What changed in this filing

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Item 1. Financial Statements

2024-10-29 compared with 2024-08-02 · 184 added, 136 removed, 532 unchanged (38% of the section changed)

3 unchanged sentences

Dollars in thousands, except per share amounts

Three Months Ended

Six Months Ended

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

Three Months Ended Nine Months Ended

September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

Net sales $ 673,250 $ 680,996 $ 2,070,047 $ 2,085,418

16 unchanged sentences

Loss on discontinued operations ( 0.02 ) ( 0.03 ) ( 0.06 ) ( 0.07 )

Net income per share $ 1.36 $ 1.08 $ 2.35 $ 1.61

Net income per share – basic $ 1.12 $ 0.95 $ 3.48 $ 2.56

Earnings (loss) per share – diluted

4 unchanged sentences

ESAB CORPORATION

CONSOLIDATED AND CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED AND CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Dollars in thousands

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

Net income $ 69,833 $ 59,113 $ 215,796 $ 159,552

Other comprehensive (loss) income:

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

Other comprehensive income (loss):

Foreign currency translation, net of tax (benefit) expense of $( 2,871 ), $ 2,984 , $( 924 ) and $ 2,546

63,675 ( 63,808 ) 23,764 ( 7,988 )

3 unchanged sentences

343 240 1,299 1,404

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

Comprehensive income 68,288 87,377 106,170 159,373

Other comprehensive income (loss) 60,888 ( 63,615 ) 21,095 ( 4,681 )

Comprehensive income (loss) 130,721 ( 4,502 ) 236,891 154,871

Comprehensive income attributable to noncontrolling interest 2,302 853 4,715 4,377

Comprehensive income attributable to ESAB Corporation $ 67,195 $ 85,667 $ 103,757 $ 155,849

Comprehensive income (loss) attributable to ESAB Corporation $ 128,419 $ ( 5,355 ) $ 232,176 $ 150,494

See Notes to Consolidated and Condensed Financial Statements.

2 unchanged sentences

Dollars in thousands, except share and per share amounts

June 28, 2024 December 31, 2023

September 27, 2024 December 31, 2023

CURRENT ASSETS:

Cash and cash equivalents $ 253,670 $ 102,003

Trade receivables, less allowance for credit l osses of $ 25,372 and $ 25,477

Trade receivables, less allowance for credit losses of $ 24,637 and $ 25,477

420,938 385,198

17 unchanged sentences

Total liabilities 2,206,809 2,180,972

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

Common stock - $ 0.001 par value - 600,000,000 shares authorized, 60,444,246 and 60,295,634 shares outstanding as of September 27, 2024 and December 31, 2023, respectively

Additional paid-in capital 1,893,665 1,881,054

30 unchanged sentences

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

Net income — — — 68,240 — 1,593 69,833

Dividends declared ($ 0.08 per share)

— — — ( 4,858 ) — — ( 4,858 )

Distributions and purchases related to noncontrolling interest — — 2,860 — ( 1,706 ) ( 3,155 ) ( 2,001 )

Other comprehensive income, net of tax benefit of $ 3,759

— — — — 60,179 709 60,888

Common stock-based award activity 5,408 — 4,438 — — — 4,438

Balance at September 27, 2024

60,444,246 $ 60 $ 1,893,665 $ 548,300 $ ( 604,900 ) $ 40,600 $ 1,877,725

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

6 unchanged sentences

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

Other comprehensive gain, net of tax benefit of $ 934

Other comprehensive income, net of tax benefit of $ 934

— — — — 38,279 501 38,780

5 unchanged sentences

— — — ( 3,644 ) — — ( 3,644 )

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

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

— — — — 20,094 60 20,154

2 unchanged sentences

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 $ 3,023

— — — — ( 62,925 ) ( 690 ) ( 63,615 )

Common stock-based award activity 11,703 — 3,501 — — — 3,501

Balance at September 29, 2023

60,271,072 $ 60 $ 1,876,335 $ 303,954 $ ( 679,540 ) $ 40,287 $ 1,541,096

See Notes to Consolidated and Condensed Financial Statements.

2 unchanged sentences

Dollars in thousands

Six Months Ended

June 28, 2024 June 30, 2023

Nine Months Ended

September 27, 2024 September 29, 2023

Cash flows from operating activities:

15 unchanged sentences

Proceeds from sale of property, plant and equipment 3,452 5,171

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

Acquisitions, net of cash received ( 86,537 ) ( 18,665 )

Other investing ( 4,058 ) —

15 unchanged sentences

ESAB CORPORATION

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

Organization and Basis of Presentation

4 unchanged sentences

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

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”).

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

The Company’s fiscal year ends December 31.

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.

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 2024 and 2023 refer to the 13-week periods ended September 27, 2024 and September 29, 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 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.

For the three and nine months ended September 27, 2024, Russia represented approximately 6 % and 5 % of the Company’s total revenue, respectively, and approximately $ 2 million and $ 12 million of its Net income, respectively.

Russia also has approximately 5 % of the Company’s total net assets excluding any goodwill allocation as of September 27, 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 $ 113 million as of June 28, 2024, which could be realized upon a transition out.

Russia has a cumulative translation loss of approximately $ 119 million as of September 27, 2024, which could be realized upon a transition out.

The Company is closely monitoring developments in Ukraine and Russia.

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

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

Basis of Presentation

5 unchanged sentences

Intercompany transactions and accounts are eliminated in consolidation.

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 $ 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.

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 expense on the Company’s Consolidated and Condensed Statements of Operations.

Research and development costs were $ 9.2 million and $ 29.0 million during the three and nine months ended September 27, 2024, respectively, and $ 9.0 million and $ 28.1 million during the three and nine months ended September 29, 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.

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.

Loss from discontinued operations, net of taxes was $ 1.2 million and $ 3.7 million for the three and nine months ended September 27, 2024, respectively, and $ 1.7 million and $ 4.3 million for the three and nine months ended September 29, 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 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.

Cas h used in operating activities related to discontinued operations for the three and nine months ended September 27, 2024 was $ 3.6 million and $ 12.1 million, respectively, and for the three and nine months ended September 29, 2023 it was $ 2.5 million and $ 12.2 million , respectively.

On July 2, 2024, the Company completed the acquisition of Linde Industries Private Limited, a leading welding company in Bangladesh, for approximately $ 69 million, net of cash received, to extend the Company’s position in this fast-growing region.

The Company recognized intangible assets and goodwill of approximately $ 20 million and $ 40 million, respectively.

The valuation of the acquired intangible assets and certain other assets and liabilities are determined based upon third-party valuations that have yet to be finalized.

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.

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.

This acquisition is expected to be completed during the fourth quarter of 2024, subject to 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 approximately $ 18 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 approximately $ 19 million, net of cash received.

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

2 unchanged sentences

The Company disaggregates its revenue into the following product groups:

Three Months Ended

Six Months Ended

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

Three Months Ended Nine Months Ended

September 27, 2024 September 29, 2023 September 27, 2024 September 29, 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 June 28, 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 September 27, 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 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.

During the three and nine months ended September 27, 2024, revenue recognized that was included in the contract liabilities balance at the beginning of the year was $ 1.3 million and $ 22.6 million, respectively.

During the three and nine months ended September 29, 2023, revenue recognized that was included in the contract liabilities balance at the

ESAB CORPORATION

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

beginning of the year was $ 2.3 million and $ 16.7 million, respectively.

As of September 27, 2024 and September 29, 2023, total contract liabilities were $ 27.8 million and $ 29.5 million, respectively.

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:

Six Months Ended June 28, 2024

Nine months ended September 27, 2024

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

5 unchanged sentences

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

Three Months Ended

Six Months Ended

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

Three Months Ended Nine Months Ended

September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

(In thousands, except share and per share data)

13 unchanged sentences

Net income per share from continuing operations – diluted $ 1.13 $ 0.97 $ 3.50 $ 2.61

(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.

(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 and $ 4.7 million for the three and nine months ended September 27, 2024, respectively, and $ 1.5 million and $ 4.5 million for the three and nine months ended September 29, 2023, respectively.

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

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 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.

During the three and nine months ended September 27, 2024, Income from continuing operations before income taxes was $ 89.1 million and $ 273.9 million, respectively, while Income tax expense was $ 18.1 million and $ 54.5 million, respectively.

The effective tax rate was 20.3 % and 19.9 % for the three and nine months ended September 27, 2024, respectively.

The effective tax rate differed from the 2024 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.

federal statutory rate of 21.0% primarily due to a favorable final ruling in a tax case in a foreign jurisdiction during the three months ended June 28, 2024 and an agreement with a taxing authority on the treatment of subsidy income in a foreign jurisdiction during the three months ended September 27, 2024.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

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.

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.

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

During the nine months ended September 29, 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.

During the nine months ended September 27, 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.

This resulted in a decrease in the ending unrecognized tax benefit balance of $ 17.7 million.

The Company also recorded a tax benefit of $ 4.9 million due to an agreement with a taxing authority on the treatment of subsidy income in a foreign jurisdiction.

Inventories, Net

Inventories, net consisted of the following:

June 28, 2024 December 31, 2023

September 27, 2024 December 31, 2023

(In thousands)

6 unchanged sentences

$ 422,654 $ 392,858

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.

At September 27, 2024 and December 31, 2023 , 24.0 % 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:

June 28, 2024 December 31, 2023

September 27, 2024 December 31, 2023

Current Noncurrent Current Noncurrent

8 unchanged sentences

Restructuring liability 5,581 — 5,345 354

Accrued interest 21,539 — 711 —

Other 45,418 36,997 46,433 33,823

4 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:

Six Months Ended

June 28, 2024 June 30, 2023

Nine Months Ended

September 27, 2024 September 29, 2023

(In thousands)

3 unchanged sentences

Cost of warranty service work performed ( 8,507 ) ( 7,891 )

Foreign exchange translation effect ( 298 ) 1,436

Foreign exchange translation effect and other ( 40 ) 1,156

Warranty liability, end of period $ 13,914 $ 13,369

1 unchanged sentence

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 and Other liabilities in the Consolidated and Condensed Balance Sheets is as follows:

Six Months Ended June 28, 2024

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 27, 2024

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

10 unchanged sentences

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 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.

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:

June 28, 2024 December 31, 2023

September 27, 2024 December 31, 2023

(In thousands)

18 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.

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”).

On April 9, 2024, the Company issued $ 700 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:

As of September 27, 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.

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

• Senior Notes with an aggregate principal amount of $ 700 million and 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.

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

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

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.

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

Loans made under the Revolving Facility will bear interest, at the election of the Company, at either the base rate or, (i) in the case of loans denominated in dollars, the term SOFR plus an adjustment or the daily simple SOFR plus an adjustment, (ii) in the case of loans denominated in euros, the adjusted Euro Interbank Offered Rate (“EURIBOR”) 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, 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 %).

4 unchanged sentences

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

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.

As of September 27, 2024, the weighted-average interest rate of borrowings under the Credit Agreement and Senior Notes was 5.01 %, 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 $ 109.2 million.

Total letters of credit of $ 27.9 million were outstanding as of June 28, 2024.

Total letters of credit of $ 28.6 million were outstanding as of September 27, 2024.

Deferred Financing Fees

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 Company had total deferred financing fees of $ 10.5 million included in its Consolidated and Condensed Balance Sheets as of September 27, 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.

5 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 June 28, 2024.

None of the concentrations of risk with an individual counterparty was considered significant as of September 27, 2024.

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

12 unchanged sentences

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

For the remaining swap, the spread was 1.250 % as of June 28, 2024.

For the remaining swap, the spread was 1.250 % as of September 27, 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 six months ended June 28, 2024 .

The Company did not have any ineffectiveness related to the cash flow hedges during the nine months ended September 27, 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 $ 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 Company expects a gain of $ 1.6 million, net of tax, related to interest rate swap agreements to be reclassified from AOCI to earnings through such agreements’ maturity in April 2025 as the hedged transactions are realized.

The expected gain to be reclassified is based on current forward rates in active markets as of September 27, 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 Six Months Ended

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

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

Three Months Ended Nine Months Ended

Derivative Type (Gain) Recognized in the Consolidated and Condensed Statements of Operations September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

(In thousands)

Interest rate swap agreements Interest expense and other, net $ ( 3,049 ) $ ( 2,717 ) $ ( 5,770 ) $ ( 4,695 )

Interest rate swap agreement(s) Interest expense and other, net $ ( 1,910 ) $ ( 1,051 ) $ ( 7,680 ) $ ( 5,746 )

Net Investment Hedges

3 unchanged sentences

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.

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

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.

On August 22, 2024, the Company entered into two additional cross-currency swap agreements, set to mature in October 2026.

These contracts have a Euro aggregate notional amount of approximately € 90 million and a U.S.

dollar aggregate notional amount of $ 100 million.

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

3 unchanged sentences

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 Company did not have any ineffectiveness related to net investment hedges during the nine months ended September 27, 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 Six Months Ended

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

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

Three Months Ended Nine Months Ended

Derivative Type (Gain) Recognized in the Consolidated and Condensed Statements of Operations September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

(In thousands)

1 unchanged sentence

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

June 28, 2024 December 31, 2023

September 27, 2024 December 31, 2023

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

1 unchanged sentence

Cross-currency swap agreements $ 26,647 $ — $ 22,232 $ —

Interest rate swap agreements — 4,215 — 9,522

Total $ 15,054 $ 4,215 $ 22,232 $ 9,522

Interest rate swap agreement(s) — 1,520 — 9,522

$ 26,647 $ 1,520 $ 22,232 $ 9,522

Derivatives Not Designated as Hedging Instruments

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

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.

As of September 27, 2024 and December 31, 2023, the Company had foreign currency contracts related to purchases and sales with notional values of $ 232.8 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

September 27, 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 $ 510 $ 411 $ 596 $ 1,088

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.

The amounts in the table above as of September 27, 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 $ 0.8 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 Six Months Ended

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

Three Months Ended Nine Months Ended

Foreign Currency Contracts September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

(In thousands)

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

Realized gains 2,542 238 378 1,265

Change in unrealized (losses) $ ( 1,220 ) $ ( 2,567 ) $ ( 591 ) $ ( 3,860 )

Realized gains (losses) 919 ( 370 ) 903 896

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.

ESAB CORPORATION

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

Financial Instruments and 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:

June 28, 2024

September 27, 2024

(In thousands)

Cash equivalents $ 5,999 $ — $ — $ 5,999

Foreign currency contracts - not designated as hedges — 3,649 — 3,649

Interest rate swap agreements — 4,215 — 4,215

Foreign currency contracts — 1,188 — 1,188

Interest rate swap agreement — 1,520 — 1,520

Deferred compensation plans — 4,994 — 4,994

$ 5,999 $ 7,702 $ — $ 13,701

Foreign currency contracts - not designated as hedges $ — $ 2,528 $ — $ 2,528

Foreign currency contracts $ — $ 1,287 $ — $ 1,287

Cross-currency swap agreements — 26,647 — 26,647

4 unchanged sentences

Cash equivalents $ 6,027 $ — $ — $ 6,027

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

Foreign currency contracts — 2,261 — 2,261

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

1 unchanged sentence

$ 6,027 $ 15,271 $ — $ 21,298

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

Foreign currency contracts $ — $ 1,769 $ — $ 1,769

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

1 unchanged sentence

$ — $ 27,489 $ — $ 27,489

The Company measures the fair value of foreign currency contracts, cross currency swap agreements and interest rate swap agreements using Level Two inputs based on observable spot and forward rates in active markets.

The Company measures the fair value of foreign currency contracts, cross-currency swap agreements and interest rate swap agreement(s) using Level Two inputs based on observable spot and forward rates in active markets.

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

For the nine months ended September 27, 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 six months ended June 28, 2024.

There were no transfers in or out of Level One, Two or Three during the nine months ended September 27, 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 six months ended June 28, 2024 and June 30, 2023.

Share Repurchase Program

On August 13, 2024, the Board of Directors authorized and approved a stock repurchase program to repurchase up to five million shares of the Company’s Common stock, par value $ 0.001 per share, from time-to-time on the open market, in privately negotiated transactions or as may otherwise be determined by the Company’s management in its discretion.

No repurchases of the Company’s Common stock have been made through the nine months ended September 27, 2024.

The timing and amount of any shares repurchased will be determined by the Company’s management based on its evaluation of market conditions, applicable legal requirements and other factors.

There is no term associated with the repurchase authorization.

Accumulated Other Comprehensive Loss (“AOCL”)

The following tables present the changes in the balances of each component of AOCL including reclassifications out of AOCL for the nine months ended September 27, 2024 and September 29, 2023.

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

ESAB CORPORATION

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)

Accumulated Other Comprehensive Loss Components

6 unchanged sentences

Gain on long-term intra-entity foreign currency transactions — 7,996 — — 7,996

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

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

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

11 unchanged sentences

327 — — ( 2,662 ) ( 2,335 )

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

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

Balance at June 28, 2024

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

Other comprehensive income (loss) before reclassifications:

Foreign currency translation adjustment ( 291 ) 63,336 ( 8,945 ) — 54,100

Gain on long-term intra-entity foreign currency transactions — 8,866 — — 8,866

Unrealized loss on cash flow hedges — — — ( 1,230 ) ( 1,230 )

Other comprehensive income (loss) before reclassifications ( 291 ) 72,202 ( 8,945 ) ( 1,230 ) 61,736

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

343 — — ( 1,900 ) ( 1,557 )

Purchase related to noncontrolling interest — ( 1,706 ) — — ( 1,706 )

Net current period Other comprehensive (loss) income 52 70,496 ( 8,945 ) ( 3,130 ) 58,473

Balance at September 27, 2024

$ ( 58,548 ) $ ( 529,275 ) $ ( 20,479 ) $ 3,402 $ ( 604,900 )

(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 six months ended June 28, 2024, the amount within Cash Flow Hedges is a component of Interest expense and other, net.

(2) During the three and nine months ended September 27, 2024, the amount within the Cash Flow Hedges column is a component of Interest expense and other, net.

See Note 11, “Derivatives” for additional details.

6 unchanged sentences

$ ( 63,847 ) $ ( 613,907 ) $ ( 8,336 ) $ 11,102 $ ( 674,988 )

Other comprehensive income (loss) before reclassifications:

Other comprehensive (loss) income before reclassifications:

Net actuarial loss ( 2 ) — — — ( 2 )

5 unchanged sentences

279 — — ( 1,530 ) ( 1,251 )

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

Net current period Other comprehensive income (loss) 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:

Other comprehensive (loss) income before reclassifications:

Net actuarial loss ( 2 ) — — — ( 2 )

1 unchanged sentence

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

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

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

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

3 unchanged sentences

$ ( 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 income (loss) 401 ( 69,271 ) 5,992 ( 47 ) ( 62,925 )

Balance at September 29, 2023

$ ( 62,439 ) $ ( 622,640 ) $ ( 7,466 ) $ 13,005 $ ( 679,540 )

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

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

See Note 11, “Derivatives” for additional details.

22 unchanged sentences

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

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

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

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

2 unchanged sentences

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

Six Months Ended

June 28, 2024 June 30, 2023

Nine Months Ended

September 27, 2024 September 29, 2023

(Number of claims)

7 unchanged sentences

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

June 28, 2024 December 31, 2023

September 27, 2024 December 31, 2023

(In thousands)

28 unchanged sentences

The Com pany’s segment results were as follows:

Three Months Ended

Six Months Ended

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

Three Months Ended Nine Months Ended

September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

(In thousands)

7 unchanged sentences

(1) The following is a reconciliation of Net income from continuing operations to Adjusted EBITDA.

Three Months Ended

Six Months Ended

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

Three Months Ended Nine Months Ended

September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

(In thousands)

11 unchanged sentences

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

Subsequent Events

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.

Subsequent Event

The dividend of $ 4.9 million included in Accrued liabilities in the Consolidated Balance Sheets at September 27, 2024 was paid on October 11, 2024 to stockholders of record as of September 27, 2024.

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