended June 28, 2024 and June 30, 2023.

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

14 unchanged sentences

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

Other comprehensive income (loss) before reclassifications:

Foreign currency translation adjustment 6 ( 23,042 ) 686 — ( 22,350 )

Gain on long-term intra-entity foreign currency transactions — 8,162 — — 8,162

Unrealized gain on cash flow hedges — — — 811 811

Other comprehensive income (loss) before reclassifications 6 ( 14,880 ) 686 811 ( 13,377 )

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

327 — — ( 2,662 ) ( 2,335 )

Net current period Other comprehensive (loss) income 333 ( 14,880 ) 686 ( 1,851 ) ( 15,712 )

Balance at June 28, 2024

$ ( 58,600 ) $ ( 599,771 ) $ ( 11,534 ) $ 6,532 $ ( 663,373 )

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

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

(2) During the three and six months ended June 28, 2024, 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)

Accumulated Other Comprehensive Loss Components

14 unchanged sentences

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

Other comprehensive income (loss) before reclassifications:

Net actuarial loss ( 2 ) — — — ( 2 )

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

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

Unrealized loss 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)

889 — — ( 2,109 ) ( 1,220 )

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

Balance at June 30, 2023

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

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

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

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

See Note 11, “Derivatives” for additional details.

14 unchanged sentences

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

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

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

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

10 unchanged sentences

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

Three Months Ended

March 29, 2024 March 31, 2023

Six Months Ended

June 28, 2024 June 30, 2023

(Number of claims)

6 unchanged sentences

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

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

March 29, 2024 December 31, 2023

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

June 28, 2024 December 31, 2023

(In thousands)

7 unchanged sentences

211,970 234,796

(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.

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

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

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

10 unchanged sentences

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.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

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

1 unchanged sentence

Three Months Ended

March 29, 2024 March 31, 2023

Six Months Ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

(In thousands)

8 unchanged sentences

Three Months Ended

March 29, 2024 March 31, 2023

Six Months Ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

(In thousands)

6 unchanged sentences

Acquisition - amortization and other related charges (2)

7,730 9,252 15,507 18,541

Depreciation and other amortization 9,115 9,013 17,898 17,606

3 unchanged sentences

Subsequent Events

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.

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.

The dividend of $ 4.9 million included in Accrued liabilities in the Consolidated and Condensed Balance Sheets at June 28, 2024 was paid on July 12, 2024 to stockholders of record as of June 28, 2024.

On July 2, 2024, the Company completed the acquisition of Linde Industries Private Limited, a leading welding company in Bangladesh, for approximately $ 77 million, net of cash received.

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